Marketing Strategy

Description

When Sony was developing the Walkman in the late 1970s, it called for a retail price of ¥40,000 to achieve breakeven. However, Chairman Akio Morita pushed a retail price of ¥33,000 to attract the all-important youth market segment. At that price, even if the initial product run of 60,000 units sold out, the company would lose $35 per unit. Sony used similar pricing strategies with numerous other product introductions. For example, when the portable CD player was in development in the mid-1980s, the cost per unit at initial sales volumes was estimated to exceed $600, but the initial price was set in the $300 range.

1. What are Sony’s pricing strategy and pricing objective in this case (3 pts)?
2. What factors enable Sony to make effective use of this strategy and achieve success? Explain why (4 pts).

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