Dell cutting rebates to streamline pricing
No. 1 PC maker, hurt by customer service problems, tries to make buying easier.
By Amanda Cantrell,

NEW YORK ( -- Dell said Thursday it's taking steps to "simplify" computer prices for consumers and small businesses, starting by cutting down on the number of mail-in rebates for its products.

The moves are aimed at making the buying process easier, the company said, and are part of a $100 million effort to overhaul its troubled customer service operations.


Dell (down $0.16 to $22.22, Charts) said it will also cut down on the frequency and complexity of promotions tied to its Dimension desktop computers and Inspiron laptops. The company will make the moves over the next 12 to 18 months and expects a steep drop in promotions.

"We know customers want an easy shopping experience and the best price at time of purchase. They also don't like rebates," Dell senior vice president Ro Parr said on a conference call. "We decided to reduce rebates and provide immediate service at the time of purchase."

Parra said that at the same time Dell is reducing rebates, the list prices of its computers will come down. While he declined to give specific details on the price cuts, he stressed that the reduction of promotions will not mean that consumers will pay more than they did with rebates.

Taking customer feedback seriously

"All we are saying is that over time, list pricing will come down and we'll do less promotions," he said. "Ultimately the customer will continue to get the same value... the net price customers pay will change little."

Parr said the moves are aimed at making purchasing decisions easier, and are a direct response to customer feedback.

"What I hear from customers is, 'I'm not sure that (the price) I got on the promotion today is going to be better than what I could get tomorrow'," he said. "This is really a reduction in complexity and we don't expect the net price that customers pay today will increase."

Samir Bhavnani, director of research for technology research firm Current Analysis, said the move reflects a trend in the industry to simplify pricing and reduce both the amount of paperwork customers have to deal with in order to get rebate checks, and the time they have to wait to get savings.

"At the end of the day, any time a company makes the buying process less complex, it's a win for the customer," said Bhavnani. "You don't want your customers to feel like they had to have majored in math to understand what they are getting and how much they are paying."

Parra said the moves are part of Dell's initiative, announced in April, to improve its customer service. Dell said in April it will spend $100 million and will add 2,000 U.S.-based customer service workers to its roster in an effort to get its customer service back on track.

Simplifying rebates

Dell said it will also start cutting the number of mail-in rebate offers for Dimension desktop computers later this year and will eventually do so for other electronics, accessories, software and services.

Parra said in the statement that starting on Aug. 1, Dell will switch to paperless rebates, which will make it easier for customers to electronically file for rebates and get their money back.

Bhanvnani said that along with other recent moves, such as the announcement it will carry AMD processors in some of its servers, Dell's announcement Thursday is a promising sign that the company is starting to take customer feedback more seriously.

The announcement comes at a critical time for Dell, which has battled slowing growth, a tepid PC market and a resurgent rival in Hewlett-Packard (Charts), as well as its service problems.

In addition to criticism about customer service, photos of a Dell laptop catching fire in Japan surfaced recently and spread rapidly on the Internet.

Dell said its engineering teams are working with the Consumer Product Safety Commission and an outside lab to find the cause of the failure and prevent a recurrence.

Dell shares tumbled about 4 percent Wednesday after a UBS analyst cut his price target for the stock. It was a tough day for tech stocks across the board, with the Nasdaq plunging about 1.8 percent.

The stock was little changed in afternoon trading Thursday.

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