HP Touchpad Sells Out Overnight

Within no time, all the HP Touchpads, boring bricks until this week, sold out almost instantly once the price dropped to $99 from $499.99.

We all remembered an old but important lesson: price makes a difference. And consider the fact that it is an orphan product with no future. Still, shazam, all gone.

I love to study the effects of price on products and have claimed for years that a $99 price point for a tablet would rocket any such device into instant popularity. This sure proves it. We must now consider whether anyone can actually produce a real high-quality pad machine for $99. I ask: why not?

Right now, the touch screen ties up the parts cost of a tablet. How many screens must be made before companies can crank them out for a few dollars each? Screen-centric phones will also head to ridiculously low prices.

I think any company could make hay with a $99 tablet and a $49 iPhone clone.

In the golden age of desktop computing, from 1982-2000, hard disk companies did something interesting. They all priced their products as loss leaders on what they called the learning curve. The learning curve was the predicted future price, which would always be lower than what the current price should be.

So when someone wanted to price a new hard disk, they figured it would get cheaper and cheaper over the next few years. So, they sold drives for what they might, or what they should, sell for two years hence. The concept in play appeared maddening, but it seems to have paid off with higher sales creating lower and lower component costs.

Problematically, by the time the companies caught up with the curve (at the point where they would make serious money), they jumped forward once again with still lower prices. They could never catch the moment where profits were maximized.

The idea resembles a death match strategy in which one hopes every other opponent dies off and the last man standing reaps all the rewards. In the hard disk game, the competition has dwindled down to Seagate and Western Digital. There is no death match with laptops since nobody has the nerve to wage this war any more.

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The whole idea of a laptop death match, based on learning curve pricing, may be the reason Apple sits on $75 billion. Deterred by the massive resource reserve, no other company could outlast Apple if someone staged this stunt. Thus, until further notice, Apple will continue to own the smartphone and the tablet business—the two market segments where learning curve pricing could possibly appear.

We know by the instant sell-out of all HP tablet inventory that at some point, these devices will take over. The public will buy nothing but them once the price gets to $99. Unfortunately, this may take more than five years, based on the slow price evolution.

It took well over a decade for the PC itself to fall below $1000. When these PC machines first appeared, a fully equipped unit ran between $2500-3500. Not until Compaq pushed its $999 machine did the pricing fall apart. Now consumers can purchase a fairly loaded, albeit less powerful, PC for $500—one-fifth the original and typical price. The same one-fifth math, when applied to the tablet, results in $99 for the low-end models. Perfect!

Sadly, we still have years to wait for the tablet at this price. But with this fire sale we just witnessed, we can confidently say these machines are here to stay. What took so long?

Source:http://www.pcmag.com/article2/0,2817,2391650,00.asp?kc=PCRSS05039TX1K0000760