I cannot beat Dell in the budget segment.

[CougTek]

I went on Dell's web site this evening. Usually, I only check their laptops, but today I decided to see what they can offer for desktop computers. To my greatest surprise, they are damn competitive. Not only against Compcrap, but against my very own self too. Their Dimension 4500S is out of my field. I tried, but failed. I simply cannot offer that much for such a low price. This is the system they promote for students (I modified it slightly to make it an acceptable purchase).

Their Dimension 4500S
Pentium 4 Willamette 1.8GHz
Intel i845G (in fact GL) motherboard
256MB DDR SDRAM PC2100
Integrated Intel GPU
Dell M782 17" flat screen CRT
Integrated audio
Harman/Kardon 206 (2 pieces speaker set)
40GB 7200rpm HDD
CD-burner 40x/10x/40x
Floppy
10/100 NIC
Dell QuietKey keyboard and 2 buttons + scroll mouse
Dell Slim Tower (kinda FlexATX form factor) with unknown rating PSU (~200W IMO)
Windows XP Home
MS Works Suite 2002
1 year warranty with 24x7x365 phone support

1388$CDN with shipping (~890U$)


My similar system
Pentium 4 1.8A GHz retail
GigaByte GA-8IGX i845G
256MB PC2700 DDR SDRAM
Intel integrated GPU
NEC FE771SB 17" flat
Realtek ALC650 6-channel intregrated audio
Altec Lansing 220 2 pieces speaker set
IBM Deskstar 120GXP 40GB (no, they don't fail and they have so far been unreproachable)
Lite-On LTR-40125W 40x/12x/48x
Floppy
Intel 10/100 Pro VE integrated LAN
Microsoft Internet keyboard PS/2 (unfortunately, I haven't found any unexpensive french-layout USB keyboard)
Logitech Wheelmouse PS/2
In-Win J523 Mid-tower w/300W ATX AMD/P4 certified PSU
Winblows XP Home (I hate to sell that piece of junk)
No clue where to get MS Works Suite 2002, downlaod OpenOffice on customer's system.
2 years or components warranty (depends which is higher), far from 24x7x365 tech support.

1595$CDN with local delivery (~1022U$)

And I really can't lower the price if I still want to make close to 15% in my pockets. Sure, my components are better than theirs, but on the other hand, the Dimension 4500S has a better look than my bastard box, so clueless customers will certainly be more attracted by it. And no matter how superior my setup might be on a reliability/performance viewpoint, the targeted customers of this system won't notice the difference. Except maybe for the fact that my box will take quite a bit more space than Dell's FlexATX enclosure. BTW, even though I can still buy old Willamette-based Pentium 4, they are only an impressive 3$ (CDN, even worst!) cheaper than the Northwood version, so... Same goes for the RAM choice. Using PC2100 memory would only save ~15$CDN. My config can easily overclock up to 2.4GHz and 533MHz FSB, but still, I cannot really guaranty it will so I cannot use this as a marketing hit.

So that's it, in the low cost segment, I cannot offer a better value than what Dell can. I'm about to create links with better distributors, so I will maybe be able to shave another 50$-75$ on the above system, but Dell will still beat me. I hate not to sell the best thing on the market, but if a customer arrives with a submission from Dell for a low-cost computer, I will have a hard time to justify the additional 200$ I would charge over the Dell. Dell will maybe screw my "back-to-school" season :-(

 

[flagreen]

Low price is only part of the reason folks select a particular vendor. Having you right there in Montreal would be a very important plus for me if I were living there as well and looking to buy a PC. This is assuming you bathe at least once a month or so! Seriously, service is very important!

Personally I wouldn't buy a P4 system with DDR. Why not price it out with RDRAM?

 

[CougTek]

Because RDRAM is the offspring of Rambus, who is the offspring of Satan. I bet Rambus' CEO sleeps in the same bed as some Microsoft's administration consil members.

But no matter what is my opinion of Rambus, the i850 and i850E chipsets are primitive compared to their DDR siblings. Most of the time, an i845E or i845G paired with PC2700 RAM will outperform an i850 + PC800 RDRAM. With PC1066, it's a whole different story, but the cost of PC1066 is too prohibitive (2.5x PC2700 DDR SDRAM for 256MB) for the value and even mainstream segments. Plus, to compete against the Dell, I must use an integrated graphic solution, something that isn't possible on a motherboard using RDRAM. Adding a separated AGP card will make that system jump to a higher price level, where I'm already able to match/beat any major OEM offerings. My concerns are with the value segment, not the others.

But if you want to know, the same system I depicted above, but with an i850E motherboard (Asus P4T533-C - the only brand with RDRAM support I can find on my price list on a quick search), 2x128MB PC800 RDRAM (168$CDN versus 105$CDN for the single PC2700 DDR module!) and an ATI Radeon 7500 graphic card (the cheapest "acceptable" external AGP card I'm willing to put in one of my machines) would inflate the overall price up to 1828$CDN, while not increasing at all the amount of money I would make on it. 1828$CDN (1172U$) is no longer into the same league as the 890U$ Dell box. People looking to buy a less-than-900U$ computer probably won't be willing to spend that much more for, let's face it, almost the same thing when they'll sit in front of it. You would be willing to do it, but you aren't exactly what I call a budget-buyer ;-)

 

[Mercutio]

Yes, Cougtek, but you CAN still build a more-thancompetitive system based on an AthlonXP that WILL beat Dell's price (barely).

Last I looked, P4 1.8s were running around $150 on the low end. I can get a retail Athlon 1800 for around $80. There's no shortage of decent, inexpensive socket A boards to mate with that Athlon. Those two things should push your box down to Dell-ish pricing.

Also remember that it's very hard to find the best deals on Dell equipment. Usually small business is cheapest, but just because you located something doesn't mean that someone shopping your products will be able to find the same, or an equivalent deal.

 

[Buck]

It is tough Coug, I wouldn't even attempt to compete with Dell when it comes to Intel products. I'm sure the purchasing power of Dell is amazing when it comes to Intel, and Microsoft.

 

[e_dawg]

Coug, why not build an AMD system? Like Merc and Buck, trying to compete with Intel parts is asking for trouble. But an AMD system? Definitely possible. Here's what I can find at a local retail store: (all prices $CDN)

Athlon XP 1800+ retail $157
Asus A7N266-VM nForce $117
integrated GF2MX video, 5.1 audio, 10/100 LAN
256 MB generic PC2100 $105
IBM 40 GB 120 GXP OEM $122
Sony/Panasonic Floppy $17
Lite-On 40x burner $102
LG 775FT Flatron 17" $254
generic mid-tower ATX case w/300W PS $55
Compaq French KB $15
generic wheelmouse $15
XP Home OEM $160
MS Works Suite OEM $150

Total = $1269 CDN + shipping

 

[e_dawg]

Whoops. Forgot the speaker system.

AOpen 2.1 sub/sat system $35

Total = $1304 + shipping

 

[CougTek]

Yeah, you're right. I could match Dell if I would use an Athlon XP config, but I was trying to compare aples to aples. And it's the first time in a while I cannot beat a system while using more or less the same components. And no way I'm gonna use a generic tower and PSU in a configuration involving a socket-A motherboard.

Using an Athlon XP 1800+ and an Asus A7N266-VM, I beat the Dimension 4500S by...3$.

Thanks

 

[Jake the Dog]

i thought do a comparison for what i would pay for, and sell, a similar system here in Oz. i must say i'm surprised at how well it compares in price. i'd dare sat tony could do even better.

Pentium 4 1.8A GHz
DFI NB35-EL 845G 533MHZ FSB Micro ATX
Integrated Intel Video
Onboard Avance Logic ALC650 6-Ch Sound
Onboard Realtek RTL8100 10/100 NIC
256MB PC2100 DDR SDRAM
Seagate Barracuda IV 40GB
BenQ 40x/12x/48x CDRW
Sony Floppy
BenQ G774 17" 0.25dp Flat Square monitor
Creative Soundworks 320 2+sub speaker set
Microsoft Internet keyboard PS/2
Microsoft Intellimouse PS/2
Aopen KF45AP4 Mid-Tower 250W P/S
---
Windows XP Home
MS Works Suite 2002
---
2 years or components warranty.


my cost is AU$1755 which at todays rate is US$950. everything is sourced from the same distributor and i could do a little better proicewise by shopping around the 3 or 4 i ususally buy from. i would sell this for between AU$1900-$2050 (US$1030-$1110)

 

[Explorer]

> I cannot beat Dell in the budget segment.

And, I believe Dell will soon be selling an "unbranded" vanilla box for even less $ to resellers that provide hardware and/or software add-ons.

 

[Vlad The Impaler]

I've been up against Dell for years. In the server and workstation segment they are useless. I only occasionly lose a deal and that is normally because of an incompentent or fat and lazy civil servant who would far rather pay an American company more money for their PC than buy from a local British one.

In the budget segment, Dell are unbeatable. However, I do not believe they can make a profit and sell at the price that they sell at. I have heard plenty of horror stories about their support or lack of it, and the way their star buy systems tend to be 'unsuitable' for businesses that wish to buy lots of computers. In addition, they have blown themselves out recently with the British MOD as their star computer supplier because of the terrible service. Excellent!

In short, don't worry if you can't beat Dell. Don't waste your time making $60 was it on a PC!?!?! Make a decent profit and show how amazing your service is. We have to give five star service to justify our prices. "You get what you pay for, madam". Dell=Enron maybe??

 

[P5-133XL]

I came to the same conclusion years ago; It's been that way for both Gateway and Dell for years. One can easily create a better system, but it is very hard to produce an exact duplicate system, but lower priced and make a profit. When push comes to shove, for value oriented customers, Dell or GW are reasonable buys. They just have too much in ecconomies of scale that small enterprenures can't match. One just has to note that when dealing with machines like those, there are definate limitations that one is accepting such as limited expanability.

 

[adriel]

Take a loss on the hardware, but make your money on the soft side by programming and selling the games that these geeks will play.

 

[CougTek]

Take a loss on the hardware,...

This isn't something I can allow myself to for systems in that price range. For servers yes, but for budget box, no way. And anyway, I never had to sell hardware at a lost to strike a deal on high-end stuff.

 

[Pradeep]

The mere fact that Dell pays around $50 (I can't remember the exact figure) for a copy of WinXP makes it exceptionally difficult to compete in the low end.

 

[Sol]

From having read some of your other posts you seem to really love Asus stuff CougTek, but if you want to be competitive there are plenty of boards which are nearly if not as good for the Athlons for much less money.

 

[CougTek]

From having read some of your other posts you seem to really love Asus stuff CougTek, but if you want to be competitive there are plenty of boards which are nearly if not as good for the Athlons for much less money.

I like the Asus nForce-based motherboards, but I'm not too found of their other implementations. Their nForce motherboards sell at the same price level as the Microstar's while they are more optimized and receive quicker BIOS updates when NVIDIA fixes a bug in their chipset.

For duallies, I prefer Tyan to Asus or anything else. For socket-A motherboards based on VIA's cheapset, I look elsewhere than the overpriced Asus too, most of the time it's Soltek that wins the crown for me. Last but not least, I trust GigaByte more than everything else for Pentium 4 motherboards using Intel's chipsets.

The Asus A7N266-VM isn't expensive at all for what it offers, only a scant 111$CDN right now (71U$ or 131AU$). With it, I get on-board video and audio. It's even cheaper to use this motherboard in a computer system than to go for the ECS K7S5A, because the later doesn't have integrated graphics. I like Asus, but only when their products aren't overpriced. And yes, some of them aren't.

BTW, I read on Ars Technica's forum that NVIDIA has released (or is about to) a new driver for the nForce-based motherboards which improves the performances quite nicely and fixes several bugs in the audio management. The driver version is supposed to be 1.12, so if you have an nForce-based motherboard (unlikely as I seem to be the only one to like it around here - you are missing something guys), keep an eye on this. I hope to see some benchmarks comparing the new v.1.12 against the previous v.1.05 soon, as I currently don't have any nForce motherboard in stock here.

 

[e_dawg]

The Asus A7N266-VM isn't expensive at all for what it offers, only a scant 111$CDN right now (71U$ or 131AU$). With it, I get on-board video and audio. It's even cheaper to use this motherboard in a computer system than to go for the ECS K7S5A, because the later doesn't have integrated graphics. ... if you have an nForce-based motherboard (unlikely as I seem to be the only one to like it around here - you are missing something guys)

Not true, Coug. I really like my A7N266-VM nForce board. (don't forget integrated video, audio, and LAN)

Did you know that the -VM board is overclockable? Yes, it has been confirmed by several members in the nforcershq.com forums. All you have to do is simulate moving one of the BSEL "JEN" jumpers by desoldering one connection point and resoldering one set of pins to the right. I haven't tried it yet, but I need to get my hands on a soldering iron first. I hope my XP is already multiplier unlocked, because I would hate to have to remove and reinstall my HSF again. (it's bloody dangerous when the screwdriver slips out of that groove in the clip when trying to remove the clip ... happened several times already but my motherboard has escaped getting speared so far...)

 

[e_dawg]

... forgot to mention that you must use the 1.01 BIOS for this to work.

 

[Buck]

It is tough Coug, I wouldn't even attempt to compete with Dell when it comes to Intel products. I'm sure the purchasing power of Dell is amazing when it comes to Intel, and Microsoft.

I just had a customer hand me a Dell quote for a higher end system, and the challenge is equally as hard when building the Intel route.

I did manage to come out only US$122.00 more and I included some minor alterations. Instead of just a CDR-W, I included a 52x CD-ROM plus the same speed CDR-W. I removed the Zip drive since the customer didn't even know what that was and has no use for it. Additionally, I skipped the RDRAM route that Dell took him on and went DDR. Since this customer would be using his computer for business which includes large databases, including Quickbooks backup files, Contact lists, etc., I specified two HDDs. A 20 GB as boot, and a 40 GB as data. The board I picked comes with onboard RAID, so I would be able to hook up each EIDE device to its own port.

As was mentioned, the biggest difference would be the color, I didn't pick black, although the speakers, keyboard, and mouse are a nice two-tone design of gray and black.

Of course, I had no intention of beating his Dell deal with close-to-identical products, but I was happy to see how close I got. It only confirmed how much money Dell makes on that system. If they had to buy their stuff at the prices I pay my distributor, they'd be out of business.

 

[Tannin]

I don't have a problem competing with Dell. Dell have a problem.

Dell don't seem to have a Dimension 4500S here, Coug, but the model they list as the 2300 is similar. Here is how the sums look. I started with the basic model 2300, but upgraded it to a half-sensible configuration. I went from 128MB to 256MB, added a CDR, from a 15 to a 17 inch monitor, had the smallest speakers they sell, but nothing that wasn't essential. Then I compared it to a similarly priced Red Hill system - and you are right. When you pit Dell against a typical ordinary specialist retailer, one of us can't compete - and that one certainly ain't me!

Dell Dimension 2300 vs Red Hill Family Power System

1: Price: $2193.40 vs $2140 - we are $43.40 cheaper

2: Case: Small, probably non-standard vs full-size, fully-standard, heaps of spare slots and free case fan.

3: PSU: Unknown but no-doubt scungy PSU vs 350W AMD certified.

4: CPU: Pentium 4 1.8 Northwood vs Athlon XP 1900+ Ours is two or three speed grades faster, or about 4 to 5 Winstone points.

5: Main board: Intel i845G vs Gigabyte GA-7DXE AMD760. I can't comment on the merit of the 845G (indeed, Tea was asking you about these a few weeks back) but note that the AMD760 is not as fast as the KT266A and KT333 boards, so take off a couple of Winstone points. Assuming that the 845G is roughly equal to the Abit i845 I'm taking my performance numbers from (which it probably is, more or less), that still leaves us two or three Winstone points in front. Or, spend $40 of that $43.40 we are cheaper than Dell by for a Soltek SL-75DRV5 KT333 board, be five points faster, much more upgradable, and still cheaper.

6: Hard Drive: Unspecified 20GB 5400 RPM vs Samsung Spinpoint 40GB 7200 RPM

7: Video: Integrated Intel video complete with horrible sluggishness and bugs vs Sparkle Gforce II MX 400 64MB with TV out - nothing fancy, but miles in front of the Dell solution.

8: CDR: Unspecified 40X CDR (probably Samsung or Acer) vs Mitsubushi 40X CDR

9: CDR: Unspecified 48X (probably Samsung or Acer) vs Mitsubushi 52X CD

10: Audio: Integrated audio vs integrated audio. No difference.

11: Speakers: HK 206 speakers vs Compro ACS828. Not sure what the HKs are like. Probably much of a muchness.

12: Keyboard: Dell vs Samsung Heavy-Duty. Assuming that the Dell keyboard is a decent one (which it probably is), no difference.

13: Mouse: Dell 2 button (probably the cheapest Logitech) vs Logitech optical scroll mouse

14: Modem: Unspecified Dell 56k internal modem vs X-Streama 56k internal.No difference.

15: Monitor: Dell 17 inch (probably Delta or Lite-On) vs Velta (Delta) 17 inch.No difference.

16: Software: XP Home & Works Suite vs XP Home or 98SE & Works Suite.You get more choice with ours. And if you don't need software, you don't have to pay for it. With the Dell, you pay anyway.

17: Delivery: No charge vs no charge. For priority delivery, $157.30 from Dell vs no charge from us (unless we don't like you).

18: Warranty: 1 year (or pay an extra $193.60 for three years) vs 2 years with 3 years on hard drive and monitor. Longer warranty negotiable, but hardly anyone bothers - our system is cheaper to repair because it doesn't use non-standard parts.

19: Telephone support: None (or $203.50 buys you 3 years 24/7) vs life-of-computer business hours phone support, limited only by the extent to which you get on our nerves.

20: Internet setup: None (pay $168.30 extra for it if you are stupid enough) vs free installation with any decent ISP - i.e., pretty much anyone except Telstra Big Pond.


Bottom line is that our system is clearly better on ... er ... 10 out of 20 points (# 1, 2, 3, 4, 6, 7, 13, 16, 18, 19), marginally better on five points (# 5, 8, 9, 17, 20), and the same on the remaining 5 points (10, 11, 12, 14, 15). Unless Dell's speakers are better than I guess, they can't beat us on anything.

For a major manufacturer with all that massive backing, it is an extraordinary catalogue of failure. Just as any good small dealer can, we offer a vastly better system, with a longer warranty, for a lower price. It is upgradable (which the Dell isn't, not to speak of), it is heaps faster, it is more compatible (no Intel integrated graphics problems with the GF-II), and in fact I can only think of one single reason to prefer Dell - that's if you are going to travel a lot and want to be able to get service from out of state. And even there, you pay so much more for the Dell that it would actually be quite a lot cheaper to simply pay cash for any service you happen to need if you are in Perth or Darwin.

 

[P5-133XL]

Tannin you are not keeping the specification the same.

An example:

4: CPU: Pentium 4 1.8 Northwood vs Athlon XP 1900+ Ours is two or three speed grades faster, or about 4 to 5 Winstone points.

If you are going to compare then please do apples to apples compare a 1.8 P4 against a 1.8 P4. Yes I know that the Athlon is better and cheaper but the point is if someone came to you with a Dell specification could you beat the Dell price (and make a reasonable profit) and keep the specification relatively unchanged. When I've tried I've also failed. The same goes with Gateway.

I'm sure most here could easily produce a better and cheaper machine. But the difficulty is the same and cheaper.

 

[e_dawg]

For the others who want the perceived security of going with a household name, you are not going to change their minds (well, most of them, anyways). Never underestimate the power of brand equity. Dell is a very respected name in the PC industry, and that name alone is worth a couple hundred $AUD, like it or not. I don't have to tell you about how Nike basketball shoes cost $10 to make using child labour but are sold for $100.

The lost sheep will either learn in due time, or will continue blissfully on their way because they are satisfied with the Dell experience.

... Maybe you could market your PC's under the name HELL. You know, capitalize on the DELL brand name by association. It sounds very close, you know. Dyslexic people can't even tell the difference.

 

[Tannin]

Of course I'm not keeping the specification the same, Mark. My job is to build the best computer I can. If Dell can't offer anything competitive, that's their problem. (Sure, I could offer a P-4 1.8, and we do list them, but no-one buys them. They cost a ridiculous AU$110 more than an Athlon XP 1900 - so to downgrade to a P-4 without costing more than the Dell, I'd have to change the video card to something cheaper (a 32MB M64, most likely) and save a few dollars elsewhere. easiest way would be to use a cheaper mouse (something similar to the one that ships with the Dell) and downgrade the PSU a bit. Still be better, faster, more upgradable system, but not nearly as good as the one I listed.

In sales, Rule One is sell your own product. Never, ever ever let your competition force you to play the game they want you too. Business is the same as sport or war: the day you start worring more about what your competition is doing, and adjusting your game to defend against their strengths, instead of making them defend themselves against your strengths - is the day you start loosing.

In sales, you only ever play the competition's game when you are 100% confident that you are better at it than they are. This is rare. If the competition is playing the quality card, and your quality is better, then sure. Or if the competition is playing the expetise card, and you have more expertise, no problem. But you only meet these types of situation when your competition isn't very good.

Consider the situation where Andre Agasi is playing tennis against me. Because I am such a bad tennis player, Agassi doesn't care if I play a serve and volley game or stay on the baseline and lob - he is so much better at tennis than me that he could play my serve and volley game (which is not his strength) and still win 6-love 6-love.

But you pit him against a real competitor - a Pete Sampraz in his prime, let's say - and Agasi knows that he has to try to keep Sampraz away from the net (where Sampraz is at his best) and keep him on the baseline (where Agassi rules supreme). Naturally, Sampraz knows this too, and generally speaking, the winner is the one who manages to impose his own stye on the game.

In the real world, everyone has their strengths and weaknesses, and any serious competitor will do something better than you do. Never ever go in against your competitor's strength. If your competition is cheap, sell quality. If your competition has good quality, sell service. If they have good service, sell upgradability. Hell, if you are really stuck, sell on price - but save this for an absolute last resort.

But whatever your competition does, make sure that you do something different. (Unless they do exactly what you do, and just as well as you do - in which case you both better hope that one of you thinks of something different, because if neither one does, the only way you will be able to differentiate yourselves from each other will be by offering lower and lower prices, and you will both discount yourselves into bankrupcy.

Never, ever compete against a quote by offering the exact same system. Never.

Sure, you get people ask you to do just that, but you get people ask you for all sorts of things that you don't do. You have the right to say no. But, if you are smart, you don't say no - you simply offer a better system, a different one, something that is more suited to what your customer actually needs. If you aim to do this, in 90% of cases, you will discover that the system that they are thinking about (that your competitor quoted them on) is sub-optimal. Maybe it has the wrong video card (too big or too small for what they intend to do), perhaps you have a better brand of motherboard, maybe you can provide them with more suitable software - whatever. Because the vast majority of your competitors are not as good at this game as you are - and that's true, look at how many of them go out of business every year, and ask yourself how many of them have the expertise of a P5, a Cougtek or a Mercutio - you will only rarely find that you can't offer your customer a better deal than the one that they already have. Very rarely.

And if you do find yourself up against the unbeatable deal, what do you do? The novice beats himself into a stupor trying to somehow persuade the buyer that his inferior deal is somehow better, and usually makes a right fool of himself in the process. Or else he discounts, and discounts and discounts. After an interminable and very stressful negotiation period, he finds that he has bust his guts selling a unit for less than it cost him to build it. (Yes, I have done both these things, back when I was learning my trade. But I never ever do that now.)

So how do you deal with the unbeatable offer? Sometime within the first three minutes you say "that is an unbeatable offer, I advise you to go with it". Good poker players know when to fold. Don't waste time and sweat chasing balls you can't ever hope to lay a racquet on. You have work to do. Finish the transaction as quickly and politely as possible, and get on with something useful. Spend your time and energy on the sales that you do have a realistic chance of closing.(And take your time: don't ever rush people into making a decision. Give them something to think about and leave them alone for a while.)

But here I am talking about the very rare exceptions, and these always come from other specialist computer vendors like yourself. In desktop systems, I have never known any of the vomit box makers ever offer a deal I couldn't beat.

 

[Tea]

(Tannin, you just told a fib!)

(Me? I never fib.)

(Yes you do. What about those Osbourne systems? They were heaps better value than yours.)

(No they weren't. They just looked like better value. In the end, they turned out to be very bad value indeed.)

(Yes, but you didn't know that at the time. Maybe you better tell the story.)

(OK. I will. But I'll make a fresh post.)

(OK.)

 

[Tannin]

The sad tale of Osbourne

Osbourne were a major Australian computer vendor. The name came from Adam Osbourne (at least I always assumed tht it did) but it had nothing to do with the company that made those CP/M portables in the USA, it was all home grown.

Osbourne were the biggest IT retailer in Australia, with something like 10 or 20% market share. They were rather dear, and very often made non-standard stuff, but they always had good quality. They did OK at retail, and were huge in the corporate and government sectors. Solid, reliable, a little stogy.

Then, one year a few months before Christmas, they suddenly started offering crazy deals. I mean really crazy - like 20% cheaper than I could build the same system, or even 30%. And the systems were not crap! They were non-standard form factor things, but the components were good: Micronics motherboards, Intel DX/2 and DX/4-100 CPUs, quality 15 inch monitors (nearly everyone else was selling cheaper brands, and only 14 inch at that), 420MB Conner or Seagate hard drives, Panasonic 2X CD-ROM drives, 16MB of RAM in the days when most vendors were offering only 8MB or even 4MB, and best of all. those wonderful Honeywell 101WN keyboards. (I'm typing this on one of them.)

How the f*&%%#@! could they do that at the price? We just couldn't compete. No matter which way we shaved it, they were hundreds of dollars cheaper, and they were not making crap. (OK, it was non-standard non-upgradable, but at that price, who cares?)

Quite a few of us retailers talked about it. And eventually, we worked it out. This is what they were doing.

They had a new CEO. He was determined to double their market share. So he introduced these special offers. You had to pay cash up front six weeks before delivery. Osbourne were buying their parts from the likes of Micronics and Agate (Seagate) and taking 60 to 90 days to pay their invoices. They were selling the boxes for less than they were buying them for, but because of the three month gap between Osbourne taking your money and Osbourne paying for their components, they could hide it. With luck, by the time they had to deliver your $3000 computer, prices would have dropped enough to let them almost break even on it.The Aussie dollar was rising at the time, and the consequent overall fall in prices kept them afloat for a while. But one day, the dollar moved the other way. And they had already spent all their pre-delivery sales dollars paying six-month-old bills, and Micronics said "ahem: you owe us $17 million dollars - no more stock till you give us some money".

That was Friday. On Monday, Osbourne no longer existed. And all those people who had paid their six-weeks-in-advance-of-delivery $3000 for a new computer got nothing.

And all those people who already had their Osbourne DX/2s and had a problem with them, they got nothing. They had to pay people like me to repair them. And because the boards were non-standard and the cases were non-standard too, if they had a mainboard problem they had to buy a new case and power supply too.

And all those people who had Osbourne DX/2s and didn't have a problem needed to upgrade sooner or later, and they paid peple like me to do that too: complete with new case and power supply. And if they wanted more RAM in the old board they had to pay through the nose for that too, because those stupid Micronics motherboards absolutely positively refused to work unless you gave them parity RAM. And there was no documentation for the weirdo jumper settings - anyone who knew how to strap an Osbourne to take extra RAM could (and did) charge a premium for their expertise.) (Not all of the Osbournes had 16MB out of the box, only the last few - before that they had 4MB.)

And all those people who had Osbourne DX/s and eventually upgraded to a Pentium or a 686 needed new keyboards, because PS/2 to AT adaptors were not common in those days.

 

[Tea]

And that's where our beautiful keyboards came from?

 

[Tannin]

Yes, Tea. That's where our beautiful keyboards came from.

 

[time]

Firstly, I'd like to thank Tannin for truly sage advice. I realize that it may seem obvious, but it lifts my spirits to see such an obviously successful dealer spell it out. I'm going to reread it a few times, and I advise everyone else to do the same as a life lesson.

Secondly, everything he said about Osborne is exactly correct. Their quality was daunting, albeit with nonstandard mainboards etc. Many of the customers who paid up front were government departments, believe it or not!

What he didn't say is that Osborne were offering FIVE year warranties. I had concluded that this was a sure indication a company was on the rocks, but I notice that Hardly Normal (Harvey Norman Computer Superstore to those outisde Australasia) is also now pushing the same as a cost option. What does it all mean?

Gateway bought the carcass of Osborne Computers and provided support for a while. Of course, Gateway is now defunct in this country as well. :clown:

 

[Cliptin]

Thanks for the lesson Tannin. I have been considering for some time starting my own consultancy but there are several pieces of the puzzle missing for me at the current time.

One of the pieces missing is that I have no idea how to purchase parts as a business. You go through a distributor, right. How do you find a distributor?

PS, It is shocking to me to see that Dell does not offer phone support. Here in the US they offer phone support for the duration of the warranty and web KB and driver downloads forever. This is the single biggest reason I recommend Dell to folks who ask me and want a generic box.

All Dell mice I have seen packaged with Dell machines were the MS intellimouse. Even the black machines come with a black one.

The HDs in the optiplex machines I have been working on were WD 200ABs.

HK is a known name in the home audio speaker segment. I have only played a little music or movies through those offered by Dell but they seem adequate.

 

[Tannin]

Thankyou gentlemen, those were kind words.

E_Dawg says that it's difficult to convert Name Brand buyers over to a real system. Nope. It is the easiest sale of all, by a mile.

Back when I used to have staff and had to train them, I always used Name Brand buyers to get my people started with computer sales. The thing is, selling a computer is really, really difficult when you first start. You feel that getting a complete stranger to voluntarily hand over two or three thousand dollars for a computer is a huge and delicate task, something quite beyond your ability.

So, assuming that you have some basic product knowledge (which is a pre-requisite before you are fit to be let anywhere near a customer), the big hurdle is confidence. You have to be able to relax. To do that, the one thing you need above all else is confidence. And the only way to get some confidence is to sell your first system. Chicken and egg stuff. So, part of my job in training new staff was to get them part those first two or three sales. From there, they are starting to feel relaxed and confident and are fit to be left to work out their own particular wrinkles. Everyone develops their own style after a while.

Anyway, whenever I had someone who had spent some time with us and was about ready to start doing system sales, I'd keep my eye open for a Name Brand buyer, and unobtrusively find some other pressing task to occupy me when they called, so as to give the learner a go. When you have a better, faster product that lasts longer, is cheaper to upgrade and maintain, can be serviced by any competent computer shop as opposed to needing proprietary parts, and costs less to buy, all you have to do is tell your customer what you have and what the difference is. Oh, and make sure you have a sharp pencil handy so that you can take down the order.

The easiest way is to keep a representative example handy. Do it with old machines - you usually have an old machine or two lying around, one of each kind, a standard one and a vomit box. You can keep one on hand (it need not be a current model, and it's best if it isn't, because using a three or four year old one gets them thinking about long-term ownership issues, which is exactly what you want) or you can just grab whatever happoens to be in the shop waiting for a repair or an upgrade.

Then you go through the two machines, pointing out the main components.

"This is the power supply", you might say, "it is just a fance name for a transformer. They are a standard size and shape and most computer shops will have spares in stock if you ever need one. Depending of the particular type, they cost about $50 to $100."

Then you point out the power supply on the vomit box and say "this does exactly the same job, except that it's only rated to 170 Watts. Notice, though, that it's a different shape. That means that you have to go to Compaq (or Dell, or whoever) for the spare part, and because you can't say 'that's too dear, I'm going to get one from over the road instead' they can charge whatever they feel like." At this point the customer is rolling his eyes, and often stops you to tell his own little horror story about the proprietary car part he had to pay through the nose for last week, or the sewing machine repair, whatever. (Everyone has one of those stories.)

You could actually stop right there - the sale is pretty much made already - but you let things roll on and tour around the rest of the system. A really good thing to look at is the video card. You compare the performance of your stand-alone video card with the vomit box, and then you point out how easy it is to upgrade, and how much video cards matter if there is anyone in the family that is into gaming. And then you mention that to replace the little 3D card in the standard machine (if it ever goes wrong) costs $50 to $100 and takes ten minutes, where the video card in the vomit box is part of the mainboard, so if it goes wrong, or just needs upgrading, you have to replace the entire main board, and while a standard mainboard is about $200, the proprietary thing in the vomit box costs whatever Dell (or HP, or whoever) feel like charging you.

And so on.

Don't be rude about Dell. (Or whoever it is.) You don't have to be. What you do is be polite about them. Find something nice to say about Dell or Gateway. Allow yourself to betray just a tiny hint of respect when you say that "integrated mainboards actually tend to be quite reliable" or "Dell are generally regarded as the least worst of the supermarket machines". You don't say "supermarket machines are horrible", you say "as proprietary things go, these are not bad" (which is a far more persuasive criticism), and you find something worthwhile to point out. (There is always something.) (Unless it's a Pavillion, of course.) The very triviality of the good thing you find to mention - and let us remember, we are taking vomit boxes here, so any good features will indeed be trivial - serves only to illustrate their lack of worth. Let the things you don't say about non-standard vomit boxes be as persuasive as the things you do say.

Be positive. Don't actively run your competition down. Say things like "we have some very competent and worthy competitors here", then as an afterthought, you add "but Dell isn't one of them". Resist the temptation to pay out on the vomit box makers. Praise them as honestly as you can. Given that they make such dreadful computers, that will be pretty faint praise, and there is nothing more damning than faint praise.

Let your natural aversion and disdain for vomit box sellers be politely veiled, so that only a person wondering what you really think will see it. (Which they will, of course.)

Mention the V-8 Bicycle Trick in an off-hand sort of way as something to be aware of (i.e., Pentium 4 2000 with 128MB of RAM and a U Series hard drive). Talk about the key factors in performance, especially balance between the different components. Make sure that you use the key phrase "and in computing, the faster it goes, the longer it lasts" at least three times so as to be sure it soaks in. Draw them a freehand picture of the performance curve vs the price curve, and take a different coloured pen to put a circle around the sweet spot in the mid-range.

Explain it properly: "If we start with the cheapest, slowest machine you can buy down at Harvey Norman's" (you are ever so casual in the way you accidently let the veil slip a fraction here, and use a name-brand vomit box as your zero degrees Kelvin of performance) "and then the next model up, and the next one" (you are drawing the start of the curve as you do this) "and so, on until we get to the machine you order when you have just won a couple of million bucks and you walk in and say 'Tony, I want you to build me the biggest, fastest machine you ever heard of, and I want it to cost as much as possible', we get a performance curve like this." The performance curve starts out nearly vertical and ends up horizontal. Then you do the price curve, which starts out nearly horiziontal and ends up vertical.

Now quite a few people are vaguely aware of ths stuff, somewhere in the back of their minds. But very few will have ever seen it expressed quite so simply and visually, and for many buyers, this is the moment when all the vague and semi-conscious reasoning they have done so far, more gut feel than anything else, starts to harden into a conscious, reasoned decision to buy. And nine times out of ten, they will buy from you.

 

[P5-133XL]

You've sold me. There is much truth in what you are saying. You're a very good salesman, unlike me.

 

[Tannin]

Some people say salesmen are born, not made, O Posthumous One. And it is certainly true that great salespeople have a natural gift for it. They are especially keyed in to attitude, body language, all that stuff, and a good one is amazingly well aware of what you are thinking.

I'm not one of them. I have an almost complete blindness to body language, and break various of the cardinal rules of sales as a matter of routine. By nature, I am one of the worst salespeople born.

But anyone can learn to sell effectively, provided only that they have one or other of the three essential attributes. Any one of the three will do. Without one of those three attributes, you couldn't sell beer in a crowded bar, and with any one of those three, you can sell snow to Siberians. They are:

1: Natural talent. Either you have it or you don't. The only way to get it is to choose your parents carefully.

2: Creative blindness: This is another one you have to be born with, or at least raised to. You are either (2a) a bit dim, and genuinely believe that your product is superior when it obviously isn't, or else (2b) you are that rather disgusting sort of creature who can pretend to be #2a so effectively that people are fooled by your lies. Most of the sales droids in computer superstores and used car lots are type 2a or 2b. They are not as effective as types #1 and #3, but they get by.

3: Great product. This last is the only 100% sure fire way for us ordinary mortals who are not gifted (#1) or creatively stupid (#2a) or naturally dishonest (#2b) to sell things. Provided only that your product is superior, you don't have to be a salesman to sell it.

Anyone can sell a superior product. OK, it means that you have to think long and hard about ways to improve your product, but if you get that right, it practically sells itself. All you have to do is make sure that you communicate the benefits of your product to people, and the easiest way to do that is just tell the exact truth about it. (Your competitors down the road at the Vomitbox Superstore will probably think this is cheating, but to hell with them.)

 

[CougTek]

You're a very good salesman, unlike me.

Tint your hair and beard in white. People will feel like they buy from Santa. You'll catch, you'll see.

 

[P5-133XL]

You're a very good salesman, unlike me.

Tint your hair and beard in white. People will feel like they buy from Santa. You'll catch, you'll see.

Couldn't do it. I'd feel bad about myself because Santa is supposed to give away is stuff not sell it. It just isn't right that a salesman has the right to enter your premisis without even knocking (through the chimminey no less), eat your cookies and milk and then sell you those presents in what could be considered extortion.

 

[time]

What's with the milk? In Oz it's beer.

 

[e_dawg]

I always wondered how small stores can compete in the PC retail industry and still come away with a healthy operating margin. Now I know. The good ones (like yourself) simply know how it's done.

What can I say, Tony? I think it's fair to say that your posts in this thread are instant classics... vintage Tannin. You know, people pay good money to learn what you have been doing all these years. In fact, if I closed my eyes, I would have thought it was 2001 and I was back in my MBA Marketing 600 and Business Strategy 631 classes.

 

[e_dawg]

Now, to your post where you decided to meet my supposed challenge of being able to convert name brand buyers. I love how competitive you are, but that was not a challenge, and that was not what I meant exactly. You were only talking about a small subset of the lost sheep I was referring to:

These people who walk into your store are at least curious enough in generic PC's to bother dropping by (or calling you on the phone). That is, they are already open to the idea of buying generic PC's. If you present a good case (which you obviously do), you can "convert" them. But there are a good number of people who wouldn't even consider buying a no-name box from a small store. You wouldn't be able to sell them a PC simply because they don't know your store nor do they want to know your store.

You may think that name brand PC's are junk, but the majority of people out there think the opposite -- they feel the DELL logo means they are buying quality and are afraid of that "no-name junk" in those small stores. They simply want to go to the big box store in the big city and buy a big brand name. There are a ton of people in this world who buy mainly on brand recognition and ascribe value to many other things besides product quality.

Surely, you feel differently about this because of your daily successes winning over the lost sheep, but the fact of the matter is that brand equity and mindshare rules. If you are lucky, you will get a chance to communicate to a select few individuals and prove that your product is superior (and in the 20 minutes you spent persuading one customer that your system is superior, the big brand competitor just made a dozen sales without having to do a thing but flash that brand logo). Most of the time, however, you won't have the opportunity to prove the superiority of your product. You just don't have that mindshare. Meanwhile, the competitor with the powerful brand name didn't have to do a thing and he's already the frontrunner in many customers' minds, with their credit cards in hand.

And if you think about it, you have built up some brand equity of your own over the years. Word of mouth sales and repeat customers are basically because of Red Hill brand equity.

 

[CityK]

if I closed my eyes, I would have thought it was 2001 and I was back in my MBA Marketing 600 and Business Strategy 631 classes.

Agreed...just prior to reading your post, and as I was joyfully worked my way through Tannin's, it occured to me that this was all too reminiscent of university....at least those moments of enlightment brought upon by the sage advice of the more memorable profs

What's with the milk? In Oz it's beer.

Its common knowledge that Santa lives at the north pole and that he, logically, travels in a north-to-south lattiudinal fashion. That being said, in the northern hemisphere, he just likes to coat his stomach before he pounds back a few from down under....it helps pervent him from losing his cookies somewhere over Siberria on his drunken flight back home.

Cheers, CK

 

[Cliptin]

Tannin would be so proud. *sniff*

At my new job, the have given me a cell phone to use. Of course it still has the same number as before and occasionally I get a call for him.

Today this conversation takes place:

*rinnng*
Me:Hello, This is Howell.
Him:Uhhh, I think I may have called the wrong number.
Me:Ok, What number were you trying to call?
Him:Uhh, 593. I was calling for Jeff.
Me:Oh, Jeff no longer works here. I have taken his place and now have his phone. Is this <company where I work> related? Can I help you with your problem?
Him:Jeff did some work for me in the past on the side, at night. <insert story about how they started working together> Do you have a number where I can reach him?
Me:No, he moved out of state. What do you need help with?
Him:Well, my home business computer is acting funny. Would you be willing to work on it. <insert story from the OE thread>

Two hours work and all I had to do was insert myself into the situation with the two bolded questions.