MICROSOFT: Here's What We Got Wrong With The First Version Of The Surface

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Microsoft Tami Reller

Steve Kovach/Business Insider

Tami Reller, with Microsoft communications chief Frank X. Shaw

Microsoft just revealed two new iterations of the Surface, its tablet-PC hybrid.

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It's replacing the Surface RT with the Surface 2, and the Surface Pro is replaced with the Surface Pro 2.

The Surface RT was a flop for Microsoft. It had to slash the price of the RT, then take a $900 million charge to account for lower priced inventory that was sitting around.

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The new devices are getting standard second generation upgrades with faster performance, better battery life, and Windows 8.1.

The overall package for the Surface remains the same, though.

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So, why will Microsoft succeed this time when it failed the first time with the Surface?

We asked Microsoft's EVP of Marketing, Tami Reller why the first generation Surface failed to sell, and what's changed this time.

There were two "critical things" that happened with the original Surface, said Reller.

First, there was the "unique version of Windows that didn't have the Windowsness" people were used to, she said. That's a slightly tangled way of saying Windows 8 was new for users and freaked them out a little.

Microsoft has updated Windows 8 to Windows 8.1. She joked that calling it a ".1" update might be the biggest undersell in the world because it's so much better.

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The second critical difference this year is distribution. Last year, Microsoft only sold the Surface in its own stores and online. Microsoft has less than 50 stores in the U.S.

"In hindsight, do I wish we went broad right away? Absolutely," she says of Microsoft's distribution. This year, Microsoft will be in 10,000 stores in 21 countries, which should boost sales.

She also mentioned other reasons she expects this device to sell better like the improved kickstand on the Surface, and the fact that it's lighter and thinner. She also noted that along with the improvements to Windows 8, Microsoft has more apps in its app store - 100,000 versus 10,000 a year ago.

We also asked her about Microsoft's marketing for the Surface. Last year Microsoft had ads that didn't really talk about the product. They were branding ads that showed the device's keyboard being clicked into the tablet.

Those established the brand, says Reller. This year, she says the company will do ads that better explain what the Surface can do.

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Reller, like everyone else at Microsoft, believes it has the right strategy with the Surface. It's all about executing on the strategy this time.