Magazine article Marketing

PC Makers Learn Branding the Hard Way

Magazine article Marketing

PC Makers Learn Branding the Hard Way

Article excerpt

IBM hopes to stand its ground in the recession-hit computer market by relaunching its PC division and moving away from premium prices.

The personal computer (PC) market is in disarray and its three leading players -- IBM, Compaq and Apple -- are all taking desperate measures to maintain their position.

In the same week IBM announced its intention to match all comers price cut for price cut, Apple cut prices by up to 50% and Compaq -- having already cut prices to launch its "affordable" Pro Linear range -- has laid off 100 staff and closed down its service operation in Stirling, Scotland.

IBM claims its move is the most important it's made "since the birth of the PC market 11 years ago".

The company has unveiled over 50 new models but more importantly it has acknowledged that the days of paying a price premium for the IBM brand are over. The new range is branded PS VP -- the VP stands for "value point".

The move is IBM's response to the rise of cheap and cheerful methods "clone" and "screwdriver" computer brands. These relied on low overheads, bought-in technology and new direct selling methods to offer PCs far cheaper than established players. Their success sported the current price war.

"If you look at our prices you can see you're not paying a premium for IBM although you're still getting IBM quality," says marketing programmes manager Steve Walker.

"We've said we're not going to start a price war but we will finish it. If our competitors cut prices we will react within 36 to 48 hours later," he warns.

The new-found flexibility stems from IBM's decision to relaunch its PC division as a semi-autonomous company last month. But its aggressive price strategy marks a major U-turn in its strategy.

Only five months ago IBM set up ICPI to launch the Ambra PC brand. The intention was that Ambra would take IBM into the lower end of the market while keeping the main brand's "integrity" intact.

That strategy appears redundant after IBM's latest move. Last month Ambra's general manager Alan Wilsher left to become chief executive of IBM's Information Systems division--but not before, insiders say, he had made clear his opposition to IBM's U-turn.

Walker insists that Ambra's role is unchanged and that it will continue to target "those parts of the market that we're not addressing". But he warns that if there is overlap "we will look at them the same way as any other competitor". …

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