Dell's pricing model is revolutionary
I receive dozens of e-mails every week about the dropping prices of computers and when it is a good idea to dump the old machine and move on. And several more letters discuss the cheapest of computers and if they truly are a good value.Let’s talk about the last question first. The very cheapest units on the market today will outperform the best units of five years ago, so if you’re still running a Windows 98 computer the answer is pretty clear...you ought to upgrade.
But whether the cheapest computer on the market is a bargain is still the question. When you look, for example, at the current $299 Dell desktop on the market there are a few questions you have to answer. How Dell got down to that admittedly amazing pricepoiint (when Windows XP accounts for $100 of that) includes: whacking the warranty or telephone support to either none or 90 days, depending on the model (you can add more if you wish at extra cost), by not including a decent optical mouse (which you will want to add for $10), by not including the reinstallation CD for Windows (which you will want to add for $10) and by only offering 256MB of computer RAM (which most will want to bump to 512 if this is the model they wish to buy.)
What Dell has been doing is not allowing a memory upgrade on the lowest model at all (at least from the factory) which forces some to think they need to move up to the next model. If you purchase the cheapest model you might want to purchase a memory upgrade. (After rebate Circuit City recently was selling 512 memory upgrades for $17.99, making adding memory a pretty incredible bargain.)
Also fueling this price drop is the surge in popularity of flat-panel monitors. Because these are now the monitors of choice, the older CRT (cathode-ray tube) monitors have fallen in price like the proverbial rock.
We also ought to talk for a moment about the “free printer” deal that Dell is aggressively pushing too. For one, they are offering the printer for free, then selling the $7 USB cable for $25 which is a pretty large shame. But let’s just examine the rationale for a second fro why all of these free and cheap printers are floating around out there.
t’s what I call the Barbie doll retailing concept (give away the doll, sell the clothes for 15 bucks). What Dell and others are doing is engaging in an aggressive war to get printers on every desktop so that you have to keep ordering ink from them. They are selling the printers at at loss just to get the recurring ink business which is where all of the profit is. Dell and others have exclusive rights on the designs for the ink cartridges.
Last but not least we need to talk rebates. Dell’s $299 desktop actually has a retail price of $374, but it offers a $75 “instant rebate” that is applied automatically in the checkout cart. So there’s no way the consumer won’t get it. Dell’s $499 laptop, on the other hand, is another story. That price is after a $150 mail-in rebate, which Dell knows many consumers won’t fill out and mail back in. I have been on a personal crusade against mail-in rebates because they simply are a rip-off in many cases. (I am waiting on one from Kbyte myself for 4 months.) Industry estimates are that fewer than 20 percent of overall estimates are successfully redeemed but many consumers use them for purchasing decisions.
Dell simply could make all of its laptops $499 using the instant rebate it uses for the Dimension desktop but it knows that some consumers won’t fill out the paperwork correctly, some will forget, some won’t get the checks, some won’t cash them once they get them... Dell just stands to make additional profit on mishandled rebates.
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James Derk is co-owner of CyberDads, a computer repair firm, and computer columnist for Scripps Howard News Service. His email address is jim@cyberdads.com
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