What Small Businesses Can Learn From HP's $99 TouchPad
Last week HP shocked the tech world by announcing plans to pull the plug on its PC business and discontinue its smartphones and just-released TouchPad tablet. (Here's my review of the latter in case you missed it.)
The most interesting part happened after the announcement, when HP immediately slashed the TouchPad's price in order to clear out inventory.
The 16GB model, which had debuted at $499 just seven weeks earlier, was cut to $99, while the $599 32GB TouchPad dropped to $149. Unsurprisingly (to me, anyway), buyers went ape, snatching up every last TouchPad from every vendor offering those prices. And those who missed the deal are kicking themselves and hoping HP will scare up more inventory.
There are lessons to be learned from all this, especially for those who run a business. Take a look:
People Want What They Can't Have
This is one of the oldest tricks in the book, and the TouchPad proves it. Here's a tablet that will see no new development -- no updates to the OS, no new apps -- and yet people literally lined up outside Best Buy stores to get one. Sure, the price had a lot to do with that, but so did the very limited supply. The sense of urgency.
Thus, whether you've got a product that isn't selling well or you're rolling out a new one, consider the scarcity sales tack. Tell customers you have very limited quantities and don't expect inventory to last long. Or threaten to put an item "back in the vault," like Disney does with certain movies. People want what they can't have.
Fire-Sale Prices Work
No one was going to buy the TouchPad for $499, not when they could get an iPad 2 for the same price. But HP scored a lot of press recently by holding a one-weekend-only fire sale, temporarily discounting the tablet to $399. Of course, that proved to be a precursor to the ultimate fire sale, but you don't have to do anything quite so drastic.
What you do need is to surprise your customers by offering them a price that seems too good to be true. It may prove to be a loss-leader, but it'll stoke sales -- and that can be healthier over the long haul.
Don't Panic
Many analysts think HP dumped the TouchPad far too soon, without ever giving it a chance to gain a foothold. After all, Android was something of a flop for the whole first year of its life. Heck, "Seinfeld" didn't find its audience until it had three seasons in the can.
In other words, if your product or service didn't set the world on fire right out of the gate, give it some time. Look at Silly Bandz: Those suckers were on the market for a couple years before they took off.
Rethink Your Strategy
There's a growing consensus that the rabid response to the $99 TouchPad is proof positive HP should continue selling tablets -- but at lower prices. How about taking the ad-supported approach, like Amazon did with the Kindle with Special Offers? (Side note: That gadget, by the way, goes on the list of all-time worst tech product names.) If HP could do that and sell the TouchPad for, say, $299, I'll bet a lot of buyers would choose it over an iPad -- or even an Android tablet.The thing is, HP never bothered to rethink its strategy. It panicked, pulled the plug, and dumped its inventory. Game over. Don't make the same mistake.
What do you think of HP's recent moves? Share your thoughts in the comments!
More on BNET: