Alex Zaharov-Reutt
Friday, 29 February 2008 22:01
Opinion and Analysis
Page 1 of 3
Could it be that after years of Windows pricing remaining steady, then
going dramatically up with Vista (as hardware prices declined) – that
Microsoft has finally learned cheaper prices can actually increase
profits?
With the news that Microsoft has decided to lower the cost of Vista comes a simple lesson from Economics 101: charge less for your product –
while still making a profit – so you can sell more products to more people, and actually find your profit increasing overall.
The opposite strategy is making more money from less people by charging more for your product, something Microsoft seems to have tried, and presumably failed at, especially with the ridiculously overpriced Windows Vista Ultimate.
We all know which consumers prefer – a more affordable product that more people can easily purchase, resulting in a much larger user base.
Microsoft appears to have finally learned this lesson after 30 years in business, and the revelation seems to have surprised them! What a pity it has taken so long, as this lesson in pricing is well known throughout history and really is not only obvious, but common sense!
CNET’s
Ina Fried put it this way in her article on the topic of Microsoft lowering their Vista prices:
“In an interview, newly minted Windows consumer marketing vice president Brad Brooks said that Microsoft had been testing lower prices over the past few months and was surprised to find that the amount of revenue lost was more than made up for by an increase in the number of PC buyers willing to shell out for an upgrade”.
The official news from Microsoft that they are lowering Vista prices comes in the form of a
Q&A session with the aforementioned Brad Brooks, the corporate vice president for ‘Windows Consumer Product Marketing’.
While there is no word on whether or not OEM computer manufacturers will also see a drop in Vista pricing, the Q&A notes that Microsoft is lowering the cost of the retail stand-alone editions of Vista, something that will delight anyone that needs to buy a retail copy of Vista.
This could be for a number of reasons, be it to load in a virtual machine on their PC or Mac, or to upgrade an existing XP computer to Vista – although the price drops vary from country to country – some getting a full edition, while others can only access the upgrade version.
So, what has Brad Brooks had to say on this rather unusual development from Microsoft – and why has Microsoft decided that ‘now’ is the time to start some pricing ‘wow’? Please read onto page 2.
