Dell to Cut PC Rebates, not Prices - ' An evolving PC market ' (
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But the move also reflects changes in the market itself, another analysts said, indicating that the main methods PC makers like Dell have used to entice customers—such as rebates and waived shipping fees—have lost some of their allure in recent years as the PC market has matured and growth has begun to slow in 2006 following a wave of upgrades in prior years.
"The way you make money in a build to order experience is you trade people up [on components] and you manage the process so that the more that they upgrade the more profitable it is," said Steve Baker, an analyst with The NPD Group in Port Washington, N.Y.
But, he added, "one of the problems with an upgrade model is that if people dont upgrade, I dont make any money."
Yet technological improvements, including faster processors and bigger hard drives, have made many of the special upgrade offers touted by Dell and others less alluring, now, than in the past, Baker said.
Items such as large flat panel displays have become more desirable instead, given that even basic PCs now offer enough performance to do everyday tasks.
Click here to read about Dell launching an AMD server.
Done right, revising its model lines to include PC configurations and pricing that are more straightforward will allow Dell to tout a better customer experience, yet still allow it to build profit into each machine, Baker said.
That way, "When people trade up they trade up more against platforms than against specific components," he said.
Dell doesnt plan major changes in the way it offers its PC models. It wont offer fewer models, for example, a company spokesman said.
But it is more likely to begin bundling PCs with components to target customers who aim to do specific tasks, such as play games or edit photos, Parra indicated.
Dell isnt the only PC maker thats looking to simplify the way it sells its products.
For its part, Gateway stopped selling low-price PCs direct on June 29 and instead switched to offering direct-sales customers new PC bundles that start at $799.
Meanwhile, Hewlett-Packard, which recently launched a new line of consumer PCs to target the back-to-school market, said it is working to keep its PC pricing approach simple as well.
The company offers various rebates and no-charge component upgrades as well as a discount for teachers and students.
"We are constantly communicating with our customers about how they want to buy HP products and ways to make it as easy and compelling as possible," a company spokesperson said in a statement e-mailed to eWEEK.
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