Dell To Hone Pricing, Cut Promotions And Bundles

Plans call for Dell to halt its complex and constantly changing price promotions tied to its Dimension desktops and Inspiron notebooks, which the Round Rock, Texas-based computer maker said would "make buying easier and improve the overall customer experience."

The strategy won't impact pricing for Dell's enterprise business. On the consumer and small-business end, though, the result is that Dell's list prices will drop over time, and many of its promotions--including the bundling of free hardware with systems--will cease.

"This is not about lowering or raising prices," said Ro Parra, senior vice president and general manager of Dell's Home and Small Business Group. "This is about taking out the complexity in the pricing we offer our customers."

Dell aims to cut the number of promotions per product line by about 70 percent and the number of promotions tied to a single product by 80 percent during the next year to year-and-a-half. The company also plans to begin migrating its paper mail-in rebate programs to an electronic rebate filing system.

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"Over time, we'll be compressing list pricing," Parra said. "We'll provide far more transparency than the heavily promotional environment we have today." The move is designed to ease the frustration of customers, who in any one quarter can see "40 or 50" different promotions on one product, he added.

Dell's pricing announcement comes as it seeks to rebound from a series of quarterly earnings disappointments and win back market share lost to rivals such as Hewlett-Packard. Part of Dell's response, announced earlier this year, was to invest $100 million to beef up its service and support. And on Thursday, Parra also said Dell will increase warranties on its Inspiron notebooks and Dimension desktops from 90 days to a year and once again include support for operating system issues in its hardware warranties.

Although the Inspiron and Dimension promotion changes will have an impact on Dell, the company's bundling strategy could have an impact on the industry at large. Dell has aggressively bundled peripheral hardware with its systems--including free or almost-free LCD displays and printers--to spur desktop and laptop sales. During this time, Dell's market share in those two peripheral areas has skyrocketed.

"In the context of promotion, yes, we will reduce our use of bundling," Parra said, adding that Dell instead will use "better merchandising" in its approach. For example, if a free LCD had reduced the overall price of a desktop and display package by 40 percent, Dell will simply find other ways to reach the price objective by bundling the free peripheral.

"All of those will reduce over time as we compress list pricing to drive more transparency," Parra said.