Best Buy and PS3s

Posted on September 23, 2009

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You can buy an installation service for your PS3 when you buy at Best Buy, and it’s pretty pricey. There are wars of words on the Internet, with one side saying the service preys on the ignorant so viciously that it should be illegal, and the other saying that it’s necessary for some consumers but priced way too high. There’s also a lot of noise about the competence of Best Buy’s Geek Squad.

Perhaps Best Buy’s PS3 inventory isn’t moving fast enough to suit them, and they’re concerned about taxes on their inventory. A Bizarro World explanation is that Best Buy expects demand to increase when Sony drops the price, doesn’t have enough to cover that demand, and wants to create a false impression of difficulty in order to scare off purchasers. Or, maybe it’s simple. Maybe Geek Squad is reporting back that, while doing other in-home services, they’re often asked to hook up PS3s to home theater systems, thus alerting their corporate masters that a market opportunity exists.

It also seems obvious to me that there are three possible reasons for charging half as much as the console for the installation.

  1. You don’t want to do it. Too many people have asked for the service, and you’re afraid that saying “No, we don’t do that” will cost you business, so you create the service but price it so high only people with money to burn pay for it.
  2. You do want to do it. You just have to charge enough to cover your costs and turn a small profit. The overhead for Geek Squad (vehicles, training, tools, store space, wages) requires a higher price tag.
  3. Sony has a reputation for not being able to produce enough consoles to meet demand. This leads to retailers over-ordering, hoping their allocation will suffice. When production catches up with demand, retailers wind up with large, costly inventories. Then Sony goes and drops the price. Retailers bought their inventories at the old price, and risk losing customers if they don’t sell at the new price. Charging for an installation service could be a way to make up the loss, and that would set the price.

But will social media change anything? No, it won’t, not in any way that the Internet hasn’t already changed it. First, people have to believe they need the service. Then they have to believe the service is worth the price. The chances of both those impressions remaining true are nonexistent. Web sites will spring up to help people set up their systems. Alternate, cheaper, installation services will swoop in like sharks smelling blood.

Social media is a key component of contemporary marketing, and it’s not going away, but neither is it a huge, world-changing, revolution.

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Posted in: Gaming, Marketing