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Dell, the world’s biggest personal computer maker, on Thursday moved to simplify its pricing structure by cutting rebates and other promotional offers to personal and small business customers.
The move marks the latest in a series of attempts to adjust the price structure at the computer maker after pricing mistakes contributed to missed forecasts in three of the past four quarters.
“We’ve come to the conclusion that for us to accelerate our growth and improve market share, we need to [reduce complexity],” said Ro Parra, head of Dell’s home and small business group, which accounts for about 15 per cent of the company’s sales.
Mr Parra indicated that Dell would adjust the list prices of its products to account for the cut in rebates and promotional offers to customers in the US. “Over time, list prices will come down,” he said.
A fall in average selling prices has hurt profitability at Dell and other big computer groups this year.
However, Kevin Rollins, Dell’s chief executive, told the Financial Times last month that the company expected to drive prices lower in order to grab market share from rivals.
Dell’s decision to slash rebates and promotions comes as the computer maker struggles to boost sales growth, which fell to 6 per cent last quarter.
In the past, the company’s strategy of selling its products directly to customers over the telephone and internet allowed it to outpace its rivals. In recent months, however, pricing pressures and increased competition from Hewlett-Packard, Acer and Lenovo have chipped away at Dell’s lead.
Mr Parra said Dell took the decision to cut rebates and promotions after “it became increasingly clear that a simple pricing and sales structure would make it easier for customers”.
He said that eliminating the need to discuss rebates over the phone would allow sales people to concentrate on promoting the features of Dell’s products.
Dell said it would cut rebates and promotions by 70 and 80 per cent respectively over the next 12 to 18 months, beginning with cuts to mail-in rebates on Dell notebook computers and televisions in August.
Companies in other US industries have also been experimenting with cutting rebates and promotions. But their efforts have met mixed results. Car sales plummeted last month as customers recoiled from the big three US carmakers’ decisions to discontinue “employee discount” pricing.
Shares of Dell fell 1.7 per cent to $22.01 in New York.
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