Same Part, Same Supplier, Different Prices

linuxwrangler writes "Infoworld's "Notes From The Field column this week includes a comment from a reader who found that Dell listed several different prices for the same part. Intrigued, I grabbed the first part number I found (a 512MB memory module #A0193405) and found that the list price is $289.99 which the price offered to "large businesses". Meanwhile, the GSA/DOD contract price is $266.21 while "home users" find the list-price discounted to $275.49 and "small businesses" fare even better with a $246.49 price. InfoWorld contacted Dell who responded, "Each segment sets its own pricing, and consumers are free to pick the one that's cheapest." Buyer beware."

Comments

Marketing vs IT

[fembots]

Different pricing strategy is not wrong, but allowing anyone to buy from any section is not so smart. And I can't believe they are actually expecting customers to help themselves, instead of building a site that is smart enough to provide useful information.

I wonder why isn't Dell doing something to control the purchase upon "Add To Cart"? Something like:

"This item is only available to our spend-like-no-tomorrow customers, please enter SLNT code now to add to cart, or select an alternative item from the following..."

Maybe it's a miscommunication between marketing and IT department?

Re:Marketing vs IT

[Bill Wong]

I've known about this for a few years now, and I've always bought as a "Small Business", regardless of the resulting use of the hardware, just because it was often 10~20% cheaper.

Re:Marketing vs IT

[null etc.]

One of the reasons that I've never trusted Dell is that they have "discounts" that rotate on a weekly basis. Today, this laptop might be 10% off, tomorrow, it might be 20% off, and the next week, there might not be any discount. And Dell customer service representatives are very strict about only honoring the discounts that appear that day, regardless of when you bought the product, whether you had a coupon, or when you want to upgrade.

My friend was told by a customer service representative to "wait until next week to place your order, if you think there might be a 20% discount again."

That's such a shady practice that I'll never buy Dell. I'm always afraid I'll be screwed by buying on the wrong day. How is that supposed to inspire consumer confidence?

I'm pretty sure it's not. It's more likely done to generate sales via the "OMG the sale ends tomorrow!" factor, to the millions of consumers who don't realize these discounts cycle on a weekly basis.

Re:Marketing vs IT

[nolife]

So you would feel Dell more trustworthy if they just had the higher price and left it at that? I do not see the connection to trust. I am sorry about your fear of the price potentially going down but that is retail baby. Sears puts things sale, CompUsa, Bestbuy, a car dealer, airlines, and grocery stores. No difference at all. None of those stores will offer the unit for the previous lower price after the sale is over either. About a drop after the fact? Check the winter coat rack at JcPenny next time you are at the Mall, you will see nice coats for $35 that were selling just 6 weeks ago at $150. You should buy a product for a price you feel comfortable with, not simply on hope that it will never go lower. I could understand someone not wanting to play the game and shop or wait for a better price but that has nothing to do with trust and that is not going to get you the best deal if your into that kind of thing.
Back to Dell. I got out of the white box business because of the hassles and free lifetime support I felt obligated to provide. I now refer everyone that asks to Dell now. I describe what is currently available and tell them to wait a week or so and check again if they want something different. I know a few people that have got discounts from newly lowered prices and others that have had to return the unit and then buy another one just to get the discount. Hey, if it is worth it to you, go for it.

Re:Marketing vs IT

[null etc.]

So you would feel Dell more trustworthy if they just had the higher price and left it at that?

Yes, actually. I'll lay it out real simple for you. Let's look at a few facts:

1. Dell's discounts rotate from 0% to 20%, within two weeks.
2. Thus, there a few possible types of consumers:
   • Slightly profitable consumers who buy a computer at maximum discount.
   • Moderately profitable consumers who buy a computer at a midlevel discount.
   • Hightly profitable consumers who buy a computer at no discount.
3. Furthermore, there are several subcategories of each:
   • Highly profitable consumers who don't wait for maximum discount because they don't know about the discounts, or they don't shop for price comparisons.
   • Moderately profitable consumers who don't wait for maximum discount because they think the midlevel discount will "end at any minute".
   • Highly profitable and moderately profitable consumers who don't wait for maximum discount because they need the computer immediately, due to circumstances.
   • Highly profitable and moderately profitable consumers who don't wait for maximum discount because they are impatient. These are the same people who ship everything overnight for $100 extra.
   • Highly profitable and moderately profitable consumers who don't wait for maximum discount, because the few hundred dollars savings don't mean anything to them.
   • Slightly profitable consumers who happen to buy a computer at maximum discount through sheer luck.
   • Slightly profitable consumers who wait for maximum discount before buying a computer.
4. If more consumers were aware of the tactics that Dell uses, a significantly higher percentage would wait a few days in order to save a few hundred dollars.
5. If this were to occur, consumers would only buy large quantities of computers during days of maximum discount. This means that very few consumers would buy computers during the other days, which would significantly hurt Dell's ability to move inventory.
6. Dell would therefore be forced to sell computers at maximum discount all the time, in order to keep inventory moving.
7. But clearly this doesn't happen. Why? Due to the ignorance of the consumer.

So the bottom line is that Dell has significantly higher profit margins due to the shady way in which it discounts its merchandise at the expense of the consumer, relying on the consumer's ignorance.

Do I think this reduces Dell's trusthworthiness? You better believe it.

How do you think Apple gets away with charging the same high price for its equipment, regardless of the holidays or which specific outlet the equipment is sold through? Because of intense customer loyalty (of which trustworthiness is a prerequisite.)

Your example of seasonal sales and competitive discounting does nothing to counter my argument, because Dell's rotating discounts are arbitrary. Seasonal sales and competitive discounts, on the other hand, occur to stimulate sales and encourage competition, according to the supply and demand curve (winter coats dropping in price during the summer? No kidding! Could it be due to a lack of demand?)

Gotta love Dell!

[chris09876]

That's just hilarious. I can't say I'm surprised... I've never liked Dell. They have a lot of shady practices, and it doesn't seem like they're convinced with offering the best value on hardware. Their support plans might be nice (and I'd assume that's why lots of schools/gov'ts use Dell), but that's not what I need. Heh.. dell...

Re:Gotta love Dell!

[Large Green Mallard]

In all seriousness, some pronounciation guides for those who don't speak Hindi or Gujarati would be handy ;)

Re:Gotta love Dell!

[1u3hr]

. For those of you that get frustrated with waiting for a half hour to talk to some grabass from India that wants you to reformat your computer, here's a few catch phrases you can study up

What a racist rant, modded informative by likeminded rednecks. How about you ponder who is hiring these Indians and firing Americans? It's the white-as-the-driven-snow WASP CEOs. The Indians didn't invade and conquer the American call centers, the American companies chose to outsource to bump up their bottom line.

And so?

[YankeeInExile]

It's called Channel Marketing/Pricing and it's been around for years.

If it takes me an hour of research to save $10 I have lost much more than I've gained.

Re:And so?

[Tenebrious1]

If it takes me an hour of research to save $10 I have lost much more than I've gained.

If you save $10 after an hour of searching, you're in the hole. If you're buying 20 of them for your office, then you've saved your company $2000. That's certainly worth your time (unless you're Bill Gates).

I have two accounts, one at Dell Business and one at Dell Home. I buy from whichever suits my needs at the best price. I've been doing that for several years now, I can't believe this is really news...

Prices for different segments

[Anonymous Coward]

I work for a large direct marketer who competes with Dell.
We set prices not only for different segments on any given part, but sometimes for specific customers. This practice has been done for years, and is a smart way of maximizing profit from different segments.

Dell seems to be making a mistake by telling consumers they can buy at the cheapest price if they want.

In the company I am in, if you sell to the wrong segment at too low a price, you (the sales rep) will loose out, becuase any lost GP (Gross Profit) that happens as a result of the sale directly comes out of your paycheck.

Also, on our web site, if you account is clasiffied for a specific pricing segment, you get prices for that segment only.

That way we make sure that the right segments get the right prices.

Re:My Life is Dilbert

[AviLazar]

Well sorry about the loss of your job...but if your boss disagrees with you and decides to go the other route ---telling him that you will not support his choice is a surefire way to get yourself fired.

Your former boss may have made a bad call - but as his employee you gotta deal with it and when shit hits the fan, he will get in trouble for making the bad call....but by not being a "team player" you open yourself to a world of hurtin (i.e. losing your job)...unless that is what you wanted.

In other news...

[Waffle Iron]

Can of pop from machine in front of supermarket = $1.00.

Same can of pop from aisle inside the supermarket = 20 cents.

Capitalist version of Marx slogan

[G4from128k]

"From each according to his abilities, to each according to his needs!" -- Karl Marx

If a segment can afford to pay more, Dell and other companies will find a way to get them to pay it. You find it in airline ticket prices (last minute, weekday travel fares catch business travellers), remodelling projects cost more in rich neighborhoods, sales people judge the buyer and set the price accordingly, etc.

Is it really that different from a progressive tax system in which the rich pay more than the poor?

Why are we still surprised about capitalism?!

[Anita Coney]

The point of business is to make profits. That's exactly what Dell is doing. What's the problem?

Re:My Life is Dilbert

[NigelJohnstone]

You can see his point though, if the drivers for the Network card don't work, no amount of pandering to the PHB will undo that bad decision.

The article talks about 256MB not 512MB

[Zed2K]

Unless I'm looking in the wrong place the article actually talks about 256MB modules not 512, but anyways:

"Depending on the link he followed, the 256MB SIMM cost either $88 (Small Business), $99 (Home & Home Office), or $110 (Medium & Large Business)."

Why in the world anyone would ever buy memory from dell continues to confuse me. A 256MB dimm from crucial for a dimension 4600 runs 42.99. A 512 one runs 76.99.

Why pay more than double from dell???

Re:The article talks about 256MB not 512MB

[crimoid]

I could understand how a non-techie would feel comfort knowing that they only had to deal with one tech support number and warranty process.

If some old grandma's computer takes a dump she's not going to want to track down some 3rd party's tech support number for an RMA - rather she'll call Dell who'll send a tech onsite to fix her box or she'll return her HP to CompUSA.

Its somewhat like dealing with servers... I'd gladly pay extra (although probably not double) to have one common vendor for all of my servers rather than mess around with a bunch of different companies.

Re:The article talks about 256MB not 512MB

[Obfuscant]

Why in the world anyone would ever buy memory from dell continues to confuse me.

You haven't been in an institutionalized environment, then. Like, for example, a state government or college.

We have buying departments. They go out and justify their existances by creating contracts with certain businesses for buying things. The upside for the business is they get a good lock (not 100%, but close) on the entire organization's business for that kind of product. The upside for the buying department is they justify their existance.

And before we forget this, there is an upside for the user. We can buy things without having to go through a set of paperwork hoops, because the vendor is officially blessed as the official vendor. Otherwise we need to justify buying whatever it is for whatever price we find it at from whatever company we locate. That justification process is not just because we want to buy from someone else, but would be in place for the contract company if they weren't contracted.

Another upside is that the contracted company already has the organization's account details and we can often just say "send me one of X and two of Y and bill it to account Z" and it gets done.

This takes place for all sorts of things, ranging from computers and supplies to chemical supplies to travel.

Of course, the downside is when you want to try to keep consistency in what you buy over a few year period, and the contracted computer supplier likes to sell the latest hardware ...

Re:My Life is Dilbert

[Didion Sprague]

but by not being a "team player" you open yourself to a world of hurtin (i.e. losing your job)...unless that is what you wanted.

Teamwork on jobsites is vastly overrated. Most of the time, your teammates are assholes. And if your temmates aren't assholes, you are.

Either way, it never works.

Re:My Life is Dilbert

[CAIMLAS]

Complete and utter bullshit. PC parts are, by very nature, COTS equipment - as the military would say.

Now, it might be the case that there are some systems which system OEMs produce which have more intensively tested drivers and things of that sort, but when you buy from someone like Dell for a business, you're still getting raked over the coals.

I ran a small office's network (3-13 employees) from 1998 until just recently this past month. The first systems purchased were "business optimized" systems and were well under "top of the line" spec at a much higher cost, as the grandparent mentioned (poor SOB). They had to be replaced within a year due to being too slow to actually get work done on, and Windows 95 was no longer being supported by some of the software vendors the company used. So we went to "custom" PCs and managed to keep a fairly uniform hardware ecosystem while getting much more bang for the buck (CAD systems) and being able to pick our hardware specifics (3com network cards, ATI video, etc.,) so we wouldn't have an outdated piece of shit in 2 years that needed significantly new hardware to run the latest OS.

Now, while I can understand a large company's situation is definately a bit different, it's not true at all that you need to compromise on quality for price. As the grandparent post explained, "business optimized" isn't always going to be better in terms of hardware is 'standard'. Still, it doesn't seem like a wise choice from where I'm sitting, regardless of reasons for "business optimized" PCs - they're still Windows PCs, and the technology is (unfortunately) so quickly relegated to the dumpster that it's just asinine for such a consideration to be serious. Now, if you had something like Sun workstations or Linux machines, which can run for many a year with pretty much the same software without problems, I could understand...

Besides, anyone ordering as many as 300 systems sure as hell better get a support contract for them as well. Doing otherwise would be beyond foolish.

Re:My Life is Dilbert

[Rinikusu]

It really does depend on the situation as a whole. If my boss told me to procure new units based on whatever criteria set by whomever, and that I was responsible for said purchase, and then the boss OVERRIDES my decision without prior discussion with me (but is more than glad to discuss it with the vendor...), then I'd say you've got more serious problems at hand. You're being set-up for failure, you can't make the right decisions because someone else is going to change your decision, but ultimately they'll make the blame stick on you if the shit hits the fan. You can't be a "team player" if the coach doesn't put you in the game unless he needs someone to blame...

This isn't shady at all

[gte910h]

This is called "Market Segmentation".

This is a good thing for companies to practice from a profit point of view. Its the process that makes the most money. It also means that people who can not afford to pay a higher price (e.g. students, the elderly) can get software/movie tickets at something they can afford.

Joel Spolsky wrote about it here.

Re:My Life is Dilbert

[swillden]

Complete and utter bullshit.

I disagree.

PC parts are, by very nature, COTS equipment - as the military would say.

True but irrelevant.

Even if all of your 300 machines are built with COTS equipment, your support burden can be significantly increased if they're not all the *same* COTS equipment.

It's well known that when you buy very low-priced computers that you can expect to get a grab bag assortment of different components. They'll all fit together and work (most likely), but they'll have whichever video card/RAM/drive/whatever was cheapest that day -- or that hour.

I haven't personally been faced with the task of dealing with managing large numbers of machines, but I can certainly see the value in them being identical. If nothing else, that ensures that you can build a single system image and use something like Norton Ghost to replicate it out to all of the machines with no worries about needing different drivers or anything. And then there are upgrades to worry about... having identical hardware means being able to test the latest service pack on one box and being sure that it will behave pretty much the same on the rest of them.

Besides, anyone ordering as many as 300 systems sure as hell better get a support contract for them as well. Doing otherwise would be beyond foolish.

Sure, but that support contract only covers the hardware. If the user manages to screw up their system it's the company support staff that is going to have to re-install the OS, drivers and apps.

Re:My Life is Dilbert

[riptide_dot]

"Complete and utter bullshit."

What a way to inspire thoughtful and enlightened discussion...

"...I ran a small office's network (3-13 employees)..."
"...Now, while I can understand a large company's situation is definately a bit different..."

Normally I wouldn't have even responded to this, but your points are ironic, because they actually help make my case. First, a business of 3-13 employees doesn't need standardization like a large organization does - it needs dependable, easy to use, somewhat powerful PCs for competitive prices. "Business optimized" PCs don't make much sense to really small organizations.

When you get into the larger support realm however, power and individual PC price don't weigh as much in the overall support equation, but STANDARDS do. When you are deploying a new piece of software/OS/etc to 1000+ workstations, it is of TREMENDOUS benefit to the support staff to not have to worry about every one of those thousand plus workstations having different hardware configurations. So, like I said before, "business optimized" PCs are by definition:

- not supposed to be top of the line
- not necessarily the cheapest option
- usually leased and not bought (so they are replaced every so often)
- static in terms of their component configuration
and
- more easily supportable because of their static nature.

Re:If anything...

[Master Bait]

Definitely failures of the marketplace when the sellers generate a reality distortion field of Branding and the buyers are hypnotized by it. My girlfriend loves Starbucks coffee and pays a huge premium for their pedestrian flavo drinks. Look inside an Apple computer and you see a collection of off-the-shelf chips and drives.

People who are loyal to the Dell brand insist that they are solid machines -- even though they are really no different than any other collection of Taiwan/China parts.

Re:My Life is Dilbert

[DrCode]

My experience is that teamwork is great; but the people who talk the most about being a "team player" are usually the ones you don't want to work with.

Re:My Life is Dilbert

[CAIMLAS]

But the point is, if you've already got an existing system install, and the "business optimized" (whatever) systems are not the same model as what you've currently got, what's it matter if you get 300 systems that are cheaper and powerful, or 300 that are older and cost more? Well, it does. It just shouldn't matter that there's "business optimized" PCs, as any level headeded person is going to get a support contract for those systems guaranteeing $years of support for that specific model.

I know this is how IBM does it, as I currently work for a large non-profit which relies largely on such contracts. The machines aren't by any means "top of the line" but they're not gimps and reasonably priced for the spec.