Pricing the Surface (or, Microsoft doomed again)

Here comes the impending failure of Microsoft’s Surface tablet. Blame the numbers people, who couldn’t figure out how to succeed with pricing.

Historically, Microsoft attempts to beat innovative companies with their own versions of neato products. Success is generally determined by its ability to beat competitor pricing. 

For instance: They competed against Sony’s Playstation and won with Xbox 360.

They did it against Apple’s iPod and lost with Zune music player. 

The difference? Game platforms aren’t for everyone, and Playstation 3 was substantially more expensive than than Xbox 360. A relatively niche market and a good price made success possible. 

Music players, however, are for everyone and in fact became ubiquitous. And when a product becomes ubiquitous, success is determined by brand trust and perceived value. Microsoft has very little trust among consumers, but could have affected perceived value through pricing — which it failed to do. Instead, Microsoft pretty much price-matched the iPod.

Today, Zunes are no longer being manufactured.

Maybe that’s ancient history. So take the Windows phone, which basically price-matches iPhones and high-end Android sets. Microsoft does not have total control over the pricing of phones running its OS, so it’s not entirely at fault — but consumers don’t care. They just know a Windows phone is a “Microsoft” product.

But Microsoft is building the Surface. It is emulating Apple: Making the software and the hardware. It can set its own pricing, much like Amazon does (and for good reason). Unfortunately, MS is emulating Apple in pricing:

“The Surface starts at $499 for an entry-level 32GB version without the Touch Cover with integrated touch-sensitive keyboard, while one with the cover runs $599. At the top of the line, a 64GB version with the touch cover included costs $699.”

So dumb. You can smell the impending doom from here. 

How do you succeed in a marketplace in which the competition has a huge head start and brand loyalty and trust? 

You make your products more accessible. You deliver quality at a lower cost.

Even if you end up taking a loss, do it. If you’re Microsoft, you have the time and money to do just that — and you have to invest in an effort to convince consumers to take a chance with you. If you’re Microsoft (who is still distrusted by consumers, if not by tech geeks), you do that with lower costs. 

Why not just market like Apple does? Apple’s marketing works because Apple’s products, on the whole, work. Apple promises ease-of-use and simple interfaces — and it tends to deliver.

Microsoft’s high profile marketing (Seinfeld, anyone?) falls flat on its face so often because too many people have had too many frustrating experiences with their Windows equipment.

Marketing, especially over the long term, only works when a company delivers what it promises. 

Microsoft needs to bring the Surface to the world at a cost that’s lower than the iPad. It’s worth it, because any loss is a loss-leader: Convince people your product is better, get them to use your free and paid services, get them bought into your ecosystem — you’ll have a fighting chance. 

Of course, the Surface will actually have to be better. That’s a different challenge altogether.