PCs don’t have to be low-margin products.
But you’d never even consider that notion if you accepted the conventional wisdom that’s being touted in so much of the coverage of Hewlett-Packard’s recent decision to keep its PC division. “PCs carry slim margins; servers don’t,” said All Things D. It’s worth accepting those slim margins, the thinking goes, because of the negotiating power HP gets with suppliers like AMD, Intel, etc.
But let me say it again—PCs don’t have to be low-margin products. In fact, you can increase margins and enjoy recurring revenue streams far beyond the initial purchase.
- Make broadband connectivity a given. The second your customer unpacks the product and turns it on, it’s connected. “Hot-out-of-the-box,” as we say here at Macheen.
- Offer compelling content and/or services. If you’re the Amazon Kindle, you might want to sell some books (and how—Kindle books are now outselling paperbacks). Or what fits your device and segment – music, apps, cloud backup, or secure customer connectivity to inside their firewall. What can you offer?
We’ve seen one device manufacturer nearly double margins by offering constant connectivity for a modest, upfront fee. And those customers are connecting at dramatically higher rates. Those “low-margin” products are now connected devices; the users are connected customers.
So don’t accept the conventional wisdom. Your personal computer is increasingly a “portal connector”— a window uniquely yours for profitable, branded content and services. What will yours be?