You’ve probably never thought about how a company profits from a computer sale. But, I know you’ve most likely been frustrated by all the trial software and in-store offers when you purchase a new computer. All that extra garbage is what generates the real profit from a computer sale.
If you buy anything other than technology then the price is the price. For example, a loaf of bread is $1.99 and there’s nothing else to buy. However, in the technology world it seems like the offers are endless both during and after the sale. And they are.
A little known fact is that stores typically profit less than $50.00 per computer sale. Most of the time the profit is closer to $35.00. For a large department or specialty store to inventory and display a range of products with a minimal return seems pointless until you realize there’s more to the sale than meets the eye.
No matter what is being sold there are two numbers executives care about: frontend and backend profits. Frontend is the $35.00 profit directly from the computer sale. Backend is a little more convoluted because it’s all the stuff like services, warranties and accessories post sale.
As consumers we’ve become accustomed to being offered extended warranties for just about everything we purchase. Warranties are great for the store because they’re almost pure profit and rarely used. Moreover, extended warranties don’t kick in until the manufacturer’s warranty expires and even then they’re generally prorated.
Stores with service depots have been known to tack on services during the sale without the customer’s approval. Several months ago a woman showed me a receipt for a laptop. The laptop was the first line item followed by three separate add-ons for unnecessary services. Those three services totaled $300.00 in non-refundable sales for a $400.00 laptop.
Commissions from trial software are a huge revenue stream for hardware manufacturers. You’d be surprised by the number of people who pay for the trial virus software preinstalled on their computers. It’s easier to leave the existing software and pay for it once it’s expired. And by the way, the trial is almost always 90 days which is generally enough time for customers to forget how much they spent originally.
I can’t count the number of cables and accessories salespeople have tried to sell me over the years. Cables from most chain stores are almost all profit. In an industry journal I read years ago it stated that much of one store’s profits were directly related to cables and accessories. If you need it and can wait, try and find a similar one online for less money.
Stores with service depots located inside the store claim it’s a convenience for their customers. In reality all they serve to do is sell new equipment. Prices of repairs by those service departments can be close to that of a new computer or laptop. Exaggerating repair costs may tend to steer customers to new computers. New equipment means another revenue stream for the store.
My advice to anyone looking to make a new computer purchase is to pay for just the machine and tax. Avoid all the other stuff even though the salesman is telling you it’s necessary. Purchasing from a department store without commissioned salespeople and a service department may guarantee you won’t be pushed towards all the extras. Remember, you’re the customer and can refuse the sale at any time until you sign the contract.
(Jeromy Patriquin is the President of Laptop & Computer Repair, Inc. located at 509 Main St. in Gardner. You can call him at (978) 919-8059 or visit www.LocalComputerWiz.com.)