MARKETING DECISION MAKING (MKDM) – ASSIGNMENT 1

Case - Emotiv Systems Inc.: It’s the thought that counts

Submitted by: Harsh Vardhan, Section L

PGID – 61910582

Q1) Which platform should Emotiv pursue – console or PC? Explain.

Ans: Emotiv should pursue the console platform due to the recent innovations in the market and the
growing popularity of the. The revenue from console games was $6.6 billion in 2007 whereas that of PC
games were mere $0.9 billion. And the sales of console-based games are expected to increase ($8.9
billion), and on the contrary, the sales of PC games are expected to shrink ($0.7 billion) over the coming
years.

What also presents a great opportunity Emotiv is the fact that games on console are played by both hard-
core as well as casual gamers. And although the margins for PC games is higher, it’s difficult to predict
the success of an accessory based PC game. On the other hand, the success of accessory based games
like Guitar Hero has shown that the success potential for accessory based games is huge in the console
market. Co-branding with consoles is a tested idea that should bring-in definite success.
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Q2) If Emotiv manages to convince one of the console makers in time for a fall 2008 debut, what marketing
mix decisions (specifically, pricing and channel) are appropriate?

Ans: If Emotiv manages to convince one of the console makers in time for a fall 2008 debut, the
following marketing mix seems appropriate:

Channel: The consumer survey showed that the consumers preferred to buy electronics/hardware at
stores rather than e-tailers – because this allows them to view a demo of the device and physically test
it. Since Emotiv plans on co- branding with consoles, it makes a lot more sense to target the channels
where people purchase consoles from. Taking these into consideration, Emotiv should target retailers
like BestBuy as the preferred channel of sales, despite their relatively higher margins – because they will
generate the highest revenues.

Pricing: According to the conservative estimate sales forecast (Exhibit 11), the sales would not cross $ 1
Million in the next 3 years, and thus the production cost would remain at $ 110. Taking this into
consideration it makes sense for Emotiv to price the EPOC at $299 since even $199 is considered
expensive by consumers, so pricing above $199 should not affect the willingness-to-buy of the target
segment of consumers because such consumers are always willing to pay a premium if the product is
truly revolutionary. Besides, the current EEG systems are sold at $10,000 – this would make pitching the
EPOC to consumers a lot easier for Emotiv because it was a similar technology available for a fraction of
the cost.

Below figures show the break up if a sale were to happen through a retailer:
 Retail Price $199 $299
Cost of Production $110 $110
Margin (at 35%) $69.65 $104.65
Console Royalty (at ~4%) $7.96 $11.96
Market Development Funds (at 7%) $13.93 $20.93
Contribution/Unit ($3) $51
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Q3) What marketing mix decisions (specifically, pricing and channel) are appropriate if EPOC is only PC
enabled?

Ans: The preferred marketing mix if EPOC is only PC enabled should be the following:

Channel: According to the case, the PC gaming community comprises of likeminded consumers, who
actively discuss new and cool trends (through blogs) and word of mouth is a very important factor for
these consumers. Hence, it makes much more sense for Emotiv to look for other channels of distribution
apart from retailers, like e-tailing partnership with blogs etc., and direct sales through their website. These
channels would also provide benefits like higher contribution per unit and greater control of inventory.

Pricing: Majority of the PC gamers are hard-core gamers who invest thousands of dollars in high
performance PCs and upgrades. The fact that Brain Computer Interface (or, BCI) was already a discussed
topic on hard-core gamer blogs tells that most of these consumers are well informed and understand the
value proposition of the EPOC. Thus, Emotiv can price the EPOC higher than $299 for the PC market -
because the consumers are not price sensitive and want high performance.