Sound Off: Tablet Pricing Shows Dangerous Assumptions

by Reads (9,644)

 

How does the saying go? There are few things that are certain in this life: death, taxes, and the price of the Motorola Xoom is way too high. Somehow, though, Motorola seems to think that this isn’t so unreasonable.

Recently, Motorola mobility chief Sanjay Jha went on record at the Mobile World Congress, attempting to defend the indisputably high price point of the company’s upcoming tablet.

 

Motorola Xoom“We felt that our ability to deliver 50Mb/s would justify the $799 price point. It is 32 GB with 3G and a free upgrade to 4G,” said Jha. “Being competitive with the iPad is important. We feel that from the hardware and capabilities we deliver, we are at least competitive and in a number of ways better [than the iPad].” So this raises an obvious question: how can Motorola expect its product to sell well — much less compete with the iPad — at a whopping $800?

It’s an expensive leap of faith to take. This will be Motorola’s first outing into the tablet market, so it’s not as if it has a loyal fanbase it can count on to blindly purchase its products regardless of price (like Apple does). Instead, Motorola can only count on those who are looking for a viable alternative to the iPad, and even then, it can only expect those people to follow their interests to a certain point. Paying $800 for an unproven tablet is far beyond that point.

Where’s the Demand?

But Motorola isn’t the only one that doesn’t get it.

We recently ran an article in which we quoted Fred Hickey of the “High-Tech Strategist” and his thoughts about the tablet market. Basically, Hicky maintains that tablet producers are overestimating the demand for their products and as such, they may ultimately have to administer severe price cuts when they find out that what they’re charging just isn’t going to work.

Indeed, this issue with the Xoom pricing is something of a microcosm of the bigger issue of the tablet market and pricing in general. Sure, the $500 iPad seems reasonably priced in comparison to the ridiculously priced Xoom, but if you look at the price of the iPad out of the context of a comparison (with such an overpriced device, no less), that’s still a lot of money for a device that is basically a giant, less portable smartphone. I agree with what Hickey is saying; these manufacturers think that tablets are going to be so popular that it’s safe to have higher price points, but this may not be how it actually plays out.

The iPad Exception

Of course, many will counter by pointing at the sales of the iPad, but I believe that this is an anomaly (again, one that exists in part due to the blind loyalty of the Apple fanbase). What about the sales of just about any other tablet out there in the market? Tablets are coming out of the woodwork now that these companies think they’ll be the next big thing, and they’re all charging hundreds of dollars for their devices that, for the most part, have sold rather poorly.

Maybe somewhere down the road, tablets will become popular enough to prove that these manufacturers will have made the right call, at which point I’ll have to eat my words. But as it stands now, I think by pricing tablets so high, companies like Motorola are putting too much faith in the public’s interest in these devices and this whole situation is an issue of putting the cart before the horse.

So what do you think? Are tablets the next big thing and should be priced as such? Or are manufacturers getting ahead of themselves and charging way too much for products that they believe will be more popular than they actually will be?

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