John, don't you think that Dell's pursuit of the business market had more to do with sales predictability than simply cost of service issues? 26% of their market is currently small office/home market according to Dell. they are looking at moving that figure up to around 40% to 45%, a 15% increase in total sales volume. Dell has determined that service costs per household is higher than for a large business based unit where service issues are handled, many times, by buyer hired IT specialists. even though service costs are higher they've discovered that (a) repeat purchases are higher (businesses are less loyal today) and (b) prices received per unit is higher. A SOHO, or an individual buyer, is not going to receive the same price break that a large business gets. So, per unit sold, the higher price that Dell receives for home buyers, averaged out over the life of the contract, more than compensates for the expected higher service fees from potential call-ins.
besides, how can one say that individual buyers can't be trained over time to utilize the internet for service issues? even so, since their current earnings picture already includes 26% SOHO buyers, an increase of 15% from this level wouldn't adversely affect future earnings (being offset by the higher prices paid per unit sold). |
