Smart positioning key to booming notebook sales

Lower customs duties, reduced prices and a renewed focus by vendors saw notebook PC sales surge to never before heights in the last year. As expectations ran high, there was a perception that vendors were cutting down on features in a bid to reduce prices. But real growth has come about because of smart market positioning by notebook vendors, says Stanley Glancy

Raj Saraf says that Indian consumers are more open to the idea of a notebook than ever before

The notebook market in India grew 72 percent in 2003 over the previous year, upsetting earlier predictions of 30 percent growth. According to market research and advisory firm IDC, the notebook PC market saw sales of 83,724 units over 48,666 units in fiscal year 2002. This unexpected surge in growth has been largely attributed to the introduction of sub-Rs 50,000 notebooks by all major vendors in the country.

But has a reduction in price been paralleled by a compromise in features? This is one question that has been bothering many users. After all, it’s a universal truth that you get what you pay for. And does this mean the Indian consumer is willing to compromise on features to flaunt a product considered elitist till date? The facts prove otherwise.

Indian psyche

Too often India has been denigrated as an extremely price sensitive market. While the Indian consumer may be price sensitive this doesn’t necessarily translate into the fact that we only buy cheap products. Says S Rajendran, general manager-Sales and Marketing, Consumer Product Group, Acer India, “India is more of a value conscious market. As long as the Indian customer is convinced of the value he gets for his investment, price is not an issue.”

Adds Raj Saraf, chairman and managing director of Zenith Computers, “Price sensitivity means that the Indian consumer looks for ‘value for money’ in every purchase. Whether they are buying a notebook or a desktop PC they ensure that they derive the maximum benefit from the purchase.” Discounts and other offers may not necessarily sway the Indian customer. In this they are not very different from their counterparts in other nations. Most are usually willing to pay a higher price if they think they are buying a product that will be a good investment.

On the ground, what this means is that none of the vendors Express Computer spoke to has cut down on any of the major features in their notebooks. What this also means is that the low cost notebook or alternate computing devices that you wished for to help finish your work during the long hours spend commuting to office and back is one step closer to reality.

Connectivity

Of course, the convenience of Internet connectivity anytime, anywhere is still at best an expensive proposition in India but at least you have the option of framing those letters that you need to urgently shoot off to a client. But certain vendors are looking at countering even this problem. To overcome spotty Internet coverage in hotels smart companies like Acer have been bundling a Reliance Data Kit (RDK) offering connectivity on the move from telecom provider Reliance Infocomm at regular dial-up rates.

The success of the strategy of bundling RDK with the TravelMate 240 series can be gauged from the fact that the company sold more than 1,500 notebooks in the very first month that it came out with the offer. The success of Acer in the notebook space points to an important fact that Internet connectivity is an important part of buying a notebook. Several vendors have made Intel’s Centrino wireless access technology a standard feature of their notebooks, though it may still not be available in an entry-level notebook. But if Acer’s success is to be considered then it is only a matter of time before others follow suit.

Falling price of components and the recent duty cuts announced in the mini-Budget have also contributed significantly to the fall notebook prices. Also, vendors are now looking at making up for what has been lost in terms of value by generating huge volumes.

S Rajendran says working professionals prefer notebooks as there is higher RoI due to mobile productivity

Market segments

Depending on the profile of the customer the market can be divided into three main segments—entry-level, mainstream and high-end. Small and medium enterprises (SMEs), small office/home office (SOHO), students, and even sales force automation in large verticals generally constitute the first segment. Typically, this segment will go in for sub-Rs 60,000 notebooks.

But this doesn’t necessarily mean that users from this segment will always go in for entry-level products. Mainstream notebook customers will go in for slightly higher priced models but will generally prefer to limit their purchases to sub-Rs 90,000 models. The extra sum is spent on multiple additional gadgets like extra disc capacity, extra battery power and maybe the latest optical disc drive.

The high-end segment comprises CxOs, gaming enthusiasts, collaborative workforce, research & design houses, etc. The need for higher computing power is felt more by this segment. This power hungry segment opts for systems that provide maximum speed and performance and is not too worried about what they have to pay to own a system that promises then the best. Prices in this segment can vary upward of a lakh to the most expensive products available in the market. According to Sanjeev Menon, brand manger, mobile computing, personal computing division, IBM India, for large enterprises, thin and light notebooks, manageability features, three year international warranty and sales and support requirements are critical. Hence, this segment is likely to pay that little extra to avail of these benefits.

Most players today have offerings in each of these segments. Players like IBM and Dell, who had initially focused on the latter two segments, have today changed their game plan to include the lucrative entry-level segment. IBM, for instance, is making available notebooks with multiple configuration options and is investing considerable amounts of money to spur demand in smaller towns. Even Acer has introduced notebooks for each of these segments. They key agenda is to retain and grow market share.

Vendors have realised that what the entry-level segment lacks in terms of value it makes in terms of sheer volumes. The opening up of the Indian market saw the entry of various players into areas like insurance, mutual funds and other financial services. Considering the huge amounts of computational work that needs to be done by agents in these fields it is no surprise that many have decided to invest on notebooks.

Also, several educational institutes, especially business and engineering schools, have made it mandatory for students to use notebooks. Some high-end business schools have in fact incorporated the price of a notebook into their fee structure. This has opened up a huge market for vendors. Zenith, for instance, claims to be the first off the blocks to launch a notebook specifically targeted at students. The company’s ‘Topper’ series, sold exclusively through colleges and other educational institutes across the country, received a tremendous response with every single unit (around thousand units) being sold out within the quarter.

Notebook vendors have also learnt management lessons from assemblers in the PC market. After pricing, one of the reasons why the assembled market has done exceptionally well is the promise of immediate after-sales service and support from the neighbourhood assembler. Today, most vendors are setting up toll free support numbers wherein customers can call anytime of the day or night.

Frills

While the entry-level segment helped open up the market, a surprising factor has been that mainstream notebooks have contributed to a high percentage of overall shipments from all the major vendors. The entry-level notebook has in fact become a stepping stone for the high-end notebooks. Says Rajendran, “This just shows that while attractive pricing helped open up the customer’s mind to consider investing in this category a better understanding of the various features convinced him to go in for a higher model despite it being at a higher price point.”

Acer, according to him, doesn’t compromise on the basic configuration, no matter what the price. In fact, the company bundles 100 hours of Internet access free of cost. What has helped Acer is that it designs and manufactures notebooks for other big branded players, which helps it in achieving economies of scale. The benefits so derived are then funnelled to the end-customer.

Agrees Menon, “Vendors have been able to bring down the prices of notebooks by bundling in features. But IBM’s ThinkPad comes with all features within the price quoted and no extra accessories or parts need to be purchased separately. This provides the customer with greater value addition.” Even Saraf accedes that customers are willing to pay more to get the notebook that satisfies all their computing needs. Zenith’s offerings in this space features Intel’s Centrino mobile access technology.

The falling cost of components is another factor that has contributed significantly to reduced prices. Taiwan-based Via Technologies has introduced its Antaur processor specifically for the notebook market in India. And Allied Computers International (ACi) has already incorporated these processors to launch its sub-Rs 30,000 notebooks in India.

Even Intel recently announced the availability of Celeron M, its budget processors for notebooks. The company aims to bring wireless computing to the masses through these processors. The Celeron M is based around the same core as its Pentium M processor but comes with a 512 KB secondary cache and runs at relatively slower speeds. The processor has been designed to cut down on energy consumption. This technology should not only see wireless technology in even entry-level laptops but should also contribute significantly to making the notebook affordable to the masses.

According to Sanjeev Menon, large enterprises want thin and light notebooks with manageability features and international warranties; sales and support requirements are critical too

Going forward

Though many market analysts attribute the surge in notebook sales to pricing, there has been an equally aggressive pitch by vendors to position different notebooks according to the profile of individual buyers. Head room for growth is very high if one considers notebook penetration in India to those of neighbouring countries on a similar platform. In Indonesia, Thailand, Malaysia Singapore, et al, notebooks constitute at least 8 percent or more of total PC shipments. Hence there is ample scope for growth. Till date, vendors have made the right moves and have been ably supported by external factors—but the notebook is still a long way from dethroning the PC.

IBM is No 1

According to IDC’s recently announced PC Market 2003 results, IBM India leads the notebook market in the country with a market share of 31.1 percent (revenue terms). In Q4 2003 (October-December) IBM India was the leader in both unit and revenue sales, selling around 7,700 units, a lead of 1,072 units over its nearest competitor.

Indian notebook market
Market segment	Customer profile	Pricing
Entry-level	SOHO, SME, student, sales force	Sub-Rs 60,000
Mainstream	SMEs, corporates, middle management	Sub-Rs 90,000
High-end	CxOs, gaming enthusiasts, R&D firms	Upwards of Rs 1 lakh

stanley@expresscomputeronline.com