Price Plus Performance Equals Sales - Twice

Price Plus Performance Equals Sales

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For retailers store location is the key to success, but for eMachines price is the critical factor in creating a successful SKU.

This formula held true for eMachines' T1090. The T1090 was introduced in fall 2001, and during its four-month run on the market, it became the leading unit and dollar seller for all PCs priced under $500.

At launch the model featured an Intel Celeron 900MHz chip, 128MB SDRAM, 20GB hard drive and 48x CD-ROM. It carried a $399 suggested retail price, after a $75 rebate. The T1090 was part of the company's first product launch with its new management team headed by company CEO Wayne Inouye, and while it was reflective of eMachine's earlier models with a high-end capability at a very low price, it benefited from several corporate improvements. These changes included a customer service department and better warranty.

Chuck May, eMachines product management VP, said what helped drive sales of the T1090 was that consumers considered it to be an extremely good deal for the money.

"The parameters that were used to drive PC sales have gone away. What's happened is the computer has become a commodity," May said.

So eMachines sells PCs as a commodity item by packing as much functionality into a device as possible while keeping costs just high enough to make a profit. The $399 after-rebate price is extremely competitive, May said.

eMachines' improved customer service and growing reputation among retail sales associates also added to its success, he said. The eMachines reputation had been all but destroyed due to poor customer service and quality control issues — to the point where sales associates were vigorously steering customers away from the brand. But that has been slowly turned around, May said.

All of this helps even out the brand name difference between eMachines and the top players in the category in the consumer's eye, he said.

From eMachines' perspective, the T1090's success is intriguing because it was accomplished with almost no advertising budget, said the company's spokesman. One of eMachines strategies that enables it to make a profit on a $399 PC is it doesn't spend much on advertising and marketing, but allows the retailer to handle that aspect with its weekly circulars.

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