HP has a brilliant idea

After last year’s flip-flopping on getting rid of its not-quite-as-profitable-as-they’d-like PC business, and the resulting self sabotage, HP needed a good idea to try to undo the damage.

Their idea is completely unoriginal, but it’s tried and true and more likely to work than anything else they could possibly do: Bundle their premium PCs with premium-level customer service and charge a little more.

The precedent for this is Gateway 2000. In the 1990s, Gateway consistently delivered PCs that were middle-of-the-road, at best, in the PC World and PC Magazine reliability ratings. But when it came to the customer satisfaction ratings, they were always at the top of the charts. Gateway found that customers were willing to forgive a lot of flaws if you didn’t hassle them about fixing them. They set up huge call centers in the midwest to support their customers, and for a time in the 1990s, they were as big as anybody. IBM even considered buying them to get their management, to turn around their failing PC business.

Then a funny thing happened. Gateway decided to see if they could improve profits by delivering the same kind of customer service everyone else delivered–the kind where you jump through a bunch of hoops as a drone reads from a script. The company quickly fell apart. Eventually they gave up, bought Emachines, told the Emachines management they were in charge now, and the Gateway management that ruined the company went away. The Emachines management was able to cut costs and keep the company going for a few more years, but eventually the whole operation sold out to Acer.

One thing Gateway didn’t try was bringing back super-friendly, super-helpful customer service based in the heartland. And today, almost nobody remembers why anybody ever bought a Gateway computer. They’re just another brand that people bought when they didn’t know any better.

But in its heyday, the approach worked. I found an old PC/Computing magazine from 1996 and looked at the ads. Gateway, still near the top of its game, consistently charged 15-20% more than a comparable system from Dell, though the machines were roughly comparable.

I’d be surprised if HP can get away with that kind of a premium, in a day when pretty much everyone accepts a 5% profit margin on a PC. But if the support is good enough, maybe they can. I’m not sure anybody knows the answer, given that none of the PC makers have tried it for more than 15 years. But it’s possible that one of the reasons Apple is able to charge such a higher price is because people know they can take their Mac into any Apple store and have someone look at it for free.

I know good support works for me. I’ve had several good customer service experiences lately–Asus, Corsair, and Micro Center, to name three. My next motherboard will definitely be an Asus and I’ll almost certainly buy it at Micro Center. And if my replacement Corsair power supply works out, there’s a very good chance my next power supply will be one of theirs too. Because as much as I love a bargain, I hate hassle even more.

If HP wants to position itself as a premium brand, providing premium support is probably its best hope for doing it. They’ll have to follow through on it, and introduce it with a carpet-bomb ad campaign. Frankly I think they would have been better off introducing it with a Super Bowl ad, but if they weren’t ready they weren’t ready.

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