Slashdot Mirror
Is Microsoft's Price Model For the Surface Justifiable?
colinneagle writes "A blog post contending that Microsoft's decision to match Apple's iPad pricing on its Surface tablet will hurt its chances in the market has brought out some negative comments from readers who seem to like the Surface tablet. I was kind of surprised by this, as I and other bloggers seem to agree that making the fully keyboard-equipped Surface tablet roughly $120 more expensive than the iPad kind of negates the purpose — to build steam by appealing to those in the market for a cheaper tablet. Also, I've yet to see an argument that justifies pricing the Surface competitively with the iPad, so I figured I would bring the question to Slashdot: Is Microsoft's pricing for the Surface tablet justified?"
"Is it priced smartly?" is probably a better question. What could be 'just' or 'unjust' about Surface pricing?
using the word justified seems to take away from the fact that there was a cost to develop and build it. Wouldn't we have to know those costs before we can say "justified"? How about asking is it worth it instead?
"The price of a thing is what the thing will bring." You can set a price anywhere you want, but it is up to the customers to decide whether they are willing to pay the price.
So, now, who wants a Surface? How does Surface fit in to the tablet market?
Apple made the first non-sucky tablet, and they reaped huge first-mover advantage, which is still paying off for them today. Related, they have network effect: everyone made apps for iPad because all the customers bought iPads, and customers bought iPads (in part) because of the rich selection of apps. Additionally, Apple did a great job on the user experience, and the quality is excellent. So you put all this together and Apple can command a premium price.
Along comes Android. Now you can get quite nice tablets for $200, and you can install any application you like. You can use multiple app stores if you like. So Android is both the low-cost solution and the more-free solution.
Along comes Microsoft. They are very, very late to the party. First mover advantage? Definitely not. Network effect, vast library of apps? No; they need to build a new stable of C# Windows 8 apps, from scratch. More-free? No; they are copying the Apple model, where the customer must go to the official app store. (And Microsoft is also copying the idea of raking a 30% commission on each sale. App developers tolerate this of Apple... will they tolerate it of Microsoft?)
So... low-cost? Definitely not. The Surface is being priced like an iPad. Customers are willing to pay a premium price for an iPad, but I cannot see any reason why customers would see enough value in a Surface to justify a premium price.
IMHO, Microsoft's best bet is to make the Surface integrate very smoothly into a Windows network. It should connect smoothly to Windows servers, it should have a good email client that can talk to Exchange servers, that sort of thing. That can carve out a niche in the business market, where incidentally a higher price doesn't hurt so much. But they are so late to the party, that many companies are already standardized on iPad. (And all the C-level executives want iPads and already have them.)
In short, at this price level, the Surface will be a niche product at best, and very possibly the next Zune.
steveha
lf(1): it's like ls(1) but sorts filenames by extension, tersely
This is why techies tend to be crap at marketing (that's a complement to techies by the way, I'm a techie).
The purpose of the Surface isn't just to make a profit on each unit (which at this price it probably is), it's to help position Windows 8/RT/Metro or whatever it's called.
The market for cheap tablets is thoroughly occupied by Android. Most people I know, even techies, think of Android tablets as "like an iPad, but cheaper, and therefore not as good". The perception (right or wrong) is that if you want the best you buy an iPad, if you want cheap and cheerful you by an Android tablet. There is no competition at the premium end, it's iPad or nothing. The perception is that the only reason you'd buy Android is because you don't have the money for an iPad.
Pricing the Surface at the same point as the iPad sends out a message to consumers that says "we think the Surface is as good as the iPad". Microsoft clearly want to position Windows 8/RT on tablets as a premium product, it doesn't want to compete with Android, it wants to compete with Apple and iOS.
That won't stop other manufacturers from making cheaper tablets, but Microsoft are setting the bar high. If someone else (e.g. Acer) make a cheap WinRT tablet it will be seen as an affordable version of a premium product, not a "cheap" product.
Paul Leader