Fair pricing means a reasonable profit on the base cost. Trying to gauge what people are willing to pay means that you want to maximise your profit at all costs, consumers be damned.
I understand that’s what Americans consider “fair”, but I don’t fully agree.
Fair pricing means a reasonable profit on the base cost.
Under many circumstances, this is true. However, console makers have historically sold consoles either at or slightly below cost, expecting to make their real profits on game sales, online store sales, etc… In the business world, it’s called a loss leader. Meaning it’s something popular that the company takes a loss on, while expecting it to encourage more sales elsewhere.
The classic grocery store example is a rotisserie chicken. You can go get a whole rotisserie chicken from the grocery store deli for like $3. It’s so cheap because the store is selling it at a loss. It’s a loss leader. Very few people will simply buy the chicken by itself. Instead, they’ll buy a tub of potato salad, some roasted corn, a can of green beans, and a gallon jug of sweet tea to go along with it. By selling that chicken at a slight loss, they were able to get the customer to buy all of those other things at a profit.
That being said, Valve has already stated that they’re not planning on having the Machine be a loss leader. Which is why people expect it to cost as much as a prebuilt with similar specs.
In most cases, yes. But you have to remember, this is Valve and not some ordinary company. They have extremely deep wallets and a lot of responsibility and expectations on their shoulders (importantly, not the stock market!). If they charged what it cost for hardware and what it cost them to do r&d, it would likely not be in consumers favor.
Like even just get off the American-bad thing for one second: pricing it as a standalone pc basically just means “the cost of the parts”. They’ve put a lot of time and effort into this across their core employees and likely outsourced stuff because they couldn’t, in-house. Actually listening to people and charging relative to that is actually a great way to be fair and make people happy, guaranteeing positive impact of your product. I guarantee they’re paying attention to what people say ALL over the place. Like… Why do you think “it’s done when it’s done” is their pace?
100%
But that’s not a terrible thing, I suppose.
Absolutely. I think 80$ for the full package seems fair.
$70 if you hand deliver it to me. It’s my final offer.
$60? why do they want $50 for something that’s clearly $10?
Fair pricing means a reasonable profit on the base cost. Trying to gauge what people are willing to pay means that you want to maximise your profit at all costs, consumers be damned.
I understand that’s what Americans consider “fair”, but I don’t fully agree.
Under many circumstances, this is true. However, console makers have historically sold consoles either at or slightly below cost, expecting to make their real profits on game sales, online store sales, etc… In the business world, it’s called a loss leader. Meaning it’s something popular that the company takes a loss on, while expecting it to encourage more sales elsewhere.
The classic grocery store example is a rotisserie chicken. You can go get a whole rotisserie chicken from the grocery store deli for like $3. It’s so cheap because the store is selling it at a loss. It’s a loss leader. Very few people will simply buy the chicken by itself. Instead, they’ll buy a tub of potato salad, some roasted corn, a can of green beans, and a gallon jug of sweet tea to go along with it. By selling that chicken at a slight loss, they were able to get the customer to buy all of those other things at a profit.
That being said, Valve has already stated that they’re not planning on having the Machine be a loss leader. Which is why people expect it to cost as much as a prebuilt with similar specs.
In most cases, yes. But you have to remember, this is Valve and not some ordinary company. They have extremely deep wallets and a lot of responsibility and expectations on their shoulders (importantly, not the stock market!). If they charged what it cost for hardware and what it cost them to do r&d, it would likely not be in consumers favor.
Like even just get off the American-bad thing for one second: pricing it as a standalone pc basically just means “the cost of the parts”. They’ve put a lot of time and effort into this across their core employees and likely outsourced stuff because they couldn’t, in-house. Actually listening to people and charging relative to that is actually a great way to be fair and make people happy, guaranteeing positive impact of your product. I guarantee they’re paying attention to what people say ALL over the place. Like… Why do you think “it’s done when it’s done” is their pace?
They’re buying the parts directly from the manufacturers though, so cutting out the retailer middle-man could offset the R&D costs.