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Non-Tech : Iomega Thread without Iomega
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To: Ken Pomaranski who wrote (7406)2/17/1999 1:16:00 PM
From: Cogito   of 10072
 
>>But it is also true that they know they cannot include them as standard without negatively impacting profit margins. A company that needs to sell a computer at a particular price point will make LESS money on that computer by including a ZIP.<<

Ken -

True, if the PC maker is only trying to hit a specific price point, say $799, then it's unlikely that they will include a Zip drive standard.

What you're missing there is that the PC makers don't all adopt the same strategy. Some, like Dell, have found that they can charge more for a box with Zip built in. They don't want to sell only the lower end machines. So they add built-in Zips to some models to entice buyers to spend a little more. Other companies, such as Gateway, concentrate instead on selling the Zip as an add-on. Both approaches accomplish two things. They sell more Zip drives, and they help the PC company make money. So we can have it both ways.

As for the validity of the razor blade model, I can only point to the fact that the drop in tie ratios that you predicted would occur as OEM percentages rose has not yet been seen. This is partly due to the demand elasticity factor exploited by Iomega with the disk pricing actions last year. And don't worry, the disks are still very profitable.

- Allen
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