OEMs: Tablets are impulse purchases and different pricing rules apply

OEMs: Tablets are impulse purchases and different pricing rules apply

Summary: The XOOM is definitely loaded to the gills with features and hardware components, but what OEMs like Motorola are about to discover is that different pricing rules apply for tablets.

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My post yesterday detailing why I wouldn't be buying the hottest tablet not built by Apple due to its suggested price set off a storm of comments and tweets. The Motorola XOOM is certainly the first tablet to appear that is capable of competing with the iPad, and some feel it's worth a price premium. The XOOM is definitely loaded to the gills with features and hardware components, but what OEMs like Motorola and HP are about to discover as their products hit the market is that different pricing rules apply for tablets.

The decision to buy a tablet, and I've bought several, is what I believe is an impulse purchase. Tablets are a totally different beast in the consumer electronics space, and especially in the personal computing segment. Tablets do not replace existing electronics for the consumer, and thus prospective buyers must get the impulse to pull the trigger on the purchase. This forces the OEM to price the tablet accordingly, as the higher the price the harder it is for the consumer to cave in to the impulse to buy it.

Apple understood this with the iPad at launch, which is why the original message about the slate from Cupertino revolved around how "magical" it is. Steve Jobs understood that prospective buyers couldn't be sold that the totally new iPad would replace existing technology, because it doesn't. Gadgets that replace other electronics can be compared by the consumer to determine if the new gadget is a good value. Totally new tools like tablets must sell on the impression the buyer has of how useful (or cool) the new gadget must be. That turns the purchase decision into an impulse buy.

Impulse purchases require that the price to be low enough to justify satisfying the desire to pull out the credit card. Conversations I've had with a lot of folks lead me to place that price point around $500. More than that and a lot of people won't satisfy the impulse to purchase. It doesn't matter how many technical goodies the OEM has stuffed in the tablet, as they are not viewed as a product that fills a definite need for the consumer; if the price rises much above that $500 mark the impulse to purchase is easily squashed.

This puts a burden on OEMs coming to market with unproven products, as historically they would take the route Motorola has taken with the XOOM and stuff it with good hardware features. This drives the cost to produce it up significantly, and the resultant higher selling price fights the consumer's impulse to purchase. Consumers will compare pricing with the competition, especially the iPad, and will be more prone to delay the purchase if the price is above the impulse trigger. They will also put the wallet away if the price is above that of the iPad. Those who haven't purchased an iPad yet are already on the fence about the impulse to jump, and higher pricing isn't going to convince them to do so now.

Topics: Tablets, Hardware, Laptops, Mobility

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  • RE: OEMs: Tablets are impulse purchases and different pricing rules apply

    Very valid point. As a consumer, I would go to buy a tablet due to primarily two reasons, 1. show-off (here I would go with majority and iPad is my choice), 2. impulse (because everyone has something). If I am category type 2, I would either choose iPad or look for something that is cheaper than that. I know as a casual user, all I need could be a better desktop with decent netbook/notebook. But my impulse pushes me towards buying tablet/slate and then the social symbol, and other factors blend in and push me towards iPad or something better and cheaper than that. Currently no Android tablet fits into that boot, so I would go with iPad.
    Ok, this as a casual user with impulse to buy a tablet.
    But as a techie/geek I could go with a good one or nothing. Here fanboy in me pull the impulse and takes over to decide. If I am in control of myself, then I wouldn't buy any of those unless I see a clear need for tablet/slate.
    Ram U
    • As a consumer...

      @Rama.NET :... I would disagree with your first point, though I won't doubt that 'status' means a lot to some people. I would also disagree with your description of the second point, though to a lesser extent.

      Yes, I bought an iPad on impulse--but more for what I perceived it could do for me than for any concept of Status or 'because everyone else has one'--they didn't. I received one of the first 3G models shipped. Since then it's proven to be far more useful than any laptop I've owned simply due to its portability.

      That said, Android and WP7 tablets could be equally as useful if--and I do mean <i>IF</i>--they integrate well with desktop software and offer a reliable and intuitive interface. I've read many good words about both platforms, but the issues still seem excessive due to a perceived lack of coordination between Google, Microsoft and the OEMs.

      As a techie, I've found and chosen the hardware that best meets my needs in computers, digital music, cellular telephony and now mobile computing; my choices differ from the majority. My choices, so far, have proven more reliable and enduring than any competing device I've ever used. These choices could change if the competition improves.
      Vulpinemac
      • RE: OEMs: Tablets are impulse purchases and different pricing rules apply

        @vulpine@...
        <br>Oops. I missed one word and it totally changed the meaning. Sorry. I meant casual consumer not consumer. A casual consumer IMO is a person, who might not have real reason to go for a tablet/slate except for casual surfing at free time while home sitting in a couch and sipping coffee and watching TV. For them cheaper alternatives like netbooks would be sufficient. They would go for iPads or tablets for the reasons I just mentioned above.

        <br>Neither James nor I ever said that all the ones that buy tablets are buying on an impulse or something else. There are genuine users like you. I have iPad and Galaxy Tab and I also have few Windows UMPCs including Shift. All of them have their own purpose in my universe. But I also know few of my friends who have iPads, which are less or under utilized but they were bought because having an iPhone and iPad is a social status to them. I am not criticizing them, I am appreciating Apple's Marketing department. When these non iOS device makers grow up like Apple's they will have market other wise they are not doomed, but will not reach the same status. This is not 80s, where Mac lost to PC clones. This is 21st century and things are little different.
        Ram U
    • RE: OEMs: Tablets are impulse purchases and different pricing rules apply

      @Rama.NET
      This article (and your reply) are describing elective purchases as "impulse buys." Retail channels define impulse buys as something you decide to purchase on a whim while in the store. This means there is no research, previous thinking, or thought involved. The DVDs, books, and candy which are in the checkout lanes at Best Buy are specifically placed there to be impulse buys. Impulse buys are a category of sub $20 items, in most cases. I doubt we will ever see $500 tablet computers alongside the Twizzlers and gum in Best Buy's checkout lanes.

      Elective purchases, on the other hand, are things you want, but don't really need. They're those things you can't quite rationally justify buying, but you want it anyway because it's cool or your friends have it. You justify it by thinking things like I -could- use this while watching TV or sitting in waiting rooms or whatever. You convince yourself the item will improve your life to justify the cash spent. These are more substantial expenditures than impulse buys and require some thought. Tablet computers fall into that category for the vast majority of people.
      BillDem
      • RE: OEMs: Tablets are impulse purchases and different pricing rules apply

        @BillDem
        yes, I complete agree with you.
        Ram U
      • You're splitting hairs

        @BillDem

        An impulse purchase CAN be a big ticket item including cars. Impulse purchases tend to appeal to emotion rather than logic. Now while there may be some who logically buy an iPad for specific uses like vulpine@ here but I think the vast majority buy it on impulse. But as I said below, as time goes on the iPad will be replaced and more of those will be based upon replacement "need", except us early adopters who just HAVE to have the newest. But yes, the many 1000's who stood in line to be the first to buy an iPad that was pure impulse purchasing.
        oncall
      • Good points

        @BillDem

        "You convince yourself the item will improve your life to justify the cash spent."

        And guess what, with a 95% user satisfaction rating, the majority of iPad users feel the cash spent was well justified. The typical response I see is "I bought the iPad for X tasks and found myself using it in more ways than expected." This is why Apple is winning and why it's very important for competitors to undercut Apple on pricing. But doesn't seem like they're getting the message.
        dave95.
      • RE: OEMs: Tablets are impulse purchases and different pricing rules apply

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  • two points

    1: We don't know the final Xoom price. We have read leaks regarding a "minimum advertised price" and a Best Buy price. But both are far from confirmed.

    2: You claim, "The XOOM is definitely loaded to the gills with features..." What features? Has anyone outside of a select group of developers actually seen a fully operational Xoom? At CES, they had a unit running a demo, and nothing more.

    Ultimately, how can we pass judgement on the Xoom when we haven't seen it do anything in real-time and we don't know the cost?
    JamisonD
    • RE: OEMs: Tablets are impulse purchases and different pricing rules apply

      @JamisonD I have played with a XOOM and have written about it on this blog.
      JamesKendrick
  • RE: OEMs: Tablets are impulse purchases and different pricing rules apply

    Impulse?? Are you kidding me? Yes, people right now have the money to just walk into an Apple store and buy an iPad sight unseen....

    How about maybe giving people credit for researching and using actually using the device before they buy it? That's one of the things I always liked about Apple is you can play with the device before you decide to buy it...

    I don't drop nearly a thousand dollars on impulse, I may have the money for it but I do my research before I make the purchase...I researched my LED TV for about a month before I finally decided which brand I wanted, and only after choosing between three and going into the store and using each one.

    The same went for the iPad, I didn't run in to the store and buy one at launch, I read about it, read what people had to say, and then went and used one in the Apple store before I decided to get it.

    I think you need to redefine your view of what an impulse buy is especially in today's economy...buying Call of Duty Black Ops, that's an impulse buy.....but not a high-dollar item like an iPad.
    Ron Burgundy
    • Agree, not impulse

      @Ron Burgundy

      I see my wife moving around the house carrying her 15" laptop. I bought her a netbook, but she prefers her full size laptop. 99% of her activities are web based with little need for a physical keyboard.

      I am just waiting for the right tablet at the right price to get her one to try out. Hardly an impulse.
      Economister
      • RE: OEMs: Tablets are impulse purchases and different pricing rules apply

        @Economister
        buy her a 13.3" laptop.
        FADS_z
      • Well,.......

        @FADS_z

        I would rather she keeps her 15" laptop, which she loves, and then get her a tablet also.
        Economister
      • RE: OEMs: Tablets are impulse purchases and different pricing rules apply

        @Economister
        Yes it is stop trying to justify your lack of self control tablets are rip offs why does anyone that already have a computer inthere home desktop/laptop/netbook/notebook need with another one? You don't buy two houses in the same community do yuo than why would you buy TABLET ONLY BECUASE ITS COOL.
        jtpfla3
      • RE: OEMs: Tablets are impulse purchases and different pricing rules apply

        @jtpfla3 Do you have more than one TV? Do you have more than one radio on you home? Do you have more forks than you normally use at one sitting? Sure, most people do not buy more than on house in the same neighborhood but I have, it's called rental property. Did my wife "need" the iPad I impulsively bought her for Christmas when she has a laptop and a netbook, of course not. Do we have a lot of stuff we don't "need"? Just like most people, of course we do. Did I buy it to be cool? Considering I rarely mention it and do not take it anywhere myself, no. To each their own but I buy stuff not only because I need it, but also when I just want it.

        Now on topic, at $500 I could justify the impulse but much above that, especially at $700 it's not very likely.
        non-biased
    • RE: OEMs: Tablets are impulse purchases and different pricing rules apply

      @Ron Burgundy I did not preclude the consumer going to the store and trying a tablet. I clearly stated what I mean by impulse buy- that the tablet doesn't fit existing computing needs exactly and thus the consumer must feel good about the purchase. That's all I said, and I'm convinced that's true.
      JamesKendrick
      • Agree

        @JamesKendrick

        The iPad does not fit existing computing needs. Very few, if any, are buying an iPad to replace an aging computer or an old tablet. It is a new-type device purchase with unproven uses for the new user and the only REAL measure a new purchaser has of the products desirability is the anticipation of how much they will use/enjoy this new product. Now, assuming some who purchase iPad forgo new laptop/PC purchases those users will eventually replace existing tablets, at that point it will qualify as a "need" purchase and the new tablets will be measured against their existing devices in specs and price.
        oncall
      • RE: OEMs: Tablets are impulse purchases and different pricing rules apply

        @JamesKendrick - I agree - also...I got the NOOKCOLOR rooted it, as SAMSUNG (my 1st choice) has lost me due to the VIBRANT issues, 10" is to large for me and the price would have stop my purchase anyways. My netbook, Laptop, Desktop(s), phone all have a specific role and the extra device, for me, needed to fit between these. While the NOOKCOLOR is on the heavy side my impulse was to buy it at just a low cost (so I got two at that price).
        heredavid
      • &quot;... the tablet doesn't fit existing computing needs...&quot;

        @JamesKendrick :"... exactly..."<br>As long as you include that qualifier, I will agree with you. The iPad lacks one single feature that I've been waiting more than 20 years to see--a notepad function that recognizes handwriting and converts it to text on the fly. Apple has a patent application out for that exact function and I believe that will make the iPad perfect in my eyes. Yes, my iPad purchase was a sight-unseen, impulse buy, but it was based on over a year of excellent service by my iPhone 3G and my wife's iPod Touch at the time. I felt good about the purchase even before I owned the iPad.<br><br>@oncall:<br>I respectfully disagree with your definitive statement; the iPad fits many varied computing needs for me as a member of two completely different charity organizations. I've used it as a database manager, presentation creator and projector, slideshow frame at events, photo previewer and editor, pretty much everything that is supposed to belong to the realm of laptop computers. Most definitely, the tablet does fit existing computing needs.
        Vulpinemac