In the past three decades, the gaming industry has become a huge business, and the company has been collecting seemingly endless revenues. As the years passed, the game evolved through graphic design and innovation. The price of these games and game consoles has increased with the new generation. Today's average new video game costs about $50, and the average console cost is between $250 and $300. Why are they so expensive? How much does it cost to create these devices to make customers pay for it? This article will explain which cost drivers or factors that cause changes in the cost of creating product activities can affect the production of games and consoles. This should give young people a better understanding of what is needed to create a game.
The best way to explain the game's cost drivers is to complete the five main steps of the product cost lifecycle: R&D, design, manufacturing, marketing and distribution, and customer service. First, we will start with research and development. This step in developing a product revolves around a question: What can we do to add value to our products? Companies must answer this question, not only will customers buy their products again, but new customers will also buy from them. In this case, production managers and employees are committed to adding value to the game to meet the needs of the customer.
When creating ideas for the console, the game company must determine how to innovate the product. For example, Nintendo's newest console, Nintendo WiiTM, offers innovation through controllers for playing games. These wireless controllers [in addition to connecting the Nunchuck controller to Wiimote's line] use motion sensors to give players a better understanding of what's going on in the game. If you are playing a golf game, you can swing the controller like a golf club to hit the ball during the game. This breakthrough in the game is new to gamers and makes better use of motion sensor activity than rival Sony's PlayStation 3TM and Microsoft's Xbox 360TM, which only provides wireless with their own consoles. Controller. Innovation tends to increase production costs, but companies know that if these innovations are attractive enough to customers, these companies can accumulate enough revenue to cover these increased costs.
After completing the development phase, the game company will design their consoles and games. They must pay attention to the details; what graphics card is installed, as well as the CPU [central processing unit, as the "brain" of the system], RAM [random access memory], hard drive, etc. Every new console needs more memory and a faster processor to meet the needs of consumers. The new technology required for the game requires a specific design for the consumer to see; the design looks attractive and cost-effective. As it implies, the Nintendo GameCubeTM is a cube that allows for the largest internal volume [given a fixed size] while using the smallest surface area and taking up as little external space as possible. With these dimensions, Nintendo is able to apply its technology to the console's enclosure and minimize costs. After determining these costs, the company must create a sales price to make a profit [this is called target costing].
The third step in the process is to make the product. Building and manufacturing complex technologies like video games requires a lot of money to sell them on a large scale. Costs must be allocated to the employees who build the games and consoles, as well as the materials needed to make the production. Companies must consider how much material and labor costs a company needs to spend to keep its budget. Once the product is completed, it will be distributed to wholesalers and retailers.
Marketing and distribution are an important part of determining the cost of video games. Companies must know where to sell their goods and who they should target. Video game companies must promote games and game consoles in an attractive way so that customers don't care about the cost, not the cost that the product will provide to them. Video game companies must pay retailers and wholesalers to sell their products to consumers, who in turn provide money to retailers and wholesalers, and ultimately back to the company that produces the goods. After the product is sold, the customer's satisfaction with the game must be tracked.
The final step in this process is customer service. Video game companies create their games to include as few errors or defects as possible. These companies have created a customer service plan for consumers to make calls when products are defective or damaged. If customers are satisfied with their game, they will continue to buy more games from these companies; however, if there are any issues, the customer will contact these companies and explain the game's problems. Once the company collects this information, they can use it as a model for research and development updates to create a new cycle of creating games.
As you can see from the product lifecycle, video game companies must spend a lot of money to handle different costs to create products that are satisfying to customers. When you consider all the R&D costs, design costs, materials and labor, and many other cost drivers, it's clear that making games and consoles is not as cheap as people think. The next time you play a video game, you should thank some people for working hard and spending a lot of money to build a business that makes you entertain yourself.
Orignal From: Cost drivers for video games and game consoles
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