Has HP done a "New Coke" with WebOS and tablets?

Has HP done a "New Coke" with WebOS and tablets?

Summary: Could the cancellation of WebOS been a guerrilla marketing campaign on a grand scale?

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In 1985, the Coca-Cola Corporation was in the doldrums. From the dominant position with over 60% of the soft drink business its sales had declined to little more than 25% of what had become a very competitive business. Then in April of 1985, Coca-Cola executed what became one of the most brilliant marketing screw ups in history; they changed the taste of Coca-Cola.

Thinking that they needed to make a significant change to their business to recapture market share, Coca-Cola decided that the best thing to do would be to modernize the taste of their flagship product.  What followed was a textbook example of what not to do with marketing.  For those of you who didn't live through it, Wiki offers a fairly complete story of what happened, and you can also read the official Coca-Cola corporate position on the fiasco.

The bottom line was this; regardless of what marketing and executive management thought before the taste change, tampering with the Coca-Cola product drew the ire of such a significant, and vocal, percentage of the customer base, that they were forced to recant the change only three months later.

But here's the kicker; the surrounding publicity of both the screwup and the re-release of Coca-Cola got people talking about Coca-Cola, raised public awareness, and drove up sales numbers significantly.  Coca-Cola came back to a premier position in the minds of consumers, and, more than 30 years later, are still there.

So let's look at WebOS and the HP tablet.

1.       HP loudly proclaims that their PC division is history

2.       The media goes on a feeding frenzy

3.       HP cuts the price of the tablets

4.       Tablets sell out everywhere.

5.       The media talks about possible successor owners for WebOS and the HP tablets

6.       Analysts talk about how the best choice is for the marginally profitable HP PC (and tablet) division is to be spun off  as its own business

7.       HP announces that they will be at least one more manufacturing run of the HP tablet

8.       Media goes wild and consumers are on edge to get their new HP TouchPad,

Suddenly the HP tablets are everywhere; an instant user base has sprung up, dwarfing the base of any other tablet than the iPad.  HP seems to be wavering on the hard line that the tablet business was done with.

Yet with this supposed fire sale, HP has done what no other non-Apple tab let vendor has been able to accomplish; jump start the sales and market for a new tablet device and operating system.

I think I might hoist a Coke II and wish HP luck...

Topics: Hardware, Hewlett-Packard, Laptops, Mobility, Operating Systems, Tablets

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77 comments
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  • Except that Coca-Cola wasn't losing money on New Coke sales.

    The trick is to turn a profit, unfortunately.
    bstringy
    • RE: Has HP done a

      @bstringy

      Establish a large enough user base and release a 2nd generation product at as low a cost possible. Get developers on board and build the market.

      It's worked for Microsoft and the Xbox, though they have the chance to make money on software sales there. But with huge third-party software support they developed what has become the dominant gaming console position.
      David Chernicoff
      • I don't understand why the tablet market isn't approached like gaming

        @David Chernicoff

        After all, the market place for each of these tablet OSes give the manufacturer a 30% cut of the sale price. That's better than Nintendo, Microsoft or Sony get off a 3rd party game. So sell the tablet at a loss for the long term prospect of winning. I had the same thought you did as soon as I read about the additional run of tablets HP is doing. "Citing customer demand?" That seems funny to me since no one was demanding them til they started selling at a loss. Now they'll have a user base, they'll have better developer support since the users are there now... They could keep this up for another 6 months, release a TouchPad 2 that sells at cost rather than a loss, and by the time the TouchPad 3 comes around they may be able to sell for a profit.

        Somehow I don't think HP is that sharp, but we'll see...
        LiquidLearner
      • How big a user base can HP afford to build?

        @David Chernicoff

        At a loss of $200 per device, this can get expensive.
        msalzberg
      • RE: Has HP done a

        @David Chernicoff
        It is a big gamble for HP. To follow this model they will have to battle Apple on one side and Android on the other all the time making a loss for years in the amount of billions of dollars. MS can sell their XBox at a loss because games are like $80 earch and they get a cut. So to break even they probably need to sell about 5 games per XBox. HP would need to sell about 200 Apps per tablet (based roughly on 30% of $3.00 - the average selling price of an App) and based on $300 (Manufacturing Cost)-$100 (Sale price) being the loss of each tablet = $200 loss per tablet. All the time Apple sell millions of tablets and Android are continually biting at HP heels as tablets come on the market and then sell at firesale prices as they go under.
        Big gamble but HP may have the financial backing to take it on...but I doubt it.
        global.philosopher
      • RE: Has HP done a

        @global.philosopher No they wouldn't! Books, movies and Apps combined would make this far less...

        The Movie service will net them somewhere close to 50% and the books even at 30% would have a typical price tag of $9 for Casual Reading and more for Technical Reading.

        In short, HP could make $200 per tablet up within a year and possibly even more if some of the games follow the Honeycomb / iPad 2 pricing models because we would then see them selling $6.99 to $9.99 games.
        slickjim
      • RE: Has HP done a

        @msalzberg 10 Million Tablets would cost HP 2 Billion Dollars but if they recoup 3 Billion in sales of Apps, then it isn't a bad deal at all!
        slickjim
      • RE: Has HP done a

        @David Chernicoff

        There is no comparison to the xBox except that the TouchPad is being sold at a loss -- and a major one at that. The monetization strategies of the xBox (and the Playstation for that matter) were planned ahead of time. Even at that, the xBox has only recently become profitable. Before the Kinect, xBox was the goto whipping boy for ABMers.

        The TouchPad has no such plan in place. Until HP announces otherwise, the TouchPad is dead. With that go any serious developers and any chance to turn a profit.

        Let's assume, for a moment that they do come out and say that the TouchPad is no longer dead. What, exactly, is their monetization plan? They couldn't possibly sell enough applications to recoup their losses.

        It's actually sad that HP couldn't find a way to capitalize on the small but zealous population of webOS fanatics. Maybe in death they will, but that seems highly unlikely to me.
        Rich Miles
      • RE: Has HP done a

        @David Chernicoff <br><br>XBox, from what I understand, is still billions in the red. They could subsidize XBox from Windows and Office. HP is putting 10 of 13 billion into Autonomy. I don't think they have the cash to keep this up. Also, what a chilling affect this would have on other makers. The table stakes is $150m just to get maybe a million users. Finally, what happens when they, inevitably, need to jack the price back up?
        dhmccoy
      • No, here's what really happened

        HP produced a new soft drink HP-Cola to compete with Coke. The problem was, everyone who tried it thought it tasted terrible and weren't buying any. So HP reduced the price of their soft drink twice. Still no good. So cutting their losses, they canceled the product, and sold off remaining inventory at Sam's club for $1 a case. The drink sold like crazy. The press then declared HP-Cola a success, while friends of those who bought the HP-Cola told them that if you mixed it with 2 parts Coke and one part HP-Cola, it didn't taste too bad.
        baggins_z
    • RE: Has HP done a

      @bstringy Hello! HP Controls everything! Movies, Apps! You don't think they will turn a profit? This is like the Game Console Market where you take a loss on the hardware but make up for it in software, and I have been saying that this whole thing is a marketing stunt!
      slickjim
    • RE: Has HP done a

      @bstringy IF it were true, I think this would be considered a loss leader strategy. Take a loss on the first round to build a user base which would increase developer interest. Then take the price back to normal after sufficient applications and support have materialized. The problem with this theory is that HP would need to call this an "introductory price" not a "closeout price."

      Also, HP is NOT proclaiming that their PC division is history. They have said from the start that they are spinning the PC division off as a separate company, rather than a division. There is a HUGE difference. This wasn't the analysts' idea, it was HP's original statement.
      BillDem
    • RE: Has HP done a

      @bstringy We lose money on every sale, but we make it up with volume....
      S_Deemer
    • RE: Has HP done a

      @baggins_z

      Except that everyone who tried HP-Cola didn't think it tasted terrible. They thought it tasted better than anything else out there. The problem was that vending machines refused to carry the beverage because they were focused on Coke and Pepsi. HP-Cola despite the well-received product, didn't want to risk the money to get it introduced to all the Coke and Pepsi drinkers.
      bmacfarland
  • RE: Has HP done a

    What a load of bull ****! HP is offering another round of tablets because it has obligations with the component makers and instead of taking a hit of $300 per tablet, they take a hit of $200 and also make another $100 per tablet when they sell WebOS because of market position. This is a perfect example of how to minimize the losses. If HP was in place of wall street, we would not have had financial meltdown!
    browser.
    • RE: Has HP done a

      @browser. The real cause of the meltdown was the personal greed of those Wall Street characters.
      pharaoh127
  • RE: Has HP done a

    Was this a brilliant marketing plan or just a hail Mary pass.<br>I will leave it up to others to try to sort that out.<br><br>But what is most important about hp's fire sale is that it proved a new operating system can make it if it is priced right. When the 2nd production run sells out as fast or faster than the first fire sale, This will open up the eyes of their suppliers and manufacter's. (bankers too) Allowing hp to negoitiate better prices for the touchpad. Or the buyer of their consumer pc/tablet portion of the bussiness.<br><br>If hp does sell they will command a higher price for selling it. While it will be a loss on their books a 99 dollars, its better than a complete loss, while at the same time making it a easier sell.<br><br>However it would'nt surprise me if they kept the tablet portion and rewrote the contracts with the suppliers for the parts, and manufacturing facilitys and were able to sell it at around the 300 dollar range.<br><br>Just think they now have a much bigger market and a ton of free advertising, It will be interesting to watch this all play out.
    darkside6966@...
    • RE: Has HP done a

      @darkside6966@...<br>"a new operating system can make it if it is priced right". Yeah but what is the right price. If iPads for selling for $1 each then you could argue that is the right price as they would walk out the door...but then again they are walking out the door at $500.<br>The right price has to be at least for the business model to turn a profit (There is a thing called Opportunity Cost so breaking even is not a good business model). $100 is not the right price because no company, not even Apple with its huge App catalogue and premium Apps could sustain that price. The right price is probably above cost (regardless of App sales...this is not the same model as the Game consoles where games are like $80 each). Cost is about $300 so anything below that for a 9-10 inch tablet is not the right price. I bet HP new they coudn't sell them at $300 either and that is why they are exitting the market. Better to use that R&D on something that will actually create a profit for the company.
      global.philosopher
      • RE: Has HP done a

        @global.philosopher Except that HP did sell them out at Staples at the $299 price when they lowered the price to $399 and had the $100 coupon deal.

        Also they are selling for $250+ on Ebay right now with no problems, despite being a dead platform. Seems like they could have sold at $300 with little issue.
        bmacfarland
    • RE: Has HP done a

      @darkside6966@... "a new operating system can make it if it is priced right"

      I'm on the HP short list (I hope) for a second round TouchPad. I really don't care if HP supports WebOS ? I figure if there are enough TouchPads out there, hackers will port Android and possibly Ubuntu to it. For $99, I'm willing to take a chance to learn something new.
      S_Deemer