HP & Dell: how to make your netbooks dominate the market

I am in a unique position in that I get to speak with the teams at major OEMs that make notebooks and netbooks.  These conversations are often frank discussions that prove how these companies are trying to understand the new low-margin netbook segment and how they can serve their customers.  I see a recurring theme to these discussions that show me that major OEMs are having trouble deciding how to attack the netbook market.

I’ve written about the netbook problem before and how it’s tough for the OEMs to distinguish themselves on an ever-crowded playing field.  The OEM reps I speak with are really struggling to come up with a way to distinguish their own netbook products from all of the similar devices that are popping up all the time.  I must reiterate what I’ve said before and what I tell these companies in private: price is everything in the netbook segment.  The sales numbers required to make it worthwhile for large OEMs like HP and Dell to participate in a low-margin segment will only be realized when netbooks hit the big box retailers.  When mainstream consumers can walk into a Best Buy and see, touch and interact with a netbook is when these will start flying off the shelves.  I still contend that $400 is the tipping point price-wise for this to happen and I understand why HP and Dell are having a hard time coming to grips with that.

I am asked over and over by these guys how they can make their product stand out when netbooks are pretty much the same.  They keep asking me what special function or feature they can add to their netbook to set themselves apart from the crowd.  My answer is always the same to them: do not add "special" anything as that can only add to their price.  I can’t state strongly enough that price is everything so while it might be cool to add special feature X to your offering it will only hurt you in the marketplace as that will make your price higher than a lot of the netbooks coming out of Asia.

Their response to this statement is invariably "then how do we set our product apart from that crowd?".  Listen up HP and Dell to what I have to say.  This is the easiest question to answer for you guys and I’m surprised you don’t get it yet.  Mr. HP netbook guy you already have the single best advantage over the many OEMs releasing netbooks today:

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Yes, that’s right.  You are HP and your logo represents the quality and innovation behind it.  It represents the global support infrastructure you have operated for years and years that proves you stand behind your netbook, even though it’s cheap by notebook standards.  So what else do you need to set yourselves apart from the crowd?  You already have an advantage so produce a solid netbook at a competitive price and tell the world why yours will be supported better than the others.  When you have an advantage then press it! 

If you really want to distance your netbook from the rest then add to that advantage.  Make sure it comes standard with a 6-cell battery, produce a line of accessories that augment the user experience should they desire.  Offer a reasonably priced augmented support package that can be purchased at the time of the original netbook sale that removes any doubt in the buyer’s mind that your total package is better than the rest.  Press your advantage.  If you build it, they will come.  I am certain of that.

The netbook segment will grow huge I predict and you ignore it at your peril.  You will start to see your notebook sales drop as a result so you’d better be in the netbook market, and soon.  Imagine this scenario:  consumer is in Best Buy (or similar retailer) looking for a simple computer for the home.  They see two similar netbooks side by side, an Acer (or Medion, or MSI, etc.) next to an HP netbook.  Both are roughly the same component-wise and both are $400.  Which one will they buy?  The HP of course because it is a known brand.  They have used HP products before and they know you’ll be around should they need support.  Get it now?

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