Pricing

A New Pricing Strategy for the PC Industry- Raise Prices!

By Colin Carroll
January 17, 2011

You get what you pay for – the recent turnaround in the fortunes of the PC makers underscores this point really well. For the longest time, the PC industry has been plagued by continued price erosion and declining profits. Discounts by Dell were matched by bigger discounts from HP. During this time, an interesting thing was happening at Apple. The company not only maintained its already high price points, but in the process actually gained market share.

 

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Some of this can attributed to the brilliant Apple marketing machine or the clear design/form factor excellence of all Apple products – in the process increasing the price premium it can command. However, a lot of this has to do with superior features and performance for Apple computers – among other things, they have more computing capacity, better graphics and tremendous user experience.

PC makers such as Dell and HP are taking a page out of Apple’s price execution playbook and focusing on performance as a means to command higher prices. A recent Wall Street Journal article highlights the current trend of rising computer prices.

The PC industry is getting more sophisticated in segmenting customers and offering higher value products to different customer segments – both creating and harvesting a higher willingness to pay.

While you can always get the $399 netbook, the question is how many people will continue to buy this product over a higher performance machine with features that you truly care about?

– Colin Carroll

  • Low Margin by Customer , Pricing Strategy , segmentation , Strategic Pricing , Value Realization , Vendavo Profit Advisor

    Colin Carroll

    Colin Carroll has over 15 years of experience helping manufacturers implement and automate price and margin management best practices. Colin is currently a Pricing Expert at McKinsey & Co. Prior to joining McKinsey, Colin was the VP of Business Consulting at Vendavo. Before joining Vendavo, Colin was a pricing strategy consultant in addition to eight years at International Paper Company in a series of sales and marketing management positions, including Marketing Manager, Catalog Segment and Marketing Director, Publication Papers. Originally from Buffalo, New York, Colin has an MSE in Operations Research and Industrial Engineering from the University of Michigan and a BA in Mathematics from Binghamton University.