I guarantee you that the price of the Surface will shock you

Let’s agree on one thing right now – whatever the price of the Surface is there will be an uproar. You agree with me, right?  OK let’s break it down, working off the the WinRT 32gb wifi version. It’s a 10” ARM based tablet and what do those cost? Let’s see, the iPad  starts at $500 for the 16GB version. Let’s peruse some Android tablets and…yeah $500 gets you a new CPU and $400 gets you an older model. Ok but what about the new Win8 tablets that are available for pre-order?  Asus Vivo RT is $600 for 32GB. I know I heard more numbers and they all felt in line with Android tablets.

But wait, we heard that the Surface was $300, right? OK enough background, let’s do this:

If the pricing comes in at $300 it turns the market on its head. It’s clearly cheaper than the rest of the market for the product regardless of OS. And while the fans will go crazy it will also ruin relationships with OEMs. It’s one thing to compete with them but it’s another to blow them out of the water by cutting your price to half of theirs after getting them all excited to partner with you on this new journey. The more I think about it, the more I think $300 is not the price.

Let’s do $500. That’s quite possible. However, it’s $200 more than Ballmer told us it was going to be, right? I mean, that’s crap. We were told we were getting a $300 tablet and that’s why I keep throwing my money at the screen.  [And yes there’s irony in ‘told’ ] However, it’s still cheaper than the market for this hardware set and it’s priced a lot better than an iPad. Yes, a lot. The build quality on the Surface is insane. Add to that the included cover and  there’s a premium piece of software included(yes Office I’m talking about you). But of course, the printed price of $500 is the same as an iPad so it’s not cheap enough (to the masses that compare things on price, not specs/quality).

OK but what about $400? That’s an oddball number. You rarely see items sell for numbers like $400 because mentally it’s a number that sounds expensive. Anyone in sales chime in here but there is a psychology to pricing and it’s the sort of number that sounds expensive while being relatively cheap. Where $300 seems relatively inexpensive, $400 feels relatively expensive. And if you’re willing to pay a premium then you’re likely to get up to $500 at that point. It also misses a niche. It’s north of the promised $300. It’s a bit too competitive to make OEMs happy. The one redeeming fact is that if a Kindle or Nexus 7 cost $200 to build then at $400 (yes larger screen and battery, better quality, etc) you can imagine MS can both make a tablet and make a few dollars, even if it’s slim. And yes, put it on the Best Buy ad next to an iPad and it’s cheaper.

Bottom line is they need to compete with Apple first because if they lose that battle then psychologically they have lost a big war. And that doesn’t mean outsell them. It means gain significant mindshare. They also can’t do this at the expense of their partners unless they really want to have an anti-trust suit commenced.

So ignore what you’re willing to pay and think about where the market is and where MS is. Where do you think they come out? Shocked at your own conclusion, right?

For bonus points, how does the pricing of the other non-existent, unpriced and to be released tablet change your thoughts? Yeah the iPad Mini and it’s cheaper pricing and will be announced days earlier. Lots of movement…I know.  Also evidence that Microsoft should start pre-orders now before we know the pricing of the Mini but that’s a separate matter altogether.