WILL PCS BREAK OUT OF BOX?:AFTER ACER'S SUCCESS WITH ITS SHARP-LOOKING ASPIRE

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Acer America last year took a standard-issue PC and packaged it in a stylish dark-green casing, rocketing Acer and its Aspire home computer to prominence.

"Acer essentially broke out of the box," said Scott Miller, analyst with Dataquest. Compaq Computer Corp., for one, took notice; the PC giant said it's evaluating "colorful new PC designs."

But most PC marketers, so focused on what's inside, have not seen the wisdom of differentiating based on industrial design.

`PACKAGING COMPANIES'

"They haven't realized they are packaging companies," Mr. Miller said. "PC companies need to move out of the technology-only space."

Mr. Miller is pessimistic that PC makers will change the tech focus because the market-PC makers, customers, Intel Corp. and Microsoft Corp.-has become accustomed to accepting only what is new in technology. Aspire sold on its looks and its smarts, courtesy of Intel's Pentium chip.

The problem is the market that can afford a $2,000 "fat PC" with all the features is fast maturing, Mr. Miller said. Yet the industry hasn't found a way to sell a cheap PC using slightly older parts. Consumers who can't or won't pay the price would rather do without than buy something perceived as obsolete.

Despite the hype over proposed "$500 PCs," Mr. Miller bets such devices will flop if they are called "PCs."

EMERGING OPPORTUNITY

He agreed there's an emerging opportunity to repackage PC technology into smart phones, videogame players and Web surfing machines-provided the gizmos aren't pitched as computers.

The big market today, however, is for traditional home PCs. By yearend, Mr. Miller expects 32.6% of U.S. homes to have one or more PCs. But he said it will take years for penetration to reach 40%.

PC-less households are largely lower-income homes unlikely to spring for a traditional PC. Meanwhile, nearly 70% of U.S. households with $60,000-plus income own at least one PC.

Since 1994, most home PC sales have been to consumers who already own a computer.

"The percentage of idiots out there [buying computers] is dropping dramatically," said Scott Briggs, president of Ziff-Davis Consumer Media Group.

CHANGING THE RULES

This changes the rules. A great brand cannot overcome an inferior product; buyers are savvy enough to steer clear of an also-ran like Compaq's soon-to-be-revamped Contura notebook. And a marketer that has earned a reputation for quality and service lapses will have a hard time keeping customers loyal when they return to market; industry watchers say home PC king Packard Bell Electronics is vulnerable.

The rise of experienced consumers doesn't mean PC marketers will only talk bits and bytes. Compaq plans to target "distinct customer segments" with new PCs this fall, carving out niches in the diverse home market.

Home PC sellers also are looking at more promotions. Just as Apple Computer is staging a "Mission: Impossible" promotion, Hewlett-Packard Co. plans entertainment and consumer marketer tie-ins for its Pavilion PC.

Brian Burch, manager of marketing services for Hewlett-Packard home PCs, predicted more ad emphasis on benefits and lifestyle, a key part of the ad strategy for Pavilion. Hewlett-Packard, he said, wants to give consumers "happy, warm feelings."

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