Dell to Cut PC Rebates, not Prices

The PC maker, in a bid to win greater confidence from its customers, will phase out rebates over about the next 18 months in favor of bottom-line pricing.

Dell has decided do away with rebates in an effort to get to the bottom line on its PC prices.

As expected, the PC maker will begin phasing out rebates and other special offers in August in favor of presenting lower prices upfront to SMBs (small and midsize businesses) and consumers in the United States, the company said on July 13.

Dells net pricing, however, will remain the same. A machine thats now offered for $999 with a $100 rebate will instead simply be offered for $899 in the future.

The move, which will not change the way Dell deals with its large business accounts, comes as the PC maker attempts to recover from a series of missteps that curbed its growth during the first quarter of 2006.

Dell believes that simplifying the way it presents prices to its customers will help it regain their confidence and thus boost sales, said Ro Parra, senior vice president of Dells Home and Small Business Group in Round Rock, Texas.

/zimages/7/28571.gifTo read more about Dells plan to repair its customer service problems with consumers, click here.

"I would not call it no-haggle pricing," Parra said during a conference call with reporters. "I think its really more about simplifying the way that we price [PCs] and making it simpler for our customers ... and trying to provide transparency and simplify our list prices."

Dell began mail-in rebates in 2000, he said. Since then its pricing strategy has evolved so that some computer products have as many as 50 promotions associated with them.

Dell projects that over time it will cut the number of promotions per product line by 70 percent and reduce the number of promotions tied to a single product by 80 percent.

The strategy will roll out over the next 12 months to 18 months, starting with its notebooks, the company said in a statement.

"I believe that, over time, well be more affective at marketing and selling our products," Parra said.

With this simplified approach, upfront prices are likely to remove uncertainties from the minds of Dell customers, said Richard Shim, an analyst with IDC in San Mateo, Calif.

Many Dell customers had taken to sifting through its different Web stores—it sells the same basic products in its home and small business stores—as well as its numerous special offers for the best deal.

"Theyre making it more efficient by saying, You dont have to go looking for the deal anymore. The first one you find is the one youre going to get," Shim said.

Next Page: An evolving PC market.