Game Player Real Action 3D (Essay Sample)

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Game Player Real Action 3D
Pricing objectives
* Growth in market share
* Target return
Pricing Constraints
* Customer ceiling
* Break-even point
Possible prices:
¯ $400
* $499
* $600
Break-Even Points
It is where the expenses to make the console are equal to the revenue accrued from it
Fixed costs per unit= $250
Variable costs per unit= $ 200
Total cost: $450
The break-even point is therefore also $450, where no profit or loss will be made.
This means that price a. of $400 is below the breakeven point because it is $50 lower than the total cost. Price b. and c. are higher with $49 and $149 respectively.
-571500-400050

Break-Even Point (units) =

1

Break-Even Point ($'s) =$500



Break-Even Point ($'s) =

$500




Formulas:




Total Fixed Costs

TFC =

$250

BEP (units) = TFC/(SPU-VCU)




Variable Cost per Unit

VCU =

$200.00



BEP ($'s) = BEP (units) * SPU


Sales Price per Unit

SPU =

$400.00



Market-product grid
The market-product grid prepared earlier looks as follows
Products


Current

New

Markets

Current

Product development

Market penetration


New

Diversification

Market development

Modification of the prices
The main pricing items affecting the price will be the demand, the cost and the competition.
The target volume of sales for the first year is 10, 000 units in the Arkansas market. With this it is easier to reach the breakeven point with price c. of $600 units with fewer units, but affect demand. Using the price of $499, it would take longer to manage the break-even point, but it would stabilize the demand.
Other factors to consider for the market, the competitor prices
Sony's Play station 3 = $400
Nintendo's Wii = $249.99
Microsoft's XBox = $450
Even while considering these prices, it is important to note that the gaming console market has a price inelasticity of demand. The effect of the price, especially considering that this is a seventh generational sixth-sense technology console, should be higher as a matter of economics and stature. The rationale is that the gamer is also after prestige since having a console that can be controlled by full body motion and show the characters in 3D is a new addition.
Using the prices considered earlier, and the charts illustrated, it is clear that it would be impossible for the company to make any profits using the $400 price because it is significantly lower than the $450 Total cost for each unit. This means that the company will be incurring a loss of %50 for each unit it sells. The second price would offer a profit of $49, and the last $199, meaning if profit is the motive, then the last one is the most profitable. Since, as indicated in the grid above, the concentration is on market penetration and product development, then it is not prudent to use profit primarily as the driver for the price. Even so, it is significant as a threshold for the price since the company cannot afford to be making losses. One of its competitors, Sony, used such a loss making model to sell PS3, but such costs were cushioned by sales in the earlier versions, and ultimately by the discovery of new technology and cheaper materials. GameD's previous consoles have not reached such a level as to offer a sustainable loss making model, which is why it is important to break even at some point. The possibility of sixth sense technology going down is still abit far off-given that the company bought the patent for it and incorporated a new 3D experience.
B.
The other factors to consider are the possibiliti...