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Price is vastly important in today’s technology industry. With the economy the way it is and a growing number of people thinking more about saving than spending, companies must determine the right price point that will induce consumers to buy their products.
As of late, several tablet makers, including HP and Vizio, have made that abundantly clear. Vizio’s 8-inch tablet retails for $299, and HP was recently forced to drop the price of its TouchPad to $399 and $499 for the 16GB and 32GB models, respectively.
Those companies ostensibly believe that they’re onto something with cheaper pricing. They undoubtedly feel that by offering lower prices than that of the iPad 2, they can get some of those customers that don’t want to spend $499 for the cheapest version of Apple’s tablet.
But what those companies don’t realize is that they’re thinking is all wrong. Pricing their products lower won’t help their cause one bit. In fact, it might end up hurting them even more.
Here’s why lower-priced tablets won’t succeed against Apple’s iPad 2.
1. They’re still expensive
Whether vendors want to admit it or not, even at $400, their tablets are quite expensive. Today’s economy is not going all that well, and both consumers and enterprise users aren’t so willing to spend cash. At $400, many people view tablets that they know can’t compete with the iPad 2 as still too expensive. The Vizio tablet is closer to where prices should be, but even then, there’s debate about the true value of a given tablet. Until these companies make customers see intrinsic value to their products’ design, even $300 or $400 might be viewed as too expensive by some folks.
2. The difference isn’t enough
Apple’s cheapest iPad 2 is currently on sale for $499, which means the HP TouchPad is $100 cheaper. Considering most buyers are voting with their dollars that the iPad 2 is more appealing than the TouchPad, HP would have needed to get more distance between the devices to actually capitalize on its cheaper price. The fact is, with its many more applications and superior software, the iPad 2 is a better bet. And $100 isn’t enough to get customers to think otherwise.
3. Android isn’t up to par yet
Other devices, like the Galaxy Tab 10.1 or Motorola Xoom, can’t keep up with the iPad 2 for one key reason: Android. When the Xoom launched, Android’s Honeycomb platform was viewed by critics as not even ready for a public launch. Even Android 3.1, while much nicer, still feels less than polished. But iOS 4 is nothing of the sort. Until Google’s Android platform can trump iOS, no price cut will change the opinions of customers who want a superior product.
4. Neither is WebOS
If Android can’t keep up with iOS, what makes anyone think that WebOS is any different? HP’s operating system comes with some neat features, like being able to tap the tablet against an HP smartphone to transfer content, but it still lacks all the applications on iOS. What’s more, the operating system is still an unknown quantity for many customers. Apple’s iOS, on the other hand, has won consumers’ confidence. Until HP can overcome that identity problem, even its latest price cut won’t matter.
Rivals Need to Compete on Features, Not Price
5. It’s a sign of weakness
One of the biggest problems for vendors offering cheaper tablets is that consumers tend to believe they’re not as nice as more expensive options, like Apple’s iPad. The fact is, companies in any industry often price products cheaper because they don’t deliver the same level of quality as those that are more expensive. Is that the case in the tablet market? That’s up for debate. But consumers looking for a slate might come to that conclusion and quickly opt for the more expensive iPad that they’ve heard good things about.
6. It’s the middle ground
The problem with cheaper tablets, like the TouchPad or the Vizio 8-inch option, is that they’re caught between two boundaries. On the higher end is Apple’s iPad 2-the benchmark in the industry-at $499. On the lower end, Barnes and Noble is selling its Nook Color for $249. So if users really want a cheaper option, they can go for that. The TouchPad and Vizio tablet, among others at their price points, are caught in no-man’s land.
7. Customers are waiting for the iPad 3
Apple has done such a great job of promoting the iPad that customers are more concerned about waiting for the next big thing from the company than actually buying what’s on store shelves right now. Recent rumors suggest a new iPad might launch as early as this fall. Now, some consumers, hoping to get their hands on the latest and greatest device, are waiting for that. So even though competing tablet prices are lower, there is still a group of customers that couldn’t care less.
8. Lower margins aren’t beneficial to anyone
One would logically believe that a company like HP, which priced the TouchPad at $499, had a margin that it was comfortable with at launch. But by dropping the price of the TouchPad, it should be quite interesting to see how much HP is actually making on its tablet sales now. The same can be said for other companies offering cheap options. At the end of the day, these companies have a responsibility to maximize profits and shareholder value. If they’re pricing their products below the market and watching margins drop, they’re not doing themselves or investors any favors.
9. It plays into Apple’s market strategy
By dropping the price of their tablets and making the iPad 2 the more expensive option, the companies reducing prices are making a mistake. Apple’s market strategy is always to be viewed as a premium provider of a premium product. By allowing it to take the lead on expensive pricing, competitors are doing just that. Against many companies, price cuts work. But that’s not the case with Apple.
10. It’s all about differentiation
When it’s all said and done, the companies that want to compete against Apple need to do something special and not try to beat the iPad maker on price. Differentiation means everything in the tablet space. Companies that want to play on the same level as the iPad will need to deliver something different. Pricing isn’t the way to do it. New features, exciting designs and outstanding software will take down the iPad-nothing else.
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