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Mike Riversdale has a problem with the price of the Microsoft Surface Laptop 3. He responded to my review of the Laptop on Twitter:

"Official Microsoft price is NZ$3100, but shop around, retailers have better deals."

That is a disgusting price.

Especially for a laptop that is, "Great for writers, lawyers and other people who work with documents." https://t.co/rbUp32ebvl

— Mike Riversdale (@MiramarMike) February 7, 2020

Soon after:

Actually, @billbennettnz, that price seems stratospheric, you sure it's not a typo?

— Mike Riversdale (@MiramarMike) February 7, 2020

Then:

Wow! I'm, wow! That's so far out of what I expect anyone to pay for any computer, it's astounding.

My brand new machine cost $1,700 (incl p&p) and even that was top end stuff (early birthday present to myself) that I um'ed and ah'ed about for a few weeks.

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I'm just blown away

— Mike Riversdale (@MiramarMike) February 8, 2020

He has a good point. The Surface Laptop 3 is far more than expensive than similar laptops. Even if you shop around it is  $1000 or so more expensive than similar laptops. That makes it at least 50 percent more than the price of a 15-inch Windows laptop from HP, Dell or Lenovo. It is a whopping 80 percent more than Riversdale's fancy new birthday laptop.

Premium laptop

Microsoft positions its Surface Laptops as premium models. It would be fair to say the build is top notch. The case is nicer than you'll find on most commodity laptops. The keyboard is the best I've seen in any laptop. The screen ratio is more suited to writing than displays on consumer laptops optimised for video. 

All these things are nice. For many people who spend all day writing a first class keyboard is a must. It is well worth paying a few extra dollars for more comfortable, more productive typing.

Yet it's still a struggle to justify a 50 or 80 percent premium.

And anyway, Microsoft does not sell its Surface Laptop 3 on these features. At the time of writing the marketing copy on Microsoft's website makes that clear. It starts: "Make a powerful statement and get improved speed, performance, and all-day battery life".

The $3100 review model might have improved speed compared with a second generation Surface Laptop. Yet it is no faster than those $1700 rival Windows laptops. We can concede the battery life is good, but not a lot better than those competing machines.

Tangible, intangible

If the tangible aspects can't justify the higher price, does it come down to less tangible things?

And that's where Microsoft's price becomes more of a puzzle.

Apple can and does charge more for MacBooks than most Windows computer makers can get away with. There are people, I'm one of them, who are happy to pay more for Apple's software and ecosystem. The fact that I can handoff between my phone, iPad and MacBook is worth paying a little extra for.

Some people swear there are productivity benefits from using a Mac. You don't have to agree with this opinion. That's not important. What is important is that many computer buyers believe they get better productivity from a Mac. 

Microsoft cannot make a similar claim. The version of Windows 10 on the Surface Laptop 3 is near identical to that on rival Windows laptops. There is no premium in the software. Unless you count the fact that Microsoft doesn't load up its laptops with bloatware.

Microsoft Surface Laptop brand

Which only leaves another reason Microsoft thinks it can charge a premium; that the brand is more valuable. It can't be that Microsoft computers are more reliable than competing devices. In 2017 the US Consumer Reports said that it would no longer recommend Microsoft's Surface laptops and tablets because of "poor predicted reliability" compared to other brands.

That's damning. Microsoft says it has fixed the problems. It may have done. But any laptop buyer with a memory or access to Google will doubt it is worth paying a quality premium.

It's not going to cut much ice with buyers, yet scale is one reason Microsoft hardware is expensive. The company does not rate among the top five PC makers. HP, Dell, Lenovo, Apple and Acer account for 80 percent of personal computer sales. Acer is the smallest of the top 5 with a six percent share of the market. It's no secret Acer is struggling.

The Surface range is a US$2 billion business for Microsoft. That puts it in the region of a little over one percent of the company. It's healthy, but not essential to Microsoft's future.

It's not about you, it's not about the laptop

So what is going on with Surface? Before Microsoft entered the market, the Windows laptop scene was in bad shape. There was as race to the bottom between computer makers. They still make tiny margins selling hardware, in some cases unsustainable margins.

Microsoft introduced the Surface to inject quality and excitement back into the market.

At the time Apple was almost the entire premium end of the PC market. That's not something Microsoft could sit by and watch. Over time that would erode the Windows brand and create all sorts of tensions. There was no way Microsoft would leave the high ground to Apple.

You can see from the numbers and the market share, that Microsoft is not serious about winning the bulk of hardware customers. It doesn't need to do that. It needs to establish a premium Windows computer brand that shines out as an alternative to Apple.

Having high prices is an important part of that strategy. A high price can be as much a marketing strategy as low, low prices. It also means Microsoft makes a tidy sum from the exercise.

If you, like Mike Riversdale, think the Surface Laptop 3 costs too much at NZ$3100, that's fine. Shop elsewhere. It's not for you. It is a message from Microsoft to let you know there is more to the PC business than getting a bargain.

Why Microsoft's ritzy Surface Laptop 3 costs a fortune was first posted at billbennett.co.nz.

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