Marketing and Research Cost Big Dollars Marketing and research aren’t considered in these kinds of break downs— nor is the labor considered. While I have no doubt that Amazon is spending a reasonable amount of coin on ads, the dollar amount likely pales in comparison to the billions being spent to market Windows 8. Its also worth noting that the Kindle Fire HD research and development is probably less involved when it comes to the software since all they have to test/build is the custom UI that is already based on Android. For the Surface, Microsoft is using the brand new Windows RT OS that likely required quite a big dollar commitment to put together. Could Microsoft have charged less to its customers and still turned a profit? Heck yes, they could. As their Windows Store and Xbox Music/Video services take off, they would make the money back— especially if they sold the Surface on the cheap requiring an Xbox Music/Video contract. The point is that these kinds of break-downs really tell us little and generally just make people jump to conclusions. We don’t know how much TRUE profit that Microsoft is making on the Surface after it is all said and done. Sure, a Windows 8 CD and packaging materials might only cost a few bucks to make— but Windows 8 is worth more than that when you consider the employee costs, bug fixing and other research that goes in. That said, I do think that the Touch Cover could have been priced much cheaper, maybe around $75, and that might have made the Surface even more appealing. What do you think, is the Microsoft Surface RT priced fairly in your opinion? Considering the massive R&D/marketing costs, what do you think a fair price would have been? [ source ]]]>
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These breakdowns also don’t take into account value-perception. If you price your hardware too low, it is perceived as “cheap.” It also tears down the entire ecosystem. Look at the iPad Mini. While I do think that the price was a bit too high, there would be nothing wrong in my mind of it being priced at $300. Even at that point, though, it would have been seen as too expensive. iPad is a premium device (in Apple’s mind), and is priced accordingly. And the perception trickles down to consumers, whether or not that’s true. The Surface has been priced to enforce that same perception. Windows doesn’t want people “picking up a surface.” They want people to consciously buy them. This is a hard task in the short term, but with the proper marketing, etc…. we’ll see.
Of course, I’m probably going to skip the Surface RT for the ASUS VivoTab Smart or the Acer Iconia W510, both of which are priced the same but offer full Windows 8. So take that for what it’s worth.
Microsoft is really charging a little more than the other competitors in the market. Though too it comes up with windows 8 and a good firmware but the original firm cost and the cost Microsoft is charging is really too high. I believe marketing cost is only one part of the story. Microsoft uses huge dollars over high level of research and development. But I will still skip buying this at that cost.
“Microsoft” the name itself reflects the quality of product. Microsoft has spent many bucks for development of this system taking into account research, marketing, development, packing, bundling into promotion so at-least that amount is reasonable.