Motorola’s pricing strategy

February 8, 2011 § 1 Comment

A few weeks ago, Motorola had on its hands, two certifiably hyped up and much wanted devices- the Atrix 4G superphone launching on AT&T and the Xoom tablet launching on Verizon. What was known was that the devices had some of the best technical specs in their respective fledgling categories and also boasted the Motorola stamp of quality- one that has good street cred with the success of the Droid platform. Also in tow was their excellent experience in crafting cool Android products. In all, a win-win. Coinciding with the split of the company and the launch of Motorola Mobility (NASDAQ: MMI), this was to be a rebirth of the iconic Motorola brand with a new identity.

What has followed is a very puzzling pricing strategy that threatens to kill all the buzz surrounding these products (if the Internet forums are to be believed). The Atrix was supposed to be ATT and Motorola’s champion against iPhone on Verizon. And from a product stand point, it still is. But from a cost standpoint, it has the possibility of falling short of its lofty goals. The phone has been priced at $199 on a 2 year contract but the Atrix accessories which include a cool laptop dock and an entertainment dock have both been priced significantly out of a normal person’s reach.  The dock costs $300 when bought along with the phone (total $500) and $500 if bought separately. To note, a brand new iPad costs $500 in comparison. The entertainment dock comes with a wireless keyboard and a mouse for $200. Full pricing details are available here. To me, it seems like the pricing does not reflect that of its competition and does not capitalize on the uniqueness of its accessories. If there is a hidden secret sauce here, I am missing it. The Atrix looks like one of the coolest devices to be launched this year, one I was seriously considering upgrading to. At this price point, I am not sure if I can afford it.

The Xoom tablet was officially launched to the American public with a Superbowl ad that reminded us of the iconic Apple 1984 ad, just that Apple was “The Man” this time around. Earlier in the month, Google and Motorola had previewed the tablet and the new Android Honeycomb OS that will power it. People (and yours truly) were really excited for the tablet. It looked and played cool. And then came the hammer that the Xoom would cost $800. Yep, the first genuine iPad competitor (ignoring the Samsung Galaxy tab which was running an Android version designed for smartphones)  will cost almost twice as much. Yes, I agree that the $800 Xoom has inbuilt 3G which the $499 iPad does not. But people tend to compare apples to oranges all the time. And the barrier of entry is much higher for the Xoom than the iPad. In addition, the VZ data plans for tablets are pretty expensive (not that any tablet 3G plan is cheap). All in all, the Xoom is going to have a tough time matching the iPad sales numbers which is a pity considering that it looks and feels like a fantastic product- comparable if not better than the iPad.

I am no business executive or finance maven but in my humble opinion, Motorola should have launched a WiFi only SKU comparable in price to the iPad. The WAN version should have been priced closer to the iPad 3G price ($630) although Apple has immense pricing flexibility due to their purchase volumes ( I should someday write a post on Apple’s excellent supply chain management). The Atrix accessories should have been much cheaper. If you think the laptop dock to be really a screen with a connector and 15 inch LCD screens costing less than $80 in the market (cheaper with more volume) pricing it at $300 or worse still $500 puts it out of the reach of very many people. Until this changes, Motorola has lost a surefire customer in me for the Atrix and a possible customer for the Xoom.

I didn’t think there would be a day where the “premium” Apple products are also the most affordable ones in their segment. To be clear, I am not blaming Motorola for all this. It is probably a mixture of costs, strategy and also carrier constraints which are driving the pricing but it is something that is worth a revisit. For my sake if not anyone else 😦

Update: To validate the barrier for entry point, HP/Palm just announced the TouchPad tablet with webOS and the first model to ship will be Wi-Fi only. Well played HP/Palm. Very smart business move. More on the TouchPad here and here. I will write a separate blog post on this topic soon.

Touch interfaces and child development

January 16, 2011 § Leave a comment

My 33 month old has started to get very comfortable with the touch interface devices at home- we have a Vtech MobiGo which I picked up 2 months ago primarily as a tool to engage the child on a long flight. He also does educational apps on our iPod Touch and my iPhone 3GS. As he has gotten better and better at fully navigating these touch based devices- I am happy and a wee bit scared at the same time. Here is why.

  • Do these touch devices help him with his motor skills and ability to interact with automated devices and thus position him better for a touch based future?. An article I read today seems to show that kids seem to enjoy Apple touch devices in their classrooms. Not surprising. But are the parents thinking along the same lines as I am?
  • Does it make him reliant on only touch driven devices?. Case to point, he got his hands on a plain vanilla Nokia from a friend and kept swiping the screen to no avail. Humorous as it was (and almost representative of Nokia’s present/future versus that of Apple/Google), it made me wonder, can he even handle traditional non-touch devices adroitly?
  • There are tons of websites recommending apps for kids[1][2]. But are these primarily to shut them up so parents can do what they want to..or are they real tools for growth and education?
  • Schools are jumping on board with giving iPads for students[1][2]. Is this a healthy development?

Meanwhile, B&N, Amazon and Apple are rolling out apps and kids books tailored for touch devices. They look fantastic. But will this impact the child’s ability to learn to read the old fashioned way?. I have nothing against e-reading. In fact I love it. But that is after I spent all my childhood reading dog eared copies of classics aplenty.

Some recommended reading on the topic are Education Nation: Six Leading Edges of Innovation in our Schools by Milton Chen (and the companion website) and also Mind in the Making: The Seven Essential Life Skills Every Child Needs” by Ellen Galinsky.

As I type this, my son is spending some time reading an old fashioned book with his mother. Not all is lost, atleast not yet 🙂

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