Episode 4: A New Hope, The Empire Strikes Back
Thursday, April 16th, 2009
By Stephen Baker, Vice President, Industry Analysis
Ok so I butchered the title, I know those are two different movies but both are relevant when thinking about Microsoft’s series of Laptop Hunter ads. Clearly this ad has created a new hope among the Windows faithful/ecosystem that Microsoft is capable of defending itself against the encroachments in perception, recognition and market share that Apple has made in the past few years.
It is important, not just to Microsoft but to the entire ecosystem (especially the big PC OEMs and ISVs), that the “Empire Strikes Back” and highlights the advantages of the Windows platform. Given the economy, the growth in netbooks, the aggressive sales channels, and the enormous unit volume this ecosystem processes everyday it is clear that price ought to be the light saber that Microsoft wields. This is where Microsoft and its partners possess an advantage, where the scale of its empire and the sheer weight of its presence make it the clear price leader, an advantage that should never be discarded and never underestimated.
However, an interesting thing has happened during this entire process. Many observers, who ought to know better, have critically missed the price versus value issue in this equation. No one knows better than a retail guy that price is price and value is something totally different. Lots of consumers shop on price, much fewer shop (or can afford to shop) on value. Consumers often base their decision on absolute price, not what offers more for less or what gives me a better experience or a higher quality build. Consumers are simply looking to answer the question “what can I afford to spend?” This is where the Microsoft world has an advantage. Scale creates competition. Microsoft’s PC ecosystem is cheaper because it is so open and so competitive. It is also considerably messier, a little more challenging to navigate, and it doesn’t make the best solution affordable to everyone. But it does make something, based on absolute price, available to almost everyone. And that is how volume and scale come about, and why Microsoft needs to press its advantage in price. Up to this point, Microsoft’s entire business model has been focused on building the scale necessary to deliver its goods at the lowest absolute price to the absolute greatest amount of people. Everybody depends on that in the Microsoft ecosystem from Intel and HP to EA, Acer, and Best Buy. Their business is hitched to that horse even more securely than Microsoft’s is. But when you get caught up in the endless bickering and moaning of the blogosphere, about what is better and what is more valuable, it is pretty easy to miss the essential fact, that price matters above all.
Consumer Technology | Stephen Baker, Vice President, Industry Analysis | 
April 16, 2009 10:22 am
Subscribe
