47 Comments

Summary:

The web is buzzing with several HP TouchPad price discounts on the webOS tablet in the U.S. That’s leading to many “doom and gloom for the TouchPad” conversation, but I disagree. There are several solid reasons why this strategy is exactly what HP needs to do.

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The web is buzzing with several HP TouchPad price discounts and other great deals on the webOS tablet in the U.S. Woot.com is offering the 16 GB version for $379 today, while HP has a weekend special of $100 off for both HP TouchPad models, making them $399 and $499. That matches a current Staples promotion, but it gets even better at that retail outlet, with another $100 off coupon from FatWallet, dropping the entry level tablet to just $299.

Given that the recent software update made the TouchPad much better, I’m likely to bite on this deal. But do all of these discounted prices mean the TouchPad is already a flop? Some are implying that on Twitter today, due mainly to the Woot deal.

Nothing against these folks and many others that tweeted similar doom and gloom thoughts; I respect their opinions, but I disagree for several reasons.

1. If you’re paying full MSRP for an HP product, you’re doing it wrong. The company constantly discounts nearly all of its products on a rolling basis. This isn’t a new strategy, either. HP’s standard operating procedure is to run various special deals, instant rebates or small coupon code promotions for as long as I can remember. By doing this across a wide product mix, HP can better combat pricing promotions against competitors. Need an example? I recently bought a $199 wireless printer from HP that supports Apple’s AirPrint and Google Cloud Print. The cost? $79 shipped, because I waited for an instant rebate, which just happend to coincide with a special discount. By the way, the printer works great with the TouchPad, too.

2. Sales will attract developers (which will attract sales). HP knows it has to build up a wide number of compelling applications for its webOS product line. Developers are understandably focused on money so iOS has the bulk of their attention, followed by Android. Those two platforms are firmly entrenched at the top, but it’s a land grab for platform no. 3. Microsoft appears to be the front-runner here with Windows Phone 7, ahead of BlackBerry and webOS, so HP needs to jumpstart developer attention. It can afford to give up short term device profits if it brings more apps in the long term, because more compelling apps can help sell more tablets in the future.

3. You don’t spend $1.2 billion and call it quits early. That’s the amount that HP spent to buy Palm in a transition from the PC world to the mobile space. Aside from iPaq handhelds and a few early smarpthones, HP really hasn’t been in the mobile game. It is the no. 1 PC maker in the world, but that market is slowing just as the mobile market is growing. This isn’t a $1.2 billion fire sale, folks. Essentially, that’s what Steven DeWitt, SVP & GM, of HP’s webOS global business unit Personal Systems Group tweeted this morning: “Its about building new relations thru webOS. $100 off a HP Touchpad is a great deal. We r in this for the long haul!”

4. The BOM for both tablets is under these reduced prices. A recent iSuppli teardown pegged the materials cost for the 16 GB and 32 GB TouchPad at $296 and $318, respectively. Add in an estimated $10 per device for manufacturing and the production prices are still well under the special deals — except for that extra $100 coupon, which isn’t likely to appear often. There are indeed marketing and other costs that cut into device profits, but HP isn’t taking a financial bath on these deals, even if some of the lower price points happen to stick.

5. HP will still sell tablets at “full price”; even today. For all of the tweets sharing the special TouchPad deals, a number of customers will buy the tablets at full price. They simply may not hear about the special. And just like with many HP promotions, if you don’t know about them, you might not see them; even on HP’s own site. While writing this article, I searched for the HP TouchPad product page on Google and added a 16 GB tablet to my cart. There was a $50 instant rebate, but that’s not the $399 deal. If I didn’t know any better, I’d think I was getting a great discount and never be the wiser that I could save another $50 just by using a different entry point to HP’s site.

We often say the tablet market is different from the PC market, and in many aspect, it is. But HP has become the top PC seller in the world by using these pricing strategies, and there’s no reason it shouldn’t do the same thing where it can in the tablet market. Put another way: if you miss this weekend’s TouchPad deals, don’t worry, because I expect to see more in the future. Then again, I’m not waiting around: $299 is too good a deal for me to pass up!

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  1. Lee J. Mendelson Friday, August 5, 2011

    C’mon Kevin. You’ve been around the gadget block to know that steep discounts on new gadget hardware is not a portend of good things. Either a new model is imminently on the way (highly doubtful), the gadget was woefully overpriced (maybe), or, as is most likely, the gadget is just not moving. Maybe the software is great, maybe the updates made it more usable – but it is going to be awfully difficult to not believe that this tablet is, unfortunately, D.O.A.

    1. Lee, there actually *is* a new model coming out: with a slightly faster CPU and with integrated 3G. And if the gadget was woefully overpriced as you say, doesn’t this price make more sense for the market? In any case, if you were HP, what would *you* do to spur sales? I think this is exactly what they need to do on occasion. People say to compete with the iPad, you have to either be better, different or lower priced. We can argue if the TouchPad is better, but it’s certainly different and now lower priced.

      1. This price may have made more sense if it was the price out of the gate. But it is extraordinarily difficult to believe that this could even be remotely interpreted as a good thing. The TouchPad was only released little more then a month ago! Now it is being discounted 25% or more – how often do you see such huge discounts on new tech so quickly after release? I wish that this was a competitor to Apple since I believe that competition is good for the industry – but it is hard to see this as anything other then a panic move.

      2. I understand why you (and others) see this as a negative. But it also creates a sense of a “good deal” pyschologically, which could spur some to buy. I’ve heard a number of folks that said, “the TouchPad looks nice, but it’s priced too high.” These are the folks that are jumping on the deal.

        In terms of seeing this as a panic move: does it really make sense to fire sale a failed device that launched about a month ago? I don’t think so.

      3. Lee, I just wanted to point out that in HP’s case, as mentioned in Kevin’s article, Sales early on in a product cycle is completely normal. I know it’s weird but HP’s been doing this since practically forever.

        For example check out their latest laptop the dv6z:
        http://www.shopping.hp.com/webapp/shopping/computer_can_series.do?storeName=computer_store&category=notebooks&a1=Category&v1=High+performance&series_name=dv6zqe_series&jumpid=in_R329_prodexp/hhoslp/psg/notebooks/High_performance/dv6zqe_series
        it has numerous free upgrades. You may think this is a cheap marketing scheme to sell more laptops, but in reality they always remove the offers, or downgrade them after a while.

        Check out the dm1z
        http://www.shopping.hp.com/webapp/shopping/series_can.do?storeName=computer_store&landing=notebooks&a1=Category&v1=Mini&jumpid=in_R329_prodexp/hhoslp/psg/notebooks/Mini
        At the products introduction they were offering a 320gb hard drive, and more ram, but it was removed.

        I don’t know if HP should be doing this for the tablet market, but as Kevin states in the article, there’s really no reason not to.

    2. This is HP way of selling more after the price drop. So HP sells x amount of TouchPad’s at cost for the next 3 days then others will want TouchPad and buy at regular price. I got mine yesterday at Office Depot because they matched the Staples price, so I payed $295 plus tax.

      1. Lee J. Mendelson HG Friday, August 5, 2011

        I have to believe that HP has a huge marketing department that is a lot smarter then me at these types of things, but I am just not buying it that the game plan from the beginning was to make an attractive piece of hardware, overprice it at launch, and then drop the price by 25% or more thirty days out to spur sales as a marketing ploy.

        It certainly makes more more sense to me to fire sale a device sooner rather then later if you’re looking to spur sales. At Staples and apparently Office Depot through price matching, we’re talking $200.00 off a $500.00 device. 40% off 30 days after launch smells like panic to me.

    3. Or, perhaps HP is doing some “unmarketing”? Not all businesses have to follow suit of Apple. Thinking outside the box can take someone a long way. I see these deals as getting the TouchPad in more hands, and thus, increasing social word of mouth. Read Guy Kawasaki’s book, Enchantment, and you’ll get what I mean.

  2. Sohrob Tahmasebi Friday, August 5, 2011

    Who in their right mind would buy a tablet that wasn’t the iPad? You may as well flush your money down a toilet. Silly I say, silly.

    1. Those who don’t care for Apple…

    2. People like me, who want the flexibility to use my device as I wish, without the insecurity of that which is Android…

    3. Uggh, yet another obnoxious Apple fanatic with the Kool-Aid.

    4. People like me, perhaps? Oh and my wife, sister, mother, and father. Not even joking.

    5. people that hate (ABSOLUTELY HATE) iTunes…

    6. Have you even used one extensively with daily use? It’s miles ahead of iOS

  3. Greg Strockbine Friday, August 5, 2011

    webos is interesting from a developer’s point of view. It has node.js built in. My wife has an iPad and loves it, looks a little bit confining to me.

  4. Hey Kevin, I am with you. I wouldn’t own an Apple decide, MS is not ready got tablets and Android is too pricey for its mediocre applications on the big screen.
    If HP had the same offer this weekend in Canada I would have grabbed one for that much. 340$ including taxes here, would be the best deal I can find for a reader, video chats and internet browsing.

    1. so many typos I apologize

  5. Price: $599.99
    Instant Savings: -$100.00
    Price after savings: $499.99Each

    **While supplies last. May not be valid in combination with other offers. Offer subject to change. No cash/credit back

    Offer Code: 28065 will be automatically added to your cart and applied to your subtotal at checkout

  6. Prices down in a month, brings lots of attention from media, and bad publicity. This is the kind of move you make to get rid of stock and move on. Of course there will be additional sales, but the image of the product and company is damaged. HP seems to be putting all their bets on the next Touchpad. It might not spell disaster, but rather spell disast…

  7. Randall Bennett Friday, August 5, 2011

    Turns out someone I know ended up buying me one offa woot. Pretty awesome. I’ll be probably developing WebOS apps for it, since it’s all cozy with node and the sort.

  8. You guys keep talking about this price drop as if its permanent Ala the 3DS… this is just a 2 day sale, after the 7th, its back to the normal price, so no, this isn’t them getting desparate or panicking, and it will put the touch pad in many more hands.

  9. Glen Bierworth Friday, August 5, 2011

    Went to Staples and the “sales”person would not honor the $100.00 discount HP was offering with the coupon from Fatwallet. So it was going to be $349 for the 16gig version. I didn’t get it. Bummed. I will wait for the next “fire sale”.

    1. Is there only one Staples store where you live? I believe the kind folks at Webosroundup.com suggested calling ahead first, to ensure that particular store would honor the discount. I ordered mine Sunday and received it Tuesday. I love webOS and my new Touchpad is the perfect compliment to my Pre+.

  10. It’s so frustrating listening to people hollar doom and gloom because of a price drop. My memory of the most constant criticism of the Touchpad was the price. People wanted a cheaper option than the iPad. Now they have it for a weekend.

    If there was never another piece of software made for the Touchpad, and you had what came with it, you would have a fantastic tablet for business or pleasure that is a breeze to use, looks beautiful, and surfs the web better than other tableets. Sounds like its worth the price to me.

    The best thing about a real free market is demand drives price. If a lower price raises demand, everyone wins.

    Apple can have their strategies, and let’s let HP have theirs. I have been waiting for a discount on a Touchpad as the economy is pretty crappy right now. Now, with a big discount like this, I think I’m in for the Touchpad this weekend.

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