“Microsoft Surface to retail at $199!” The various headlines around the web are going to cause problems for Microsoft.
I’ve no inside information on the launch price of the Surface RT, but let’s assume it’s true. Is Microsoft taking $80 out of that price to pay for the operating system? Probably not, so right there they’ve got an advantage of almost a third of the retail price over their hardware partners. The price is comparable to the Nexus 7, but the bill of materials is likely much higher.
Can Microsoft make it up on the back-end, relying on sales through the Windows 8 app store and Xbox Live annual memberships to reach a break even point? Even if they can manage to make it, I doubt their hardware partners can come close to matching them while paying for the OS with none of the post-sale income streams to help boost the bottom line.
The $199 is challenging in more ways than one, but if it Microsoft do release the Surface at that price point, it’s an incredibly aggressive move on their part to grab market and mind share.
On the flip side, if the perception of the Surface RT costing $199 manages to establish itself, then any price above that is going to make consumers think twice about buying the tablet. Even a $299 price tag, which right now seems a reasonable number, is going to make the Surface RT look expensive.
By leaving a void of information around the price Microsoft has left itself open to this problem – saying ‘competitively priced’ is not enough when you have the Nexus 7 at $199, the Apple iPad available for upwards of $800, and the Surface RT will be somewhere in-between.
Microsoft needs to get on top of this story and ensure that people are delighted when they see the price of the Surface RT, not shocked. Expectations need to be set, and then exceeded at the point of delivery.