“Largely unnoticed in the [Microsoft 30GB Zune for US$249.99, 99-cents more than a 30GB Apple iPod] pricing announcement last week was this little tidbit about how consumers might pay for Zune music. CNET had a pretty decent description in their article, where they accurately noted that Microsoft’s real play is to get people to buy subscriptions for $14.99 a month. But if pressed, they’ll generously allow people to buy individual songs,” Carl Howe writes for Blackfriars’ Marketing. “But you can forget one-click buying; Microsoft has a cuter idea:”

There will also be the option of purchasing individual songs through a system called Microsoft Points. The new Microsoft cash system will work by adding money to an account, as with a prepaid phone card. Points will then be deducted from the account with each purchase. A single song will cost 79 points, “the equivalent of 99 cents,” according to Microsoft spokeswoman Kyrsa Dixon.

The point system is already used in the Xbox Live Marketplace, and Microsoft plans to host other online stores where Microsoft points can be redeemed, according to Katy Gentes, product marketing manager for Zune. In the United States, points are available in denominations of $5 for 400 points, $15 for 1,200, $25 for 2,000 and $50 for 4,000. That makes $1 worth about 80 points.

Howe writes, “Now from a marketing point of view, there are two marketing tricks going on here. First, is the concept of not having 100 points equal a dollar. That would be too simple and easy to understand. Instead, Microsoft sets the song price to 79 points, which most people will perceive as being inexpensive because it is less than 99. Yet, if you do the math, it’s actually slightly more than $0.99. Cute, very cute.”

Howe writes, “The second marketing trick is the use of a new form of currency; yes, Microsoft money has finally arrived, and it has all the charm of an end user licensing agreement — and just as many tricky parts. Note the denominations offered above and think about this common transaction: buying your average, garden-variety album for $9.99. You’ll need probably 799 points to buy that. But notice that there’s no 800 point denomination. Microsoft is betting that most consumers won’t buy two 400 point packs, but will instead opt for purchasing 1,200 points for $15, and will leave the extra 400 points on account with Microsoft. So consumers end up either 1) doing extra work to pay exactly the right amount (i.e., going to the store, purchasing two 400 point packs, returning to the music purchase and then buying their album), or 2) provide an interest free loan to a company that has $40 billion in the bank. Cute, too cute by half.”

Howe writes, “If the company spent half as much effort investing in, say, making a truly elegant hardware device (instead of just re-badging someone else’s) and making the user experience simple and hassle-free with one-click credit card payment (it worked for Amazon, didn’t it?), they’d probably make more money in the end than pinching pennies with tricky pricing and proprietary money schemes.”

Full article here.

MacDailyNews Take: This Zune thing is so bad, and keeps getting worse, it’s almost as if Microsoft wants it to fail. Is there any benefit at all to Microsoft if Zune fails? Some tax benefit or something? Or are they just really that incompetent? The world “chose” Microsoft’s Windows because they didn’t know any better, they thought a computer was a computer, people that had no idea what they were talking about told all their friends to buy a Wintel PC, and people wanted a computer for as cheap as possible. Windows is a mistake that snowballed. We’ll be correcting that mistake for a long, long time.

But, people are more technically savvy today. Note that iPod dominates and it isn’t the least expensive, it just works the best and people know it. Ditto for the Mac slowly beginning to take market share from Windows again. People aren’t as easily fooled with tech nowadays. Either Microsoft wants Zune to flop for some reason or they actually believe their own press clippings and think they can fool the world again, which just isn’t going to happen.

Related articles:
Why Microsoft’s Zune won’t kill Apple’s iPod – October 03, 2006
10 Apple iPod vs. Microsoft Zune myths – October 02, 2006
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How Microsoft’s Zune can kill Apple’s iPod – September 21, 2006
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