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Dell to simplify pricing structure

Dell Inc. outlined plans to simplify pricing and reduce the number of mail-in rebates for consumers and small business as part of the computer maker’s recent initiative to improve customer service.
/ Source: The Associated Press

Responding to customer complaints, Dell Inc. said Thursday it plans to gradually reduce its use of mail-in rebates and its often confusing array of other promotional offers.

Ro Parra, senior vice president of Dell’s Home and Small Business Group, acknowledged the various programs had become increasingly complex and cumbersome for customers trying to get the best deals on computers and other electronics.

Dell was not cutting or raising prices but rather streamlining the way customers buy everything from desktop PCs to TVs to give them the best price immediately, he said.

“On any given quarter, we have had 30, 40, 50 promotions on any given product, so it really became very confusing and difficult for our customers to understand and shop,” Parra said.
The move, however, did not impress Wall Street. Dell shares fell 3 percent on the Nasdaq Stock Market.

Forrester Research analyst Ted Schadler said Dell’s move makes sense in such a price-driven industry where consumers do a lot of quick comparison shopping.

“When you go to you never quite know what the price is until you get to the end,” he said. “If you’re going to compete on price, you better be able to see what the price is. With all these promos, you can’t.”

Parra said the decision for Dell, where about 80 percent of customers redeem their rebates, was based solely on customer feedback and had nothing to do with price competition from rivals such as Hewlett-Packard Co. and Lenovo Group Ltd.

Dell joins several retailers who have cut back or eliminated mail-in rebate programs since last year.

In June, OfficeMax Inc., one of the nation’s leading office supply chains, said it would offer immediate discounts on product pricing instead of mail-in rebates. And in April 2005, electronics retailer Best Buy Co. Inc. said it would abandon all mail-in rebates in two years.

The reduction of mail-in rebates begins next month on Inspiron laptops and Dell televisions. Rebate cutbacks for Dimension desktops will come later in the year, followed by other electronics and accessories, software and services.

Parra said Dell will cut the number of promotions on product lines by 70 percent and the number of promotions for any single product by 80 percent within the next 18 months. The moves were coming gradually instead of all at once because of the scope of the undertaking, he said.

Part of the plan, Parra said, will involve doing away with paper-based rebate forms in favor of a system for customers to file for their rebates electronically.

Schadler said that it would be a mistake to completely remove rebates and promotions because they still have a role to play in driving sales.