5 things every tablet needs to succeed
More aptly stated: 5 things every other tablet vendor but Apple needs to succeed.
Seemingly everyone who owns or can outsource a manufacturing facility is releasing a tablet this year, and many of them were announced during Consumer Electronics Show 2011. To date, about 85 tablets are in the queue. Most of them will fail. The contenders will compete with one another to lessen the numbers long before any one poses competitive threat to market leader iPad. To match, or even outsell iPad, manufacturers need at least five things, presented here in no order of importance. This list focuses strictly on logistics and purposely omits usability and design, which are separate topics for a future analysis.
1. Right price. Apple has set entry price at $499. Contenders must go lower, to open up mass-market competition and rapidly gain share against iPad.
In a survey IDC conducted earlier this month, more than 2,200 developers identified price (57 percent) as their top priority for tablets. If you "look at the fundamental problem of how these players can truly differentiate, the biggest variable that will have the most impact (at least in the near-term) is price," according to the report. "Developers eye the enticing possibility of a sub-$100 tablet and think mass-consumer opportunity."
Mass-market can dramatically change the sales equation. Apple prices to maximize margins rather than to gain market share. But as Amazon showed with Kindle, there is for any product a price that will burst open the floodgates of sales -- $139 was the price for the ebook reader, and I'm not suggesting it's the right one for tablets. Amazon has called Kindle its best-selling product ever; IDC says the retailer sold 1.14 million units in 2010.
The market has yet to determine what is that magic price, and $499 isn't it. Apple sold 7.33 million iPads during fourth calendar quarter 2010 for an average selling price of $600. If Apple can sell that many iPads for so much, how much better could the right competitor with the right tablet do asking for much less, say, $399 for a 10-inch model or $299 for a 7-inch tablet? With Apple commanding the global tablet market -- 87.4 percent share, according to IDC -- competitors need to think about tactics that will build share fast. Price is one tried-and-true method. For smartphones, Apple found the magic number to be $199, which set iPhone 3G sales ablaze compared to the original model released about a year earlier.
2. No carrier commitment. Early tablet contenders, such as the Samsung Galaxy Tab, are going to market with the wrong lower-price strategy. Carriers subsidize costs and require two-year contractual commitments. If T-Mobile didn't demand a data plan, I would have purchased a Galaxy Tab months ago. Other consumers will balk, too, at adding an additional data fee on top of their smartphone plans.
Apple sells iPad with optional 3G and there are models with or without cellular network radios. Buyers can choose WiFi only. Even if they buy a 3G model, the data plan is optional and there is no contractual or time commitments. That Verizon can sell iPad without 3G (since the radios are for AT&T), surely there is demand for the right tablet offering just WiFi.
Barnes & Noble Nook ebook reader is the device currently available that's closest to a cheap Android tablet. According to an exclusive report at Engadget, the bookseller is discontinuing the Nook 3G, presumably because of weak sales compared to the stronger-selling WiFi model. Consider this: 3G is free; there are no monthly service fees. Buyers simply pay more upfront -- $149 for WiFi, $199 for WiFi and 3G. Buyers' preference for paying less upfront to skip 3G, otherwise a free benefit, is revealing.
3. Broad distribution. Apple didn't launch iPad into a vacuum but with lush sales and distribution environment. The company leveraged existing manufacturing and distribution channels, third-party peripheral relationships and developer programs established for iPod and iPhone. By comparison, most iPad contenders are coming to market without similar ecosystem; it's a major reason why most will fail.
Amazon is example of how distribution can break open a new or stagnant market. Manufacturers shipped e-book readers for a decade before Amazon launched Kindle. The retailer used its massive distribution presence to aggressively promote the device and sold e-books at a loss to gain market share. The strategy vitalized a stagnant market and propelled Kindle to market share-leading status, according to IDC.
Competing tablets have to be everywhere iPad is and places it isn't to even put down table stakes. This is a high-stakes game for which Apple has upped the ante.
4. Massive marketing. Other than Apple, Samsung is the only tablet manufacturer doing anything close to meaningful advertising -- on television, particularly. Apple has long showed that effective advertising matters. I remember when only Apple advertised an MP3 player. It's not surprising iPod sold so well, given that from the massive marketing it appeared to be the only choice.
Tablet competition will be stiff in 2011, as the market shakes out the losers -- in an iPad against everything else skirmish. Competitors will need visibility, and broad distribution isn't enough without advertising. Continuing the warfare analogy, distribution is the ground force and advertising is the air cover.
Consider how many times you as a viewer see commercials for wireless carriers during prime-time programming -- in the United States from AT&T, Sprint, T-Mobile and Verizon. These carriers understand the importance of advertising in a hugely competitive market. Tablet manufacturers should consider such aggressive amount of advertising -- that emphasizes user benefits -- as what it will take to improve visibility against iPad. By the way, Apple has defaulted to emphasizing apps rather than iPad features in its TV advertising. Samsung commercials more emphasize the benefits of Galaxy Tab portability and the tablet's different contextual usage benefits. It's a good approach.
5. The right applications -- not the highest number. Over the weekend, Apple achieved an amazing milestone -- 10 billion downloads from its App Store, the overwhelming majority for iPhone and iPod touch. The store offers more than 300,000 applications, a number many pundits and Apple enthusiasts use to predict the dominance of iOS on smartphones and tablets.
This thinking is flawed. The app-centric model is transitional. Businesses and consumers love apps in part for their familiarity -- what they use on PCs. Developers love mobile apps because they're generally easier to create than desktop applications and there's potentially more money to be made. But tablets are fundamentally different from PCs -- the devices are more personal and tactile, and they're used more contextually.
There must come a point of application and finger fatigue, where the number of apps people use everyday is less and less and all that flicking from app to app becomes tedious. I'm surprised not to have seen any studies looking at how tablet behavior changes over many months. Do you really want to go to three or four different apps to get news or would you prefer to get it one place? Do you really want notifications from five different communications or social media apps? Do you really need separate apps for Hulu and Netflix, when a Web browser could do?
One killer application for tablets may yet be the browser, a benefit Apple touted in early iPad marketing before there were large numbers of supporting apps. For developers looking to maximize their reach and minimize resource expenditures, mobile browser apps may yet prove the best approach -- write once for many devices.
That said, there has yet to emerge a killer application for tablets.