Is N-Gage pricing strategy flawed?
I have to ask, whether the new pricing model of N-Gage is still flawed? What Nokia tries to do here is that it keeps the prices of the game deck and the games on the level where it can still make money from both. This way they are still not able to break into the portable gaming platform genre. Sales will definitely increase, but I doubt that they are able to start positive cycle where sales feed even more sales.
I have no idea, how profitable N-Gage has been up until now, but I am betting that it has been loosing some serious money. Present changes in pricing strategy will not be able to turn the market trend and those losses just keep on coming. At some point of time, they just have to plug off the project N-Gage. Blame the investors they want speedy results.
Now, what if Nokia sets a special offer in which you can go to any store or chain or online shops that sell N-Gages and order the N-Gage as a FedEx delivery. Lets set an ultra optimistic price tag of 50 USD for this service. Shops would love it, they would get a sales commission without having to put up with stock units, and just couple of test devices would suffice. People would love it, cheap N-Gage as a home delivery. Nokia would love it, because every shipped N-Gage would be paid and would help to create a market.
At one part, the problem lies in the cannibalization that would become problem for Nokia’s other phones. Cheap N-Gage model would lower the sales of popular teenage cell phone models. There is a benefit though, a severe blow for the competition too. Nokia could benefit from operational revenue of scale production while competitors would be in trouble with their production capacity.
One part of the problem is that production runs might not be able to react to the increased demand, but this really is an area where Nokia is very strong. They actually tend to shun low production runs.
Naturally the biggest problem would be the STAGGERING cost that would sink in to such a business model, but think of it as a campaign. Run it for a half a year and then update the game deck, just some minor updates, and raise the price for the total service. Markets would be flooded with N-Gages and game sales would pick up. Every update would increase the price and narrow the loss margin of game decks. Some of the loss would be cover by the increasing game sales.
Nokia has lot of experience on setting the market price and production volume so that they manage to grab large chunks of market in a very profitable manner. However, it could be so that what works with mobile phones, does not work with mobile games. They have already gambled with N-Gage that mobile gaming will be successful market area. I know that they want to make it a double gamble by introducing new delivery and revenue models. So it will be just a battle of wear and tear while fine-tuning those margins.
I have no idea, how profitable N-Gage has been up until now, but I am betting that it has been loosing some serious money. Present changes in pricing strategy will not be able to turn the market trend and those losses just keep on coming. At some point of time, they just have to plug off the project N-Gage. Blame the investors they want speedy results.
Now, what if Nokia sets a special offer in which you can go to any store or chain or online shops that sell N-Gages and order the N-Gage as a FedEx delivery. Lets set an ultra optimistic price tag of 50 USD for this service. Shops would love it, they would get a sales commission without having to put up with stock units, and just couple of test devices would suffice. People would love it, cheap N-Gage as a home delivery. Nokia would love it, because every shipped N-Gage would be paid and would help to create a market.
At one part, the problem lies in the cannibalization that would become problem for Nokia’s other phones. Cheap N-Gage model would lower the sales of popular teenage cell phone models. There is a benefit though, a severe blow for the competition too. Nokia could benefit from operational revenue of scale production while competitors would be in trouble with their production capacity.
One part of the problem is that production runs might not be able to react to the increased demand, but this really is an area where Nokia is very strong. They actually tend to shun low production runs.
Naturally the biggest problem would be the STAGGERING cost that would sink in to such a business model, but think of it as a campaign. Run it for a half a year and then update the game deck, just some minor updates, and raise the price for the total service. Markets would be flooded with N-Gages and game sales would pick up. Every update would increase the price and narrow the loss margin of game decks. Some of the loss would be cover by the increasing game sales.
Nokia has lot of experience on setting the market price and production volume so that they manage to grab large chunks of market in a very profitable manner. However, it could be so that what works with mobile phones, does not work with mobile games. They have already gambled with N-Gage that mobile gaming will be successful market area. I know that they want to make it a double gamble by introducing new delivery and revenue models. So it will be just a battle of wear and tear while fine-tuning those margins.
posted by Jarkko at 11:52
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