HP’s decision late last week to slash its discontinued TouchPads to $99.99 and $149.99, respectively, drove consumers into a chaotic buying frenzy usually reserved for new iPhones, iPads, video game consoles, and impossible-to-find holiday gifts. Long lines of people were reported this weekend at Best Buys and other big boxes across North America — many of whom were turned away for lack of stock — and online retailers watched their supplies vanish in mere minutes. We’d even heard rumors that HP beefed up its IT staff to handle unprecedented server load. Considering that Best Buy allegedly couldn’t figure out what to do with a quarter million unsold TouchPads just a week ago, the response to this fire sale has been nothing short of astonishing.

Obviously, any product is more appealing when it’s slashed to a mere fraction of its original retail price — everybody loves a deal. Still, it begs the question: as consumers, why do we now want a tablet that the majority of us considered uncompetitive mere days ago when it was matched to the iPad 2′s price points, especially now that the prospects for long-term support for the product and the platform are murky at best?

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I’ll admit, I was drawn to the allure of an ultra-cheap TouchPad just the same as everyone else; I ordered one off of HP’s site on Friday evening. But the decision process behind my purchase gnawed at me all weekend. I’ve used a TouchPad and I didn’t really like it — I found it fat, slow, and buggy, even with the webOS 3.0.2 update applied. And besides, I already own an iPad 2… yet, for some inexplicable reason, I can confidently say without hesitation that I’d buy the $99.99 TouchPad all over again if given the opportunity. But why? Are others in the same boat?

I wanted to break it down to the nuts and bolts: what’s the psychology behind our decision to clear store shelves of TouchPads in the past couple days? And just as importantly, is there a critical lesson for tablet (and, closely related, smartphone) manufacturers to learn here? Can you take a page out of the old video game console playbook and brute-force your platform into relevance by simply taking an extraordinary loss upfront?

To try to get to the bottom of the phenomenon, I polled my Twitter followers, asking for TouchPad fire sale buyers to email me. In turn, I asked the respondents — over 50 in total — a few questions. Here’s what I learned.

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Not in it for the money

“As of right now, I am planning on keeping it with the hopes that there is more in store for the tablet (either way at $99, who cares).” – Anthony C.

Well over 90 percent of folks polled said that they planned to either keep their TouchPad or give it to a friend or family member; some bought several with the intention of spreading them around. The remainder said that they bought multiple units and would sell some of them, but would keep at least one. Not a single person indicated that they planned on selling all of their units in an attempt to turn a quick profit.

Needless to say, it’ll be interesting to see where TouchPad prices stabilize on eBay over the next few weeks. Right now they seem to be consistently selling for over $200, but I think we’re still in a state of flux — buyers and sellers are probably still adjusting to the realities of the fire sale pricing, and long-term retail availability (between remaining warehouse stock and stragglers from the factory) is unclear.

Tablet rookies and veterans alike

“[It’s] kind of hard as a tech fan to pass up on a fully functional tablet [at that price].” – Brett A.

Half of respondents said they didn’t own another tablet; at $99.99, the TouchPad deal was just too good to continue sitting on the sidelines. As one John F. put it, “while I have thought about purchasing a tablet for a while, I haven’t been able to justify the amount of money they cost versus the use cases (for me personally).” Others weren’t sure how a tablet would ultimately fit into their life, but bought anyway simply because $100 fell below their impulse purchase threshold.

Of course, that leaves the other half of buyers I spoke with who already own a tablet (or, in some cases, multiple tablets). Most of these individuals own an iPad or iPad 2, and virtually all plan to continue using it as their primary tablet — for them, the TouchPad is more of a curiosity, a toy, or a specialty device. (One buyer specifically cited Hulu as a justification for keeping the TouchPad around.) The rest (around 20 percent) own an Android tablet like a Galaxy Tab or Asus Eee Pad Transformer, and most of those folks intend to relegate the TouchPad to backup duty as well.

With Android on the brain, is this the next Nook Color?

The phone and tablet businesses are learning the tough lesson that a self-sustaining ecosystem of developers, apps, and users is both critical to a platform’s success and also extraordinarily difficult to catalyze. When I heard (and saw) the pandemonium at Best Buys around the country, I couldn’t help but think: had HP finally sparked that cycle for webOS in the most tragic, unintentional way imaginable?

“Since I already have an Android tablet I’ll be keeping it stock because webOS is… ‘sexy.’” – Jeff M.

Possibly, but the jury is going to be out on that one for some time — and it’s largely dependent on HP’s next few moves with the platform. Roughly half expected to keep their TouchPads on webOS (of those, it was split pretty evenly between the bone stock crowd and those who planned to pursue some combination of homebrew and overclocking). The other half were looking to install Gingerbread, Honeycomb, or Ice Cream Sandwich once a stable port became available, and many of these buyers were very vocal about this point — they’d purchased the TouchPad to be a well-equipped Android tablet, not a webOS device.

If HP leaves a vacuum of leadership and guidance for developers and fans in the coming months, solid Android ports are going to be extremely relevant.

Obviously, my Twitter followers — and thus, the respondents to my survey — trend toward the techie side of the spectrum, and I don’t think that fully half of the general TouchPad-buying populace is looking to graft on a different operating system. But this gets back to what I was saying earlier: if HP (and any potential webOS buyers or licensees) leave a vacuum of leadership and guidance for developers and fans in the coming months, solid Android ports are going to be extremely relevant. People — many of whom wouldn’t consider changing ROMs otherwise — will recognize Android ports as a way to extend the TouchPad’s useful life by piggybacking onto a platform with active momentum. As Hank W. puts it, “I have definitely considered loading other operating systems onto it (mostly Android 3.0) but I have decided to wait until HP completely drops support for webOS to the point where it’s no longer usable.”

The bottom line is that I get the impression that HP has a clear and present opportunity to leverage this glut of TouchPad sales into legitimate relevance for webOS — the only question is whether it cares to do so. If not, the TouchPad stands to go down the trail blazed by the Nook Color: a well-built, highly capable Android tablet on the cheap, assuming the community can manage to get a stable Android firmware put together. And when have they ever failed to do that?

What’s a TouchPad worth, anyway?

“A good tablet at $99 is more attractive to me than a wonderful tablet at $499.” – Pat D.

Most respondents were frank about the fact that the TouchPad’s clearance $99.99 / $149.99 price structure actually fell below the maximum price that they would’ve paid. The median price buyers gave me worked out to $224.50, which splits nicely between $199.99 for the 16GB model and $249.99 for the 32GB. Some said it would be worth more to them — as high as $400, for a couple folks — with the knowledge that the platform would continue to be actively supported.

Several buyers pointed out to me that even though the TouchPad isn’t necessarily as nice or usable as an iPad, it’s light years beyond the $100 Android tablets widely available at drug stores and bargain outlets. As TmoNews‘ David puts it, “This isn’t a Walgreens style tablet where my expectations for a $99 tablet will be met with $99 quality.”

So, did HP leave money on the table? My best guess is that they did, yes — at least $50 per unit, if not more. At $150 to $250, they may not have caused the same level of mass hysteria over a 48-hour period, but I have little doubt they still would’ve been able to sell through inventory in a reasonable amount of time.

The billion-dollar question

“That’s Amazon Kindle money and you get the second best tablet on the market.” – Jon H.

Should (and could) the TouchPad have launched at a too-good-to-pass-up price? As I mentioned before, the idea is right out of the game console manufacturers’ playbooks: for the first year or two, HP would eat some extraordinary cost per unit — several hundred dollars, perhaps — in an effort to build and lock in a legitimate webOS ecosystem by any means necessary. A brutal game, yes, but a game that a select few (HP included) could likely afford to play.

Several respondents mentioned that it’s difficult to recommend a $500 iPad 2 against a $100 TouchPad, just as it’s virtually impossible to recommend a $500 TouchPad against a $500 iPad 2. At some point, the scale tips. Not everyone will agree, of course — if you’ve budgeted $500 for a tablet and you just want the best tablet that your money can buy, you’d still be comfortable spending the money for the iPad 2 and you probably wouldn’t look back.

This isn’t a zero-sum game, though. Three-quarters of buyers I spoke to said they would’ve bought a TouchPad just as quickly if it had launched for $99.99/$149.99 — in other words, if this was a permanent price, not a clearance — and another one in five said they would’ve eventually bought one. As I’ve said, my sample set falls on the geeky side, but everyone knows HP, and I have no doubt that they could’ve come up with a clever marketing campaign focused on the fact that they were undercutting Apple by hundreds of dollars for a similarly-equipped tablet. Even if they’d only won a fraction of would-be iPad 2 buyers with the campaign, they would’ve attracted legions of folks who simply can’t justify spending half a grand on a non-essential gadget.

“I’m confused as to why they didn’t at least ride it out through the back to school and holiday season.” – Lewis B.

And thus would begin the virtuous cycle: users lead to developers, which lead to apps, which lead to users. The tablet market would presumably be larger overall, and HP would’ve owned a chunk of it. Granted, that chunk would’ve come at a monumental operating cost, but right now, tablet vendors urgently need to be thinking in terms of generational platform leadership — just as Windows’ dominance today grew out of a seed planted by MS-DOS, PCs, and PC clones over a quarter century ago.

And I would argue that webOS is on that very, very short list of platforms with enough promise to deserve that kind of no-holds-barred approach to building market share. Most of my respondents were of the opinion that the TouchPad is worth $99.99 on its hardware merits alone, but — in a market utterly dominated by iOS — nearly half still want to give webOS a shot. By any definition, that works out to a potential user base worth serving.

This article was orignally published on Thisismynext.com — “The $99.99 TouchPad phenomenon, in your words.”

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