Dell Slashes Promo Pricing After Profits Shortfall

14 July 2006

Dell Computer, reeling from undershooting sales growth forecasts in three of its last four quarters, is to cut pricing rebates and other promotional offers to personal and small business customers.

Dell's home and small business group - where sales growth fell to 6% in the last quarter - accounts for around 15% of all sales. Says vp-Americas, Rosendo G Parra: "We've come to the conclusion that for us to accelerate our growth and improve market share, we need to [reduce pricing complexity]."

However, price tickets overall will likely be adjusted down to compensate for the withdrawal of promotional pricing. "Over time, list prices will come down," said Parra

The globe's largest PC-manufacturer claims the strategy is not driven solely by growth underperformance. Parra insists it decided to abolish rebates and price promos after "it became increasingly clear that a simple pricing and sales structure would make it easier for customers".

Eliminating the need to discuss rebates over the phone will allow sales people to concentrate on promoting the features of Dell's products, he avers.

Starting August, Dell will progressively trim back rebates and promos by between 70% and 80%. First to go will be mail-in rebates on Dell notebook computers and TV receivers, and other lines will follow suit over the ensuing twelve to eighteen months.

The move follows a broad hint dropped last month by Dell ceo Kevin Rollins in an interview with the Financial Times. He told the London newspaper he expected to drive prices lower in a move to increase market share.

Data sourced from Financial Times Online; additional content by WARC staff