Dell to Build ‘Luxury’ PCs

By on September 28, 2005

Dell, a Mass Marketer, Seeks the Luster-Prone Customer: With Apple’s perceived high prices coming down recently it’s interesting to see Dell go in the other direction. Apparently a segment of our population does view more expensive as being better. Or so Dell hopes.

Dell is making a distinction between the premium market and the luxury market, it says, much in the way that Toyota did when it created the Lexus line. Dell first tested the market early last year with machines for gamers called the Inspiron XPS. That was successful enough, the company said, that it now wants to market the brand to image-conscious customers with money to spare, the kind who would buy a Tag Heuer watch or a Dyson vacuum cleaner.

Apparently the higher price also buys better customer service. Something Dell has been getting hammered on lately.

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Comments

  1. Of course, this is a natural move for a company that size that has to survive. In every industry where the product has become common, there needs to be a niche style or categorization. My perfect example is women’s luxury handbags or purses. Yes, women can buy bags and purses for about $10-$50. But why do they need to buy $500 – $1000 bags and purses just because it was made by Louiss Vuitton? or Coach? or Prada??? Common…. it is all about branding and perception. My recommendation is to live smart. You can buy whatever you want as long as you make sure you do not get ripped off, use sites like http://www.PriceComparison.com to compare prices before you buy.

    Eldon

  2. I once heard that watches are the most over-purchased product in the world.

    There’s a theory of the “luxury multiple” when making a purchase. This refers to the multiple you pay for the luxury version over the basic version.

    • A basic sedan (a Honda Accord, let’s say) costs about $22,000. A top-of-line Mercedes is about $150,000. So that has a “luxury multiple” of about 7.

    • A decent house for four people in Sioux Falls is about $140,000 (we’re spoiled, we know). You could go crazy and get a massive, luxury house for a million-and-a-half (there are maybe a dozen of these in town), giving that purchase a luxury multiple of 10 or 11.

    • But watches are off the charts. You can get a good-looking watch than tells the time and is of good quality for $65 (this one, for instance). A Rolex, by comparison, is — what? — $12,000? That’s a luxury multiple of 184.

    When you look at this, the Dells aren’t that bad. A basic game machine — the Dimension 4700, for example — is about $750. The most expensive XPS machine to which the article refers starts at $1,900, for a luxury multiple of about 2.5.

    (Of course you can pimp them out beyond that, but it begins to get ridiculous pretty quick. I got one up to about ten grand. We should have a contest to see who can jack up the price of a Dell the most…)

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