Medion U.S.A., a Germany-based PC maker, officially entered the U.S. market last month and plans to sell computers in non-traditional retailers using what it calls a “burst promotion” strategy.
Costco was the first U.S. retailer to test the Medion concept with PCs by carrying two SKUs in its Phoenix, Tuscon and San Diego stores in May. Christina Calsan, Medion’s product marketing manager, defined “burst promotion” strategy as a hit-and-run situation with Medion agreeing to sell a set number of computers through a retailer for a very specific length of time.
“We take a fixed quantity of PCs, go into a store and build excitement through POP and advertising and then blow them out. These [selling periods] can last anywhere from one hour to two weeks,” Calsan said.
The company tries to place its PCs in chains not usually known for selling PCs. Although Costco is a major PC seller, Carlsan said it still fit into Medion’s model.
Medion’s only other foray into the U.S. market had it selling a number of digital cameras through the Aldi supermarket and drug store chain, Carlsan said. Aldi’s is also based in Germany, but has several hundred locations in the United States. Most of Medion’s European sales go through food and drug store chains.
Medion’s burst promotion strategy, which it has used in Europe for many years, allows the company to operate without any inventory, Carlson said, which helps keep overhead down.
Making a success of the burst promotion strategy in the U.S. PC market does present several problems. One of Medion’s highest hurdles is developing brand equity while hopping from chain to chain. Carlsan said the constant movement will be somewhat compensated by sticking with the Medion name, where in Europe the company’s PCs are sold under several names.
In addition, the packaging highlights the fact that all the computer’s components are top-tier brands such as Intel processors and Seagate hard drives, Carlsan said, letting the consumers know that these are high quality products.
Carlsan hopes the strategy will help attract consumers interested in buying a second PC for their home and perhaps its unique approach will help place a PC before someone who has not previously seen the need to buy a computer.
ARS, La Jolla, Calif., PC analyst Todd Smith examined Medion’s initial rollout and believes the company needs to make several changes to be a success.
“More than likely, the vast majority of consumers will be willing to pay that $100 premium for an HP product, which already has a wealth of brand awareness, established support, and mind share,” he said of the fact that the company did not accompany its Costco roll out with a major marketing campaign.
Medion is headquartered in Essen, Germany and its U.S. component, Medion U.S.A., is located in Hoffman Estates, Ill. The 20-year-old company sells PCs throughout most of Europe and had sales of about $1.9 billion for 2001 according to its annual report. The report also states the company plans to increase its presence in North America this year and bump up its overseas sales by 25 percent in 2002. Medion’s U.S. PC sales were about $3.5 million for the first quarter of 2002. Its U.S. operation officially started one year ago said Carlsan.
The company makes a wide variety of mid-range priced PCs, Carlsan said, and has little desire to play in the entry-level segment of the market. The initial product launch at Costco featured a desktop SKU 1.6GHz P4 processor, 512MB RAM, 80GB hard drive, 16x DVD, 24x CD-RW, and a 17-inch monitor housed in a bright white and blue mini tower for $999.
The company also manufactures notebook computers and a variety of CE products including digital cameras and portable music players. Medion notebooks should find their way into the U.S. market in the near future and there are plans to expand this further into the CE side of the business.
Other CE products listed on the company’s Web site are DVD home theater systems and portable MP3 players.