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When will the PC market really grow up (and act more like the automotive market)?

By Rutger-Jan van Spaandonk

As a foreigner, I am baffled by the PC market in South Africa…

No, let me put if differently: when I first came to this country I was baffled by the automotive market. Nowhere in the world had I seen such a concentration of luxury vehicles as in the suburbs of Johannesburg and Cape Town. Soon I found out that South Africans really do like their cars (and their boats, second homes, motorcycles, cell phones, etc.). The true and sincere appreciation of South Africans for quality and brands coupled with a “healthy” consumer credit market, make South Africa a heaven for marketers.

And that is why it is so strange that “grey boxes” and unimaginative marketing dominate the PC market in South Africa. With the notable exception of Sony and Apple Computer (Full disclosure: I am consulting to Apple Computer’s distributor in South Africa), most PC vendors and resellers compete on price and specifications (not even on performance: a 2 GHz processor in an ill-configured computer gives you similar ‘performance’ to the massive 6.75L V8 engine in a Rolls-Royce: not high at all).

In the year until September 2001, 715 000 PCs were sold in South Africa, mostly to business and professional users. Only now are we slowly seeing an increase in computers sold for home use only. Assuming that the typical S-shaped curve of adoption holds, the early adopters will be the high-income earners who realise that the BMW and mobile phone are no longer sufficient to set them apart from the pack. More importantly, people can nowadays actually do something fun with their home computes, such as editing movies, publishing web sites, making music, and sharing pictures. In short, a beautiful and useful PC all of a sudden is the next generation have-to-have toy.

Now, why would want you apply a commodity marketing strategy, and try to flog your wares via mass market discount stores like Makro, Game, Dion and Incredible Connection (which is the current strategy), if your potential customer is a rather well-to-do and fashion- and image-conscious individual?

Compare this mental picture to the gleaming BMW showrooms or upscale Vodashops: where would you rather spend your money? And where would you be inclined to spend more of your money?

It seems that before the boom even happened, the vendors and resellers collectively destroyed their own chances to make money, by just “moving boxes” into the market. Everyone understands the real and perceived difference in value – and hence price – between a VW Chico and a BMW 3 Series, although they are both cars. In the PC industry, vendors and resellers have not managed to educate the market, and therefore customers do not comprehend the price difference between an entry-level Mecer computer, and a fully loaded Apple iMac.

To reverse this situation, the PC industry in South Africa should apply an automotive-like strategy.

First of all, it is important to make financing available. Any car dealer will tell you that it is easier to sell a car – or sell a more expensive model – when the consumer can buy it on credit; the same would apply to PCs.

Secondly, vendors should set up a healthy market for used equipment. This would allow users to upgrade to a new machine more often because their existing machine has a residual value, and it provides cash-constrained users with an opportunity to get the know the product – by buying a ‘used one’. And the vendor can establish a brand connection long before the user becomes a first-time customer for new products.

Another way of making customers less price sensitive, create customer loyalty and generate additional revenues, is to bundle the product with value added services, such as insurance, extended warranty and maintenance contracts, and Internet connectivity.

Finally, vendors should focus in their marketing communication on what the computer can do for the user as opposed to touting the stuff under the hood (GHz, MHz, and the likes) – it does not really matter whether your PC crashes in 0.1 or 0.01 millisecond (Apple joke!). It is more important for the user to know whether or not the computer can import pictures from a digital camera, allows for fast connections with peripherals (ever tried to download MP3s onto an MP3 player?), enables sharing of digital media with friends and family via the web, or can burn CDs and DVDs.

More importantly, what does the particular PC tell the world about the user? Is her or she cool, hip, creative, cheap or a nerd? That way, the consumer will be able to appreciate the “real” value of the machine, and accept a premium price point.

Looking at the medicine above, it is clear who is leading the pack in South Africa – Sony and Apple Computer – but let’s hope other vendors will catch up soon.

Rutger-Jan van Spaandonk is the founding director of FutureForesight Group, a boutique strategy consultancy. He can be reached via mailto:rj@futureforesight.com.2005

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The Big Change is a business strategy blog and newsletter published by Arthur Goldstuck, managing director of World Wide Worx, a leading technology research organisation based in Johannesburg, South Africa.

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