Emotiv Systems Inc. – Case Study – Shwetha R
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Emotiv Systems Inc.
Emotiv Systems Inc. Case Write-UpEmotiv should pursue a strategy wherein they launch through PC platform in order to be able to announce launch plans of EPOC at the GDC 2008 since they seem to need more time to convince the console makers. Once they gain momentum and awareness, they must launch themselves in collaboration with consoles as well. We have the breakeven analysis of launching with PC strategy in Exhibit3 and we are breaking even with this strategy in three years even with conservative sales estimation(Exhibit 4).Console Makers: If Emotiv manages to convince console makers, their marketing mix must be as follows:Pricing – They should price the product at $299 and we can breakeven in three years at this price. From Exhibit 2, the breakeven volume at $299 for the years 2008, 2009 and 2010 can be recovered based on the average of conservative and aggressive sales estimate for EPOC as in Exhibit4 that we gathered using the Guitar Hero sales(we take the average of conservative and aggressive sales estimate because console gaming is doing well in the US with 40% of 110 million household owning a gaming console and hence conservative estimation would be an underestimation). Pricing it at $399 could prove to be detrimental because consumers in the console gaming sector might not be willing to pay such a high price for a gaming accessory considering the fact that the console itself costs about that much(Microsoft Xbox 360 launch price was $299-$399)Channel – the sales would largely be through retail channel(80%) with the remaining coming from e-tailers(15%) and direct sales(5%). It is recommended for Emotiv to go via retail channel atleast for the initial three years since EPOC is a completely new product concept and customers would appreciate and understand it a lot more by experiencing it first hand at the retail stores through demos and physical inspection.PC enabled only strategy: If EPOC goes with only PC enabled strategy, their marketing mix would be as follows:Pricing – The calculations for PC based strategy is given in Exhibit3. They should price the product at $399 and we can breakeven in three years at this price. Unlike in the case of console gaming, PC gamers are people who spend thousands of dollars on augmenting their computers with extra processing power, sound cards, etc and hence we believe that the EPOC would sell sufficiently at $399 in this sector. From Exhibit3, the breakeven volume at $399 for the years 2008, 2009 and 2010 can be recovered taking the conservative estimates into account(conservative estimates are used here due to the decrease in the popularity of PC games).
Channel –The sales should largely be through retail channel(80%) with the remaining coming from e-tailers(15%) and direct sales(5%). The channel strategy would be same as for the previous case of console makers for the same reasons as mentioned above. We could stick to the largely retail based channel for the first three years until consumers become more aware of EPOC and gradually reduce the significance we give to retail channel.Exhibit 1: Pricing and the corresponding contribution marginsUnit price$399$299$199Console royalties4%*399 = 15.964% * 299 = 11.964%* 199 = 7.96Third party developer royalties2% * 399 = 7.982%*299 = 5.982%*199 = 3.98Retail margin38.4%*399 = 153.21638.4%*299 = 114.81638.4%*199 = 76.416Margin(Console)119.82462.2244.624Margin(PC)127.80468.2048.604Margin(without console and PC)135.78474.18412.584Percentage margin to the channels = (35%*80%)+(25%*15%)+(7%*95%) = 38.4%
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By: Shwetha R
Submitted: November 29, 2016
Essay Length: 757 Words / 4 Pages
Paper type: Case Study Views: 701
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