How do you system builders compete with Dell?

[villiageidiot]

You guys who build computers for a living. How can you compete with companies like Dell and Gateway? I keep on seeing systems getting cheaper and cheaper. When I was pricing my system, I mentioned to my neighbor that I was going to build a system. She is a divorced mother, with 2 teenage daugters and money is tight. They have an old Gateway 266 system that the kids use and they want a new computer. The girls use it for chat, homework, mp3's, playing the sims and doing homework. I told her I could build her a computer for about $300. I am not looking to make money from her, I thought it was fun building mine and it was a good learning experience. I told her we would use her old hard drive, floppy, cd-rom and possibly video card. A few weeks ago, I remember seeing an ad in our local paper for a new Dell 1.2ghz celeron system, loaded with software, 15" monitor, keyboard and a think even a printer for $599. Look at Gateway, they have a similar system. How do compete with that? She doesn't care about benchmarks, frames per second, overclocking or anything like that. And it probably will be pretty stable, lets face it, most computers, unless they are pushed a little bit are pretty stable. So she sees this ad, this system is completely new, why would she want me to build it? How do you guys convince the average Joe, that the system you can build for them is superior to the manufactured systems? I just can't see Joe Public going for a custom built system when you see the big boys with deals like this

[Hot Rod]

I've run into the same problem. One lady was getting upset with me because she just couldn't understand integrated parts, etc... and why the price difference. I finally gave up and just said custom building was probably NOT the way she wanted to go and suggested she buy a Dell. I've had the most luck in selling custom PCs to people that have gone through a few Compaqs or Gateways and just aren't happy with the name brands and find out for themselves how much of a pain they are.

I'm curious to hear everyone else's opinion on this.

[mbossman2]

There are 2 kinds of buyers out there.

Those that care about price.

Those that care about quality.

The point is that when you are selling to someone, you must identify the qualities to which they ascribe value. You can talk speeds, feeds, and features until you are blue in the face, but unless you show them the value of all of the above and what benefit they will get out those features then it won't matter.

The hard thing with selling any kind of high tech device is that they all look and act very similarly to the untrained eye.

Let me give you an example:

D-Link Routers and Cisco routers.
They both provide the ability to go behind a broadband connection and provide basic routing services (NAT/PAT). What really differentiates them?
With D-link all you really get is a basic IP only router (kind of like a Ford Escort).
Cost $100-200

With Cisco you get the ability to activate features like: QOS, 802.1q VLAN trunking, 802.1p prioritization, layer 3 tagging, SNA, IPX, DECnet, Appletalk routing, Stateful firewall, Intrusion detection, DES and 3DES encryption, VPN acceleration (and on and on). Plus couple that with tech support that most other tech comapnies wish that they could provide and mean time between failures measured in years rather than days/weeks/months.
Cost $500 +

Now, does the average home user need all of these features? Will they activate even 10% of them? Probably not, so to the average home user, Cisco has very little of value to them other than the name. The cost differential just is not worth it to them.

That is what you are running into. The neighbor lady sees no value in what you are selling (superior quality, longer life cycle via standard/non-proprietary upgrades), so this is more than likely not the kind of customer that you would want (as a business owner) because customers like this will always seek out and find the lowest price for a product that they perceive will meet their needs.

One of the hardest things for a salesperson to overcome is their feeling that "my products/services are so wonderful and everyone needs them", when in reality, your obtainable customer base is probably only 10-15% of what you think it is (this is higher in business to business sales but not much). As a salesperson (and every business owner/employee is one), your job is to look at all the possibilites (called prospects) and identify deals that you can actually play in, provide value, win and make a profit (called opportunities).

I hope this helps and gives you some insight.

Matt

[Computer Hobbyist]

I don't know how many of the guys here build computers for a living, but I doubt any of them attempt to compete for the low end business. Figure out what your customer really needs. It is probably the $600 Dell. Recommend she buy it. Before you do, look for any hidden charges and costs. If the Dell really costs $675, she will hold your recommendation against you.

When I started as lawyer a long time ago, a wise old man told me that the worst possible reputation was to be known as the "cheapest" lawyer around. Same principal applies here.

CH

[Carl Price]

A long time ago, I identified my niche as selling to businesses. These folks can't afford to have their computers down for days at a time. I tell them that when (not if) the computer goes down, I can generally get it back to them in less than 24 hours. Most businesses are willing to pay a premium for that kind of service.

I would say that 95% of all the rest of my computer sales are second computers to business and people that have tried the Dell, Gateway, Compaq route and would never have another after the the computer goes down and they are quoted a price for repairs that would more than pay for a new computer. I once sold a replacement computer to a business that have to send their computer back for service and It have been gone for six weeks. When It came back the harddrive was blank even though it was working fine when it left. That incidence made the sale of a backup system easy.

People are going to buy their first computers from the lowest bidder, but I make a good living picking up the pieces when their computer breaks. I'm sorta like a good garage with an excellent reputation. My whole advertising depends on word of mouth. Treat your customers right, don't gouge them, have quality products and you'll do alright.

[a|acr|ty]

If you want personalised service, fully customisable systems you go to a "system builder".

On the other hand, if you just want a computer and you dun really care what's inside, pc makers are just convenient... until you find out that you want to upgrade your system.

[BFD Deadeye]

I can typically build a computer using same/similar componenets as a "Brand Name", for less (excluding the software package". Really, the guts of Brand Names are el cheapo.

I don't make a lot of money on hardware/computer sales. My money comes from tech support and repair. My only competition in this town of 2500 is a company that gouges TERRIBLY! I worked on a computer from them 2 days ago. It cost the guy $2500 2 years ago for a Celeron 266 and 5 GB HD. I told him that I could've built that system for under a Grand 2 years ago, and still made a tidy profit. My name is getting circulated around Conrad, MT. now, and business is picking up. Word of mouth sells my service for me. And all the clients I get will be returning I'm sure.

Be fair, tell the truth, and if there is a cheaper way to do things besides going with me, I tell them. Then they tell their friends how honest I am, then they tell their friends, and so on. I started this business 6 months ago, and I get new clients every month. Will only be a matter of time before I'm so busy I won't know what to do....but I'd rather turn work away because I don't have time, vs. twidling my thumbs because nobody calls me.

It's not the hardware so much for me, as the fair reputation I get selling so inexpensivly. Computers will always have the need for a tech now and then, and that's where I make my money. Selling computers for as little as possible is an investment for me. An investment in securing my tech services when the time arises.

[wedor]

I agree with Carl Price, my only target clients are businesses that can't afford down time and are willing to pay for what is considered "Premium" service. I respond to calls for help from my limited client base usually in an hour, sometimes less, the fact that I am able to show up so quickly makes them very happy. I'm still trying to build a larger client base but I shy away from home users. Most home users are only price conscious and do not see the value in fast service, they are usually less computer savvy so they don't understand how things work and are more likely to listen to the advice of some third party and then ask you why things don't work they way they were told. Case in point, user (actually my son's mother's(ex-wife) sister)buys a Compaq, they start having trouble with the sound from websites about 6 months later. On a trip to Circuit City a sales rep tells them problem is that they need more RAM (they have 128megs), a new sound and video card and that will fix their problems. They call my son while he is here and ask what sound car they should get, I sggest they should do some preliminary checks first. I suggest a virus scan, they say "we can't have a virus, McAffee scans every time I start up and it says there are no viruses" after finally convincing them the download and run Housecall, I forget how many viri were found but it was numerous, along with several trojans. Bottom line? the sound still didn't work right so they were going to Circuit City to get their new components because rep had assured them installation was just a matter of plugging them in and that's it. Another bought a Dell, got it delivered and called me to say the monitor isn't working, I asked the usual questions, "is it plugged in", "turned on" of course I was told "yes" Now I've seen DOA stuff out of the box so I went there with a different monitor. I looked at it first and then asked "where's the power cable" , they assumed that once you put the cord from the monitor to the computer that was all it needed. Same user then bought an HP printer then proceeded to spend 45 minutes or more on the phone with HP tech support attempting to get it installed. I went there and guess what? you got it, no power cord. I don't wnat to sell these people systems, they'd drive me crazy. I'd rather leave these people to the big retailers, that's why tech support costs so much. I can't possibly build a system for less than they do, they buy by the truckload and do mass assembly. The only area I can compete in is business systems. I would rather sell fewer business systems to a small number of clients than a large number of home PC's and have to tech support these systems.

[HAL9000]

I don't try to compete with it, not worth my time. I simply tell them, if you have a problem, deal with their techs, if it needs warranty, you pay to ship. If you bring it to me to fix, it's gonna cost ya. If you buy from me, well, you'll probably get a lot of freebie support and don't have to pay shipping in the event of a warranty issue.

It can take ridiculous amounts of time to convince somebody to buy my machine over a Dell and time is money. If you want the price, go get it then and let me get on with making money elsewhere.

I also agree, I would rather have some return business clients than a bunch of whiny end user home clients anyday. The business just phone and say fix this or make this do that. I do it and send the bill.

[glc]

I don't even build systems any more except for a select few customers - we are now hooked up with a custom system builder that does top quality work with top quality components (NOTHING proprietary), and can sell us the systems for less than it would cost us just to buy the parts to do it ourselves. We target strictly business customers, but quite a few of them have bought our machines for home use once they see how nice they are without all the shovelware that the big box builders load on their machines. The ONLY software that our boxes come with is an OS, and any software needed to operate the components (DVD player, CD burning software, etc.) and M$ Works Suite or Office are options. We offer 98SE, ME, 2K Pro, XP Home, or XP Pro. Unfortunately, all we offer is a restore CD due to the ridiculous current M$ policies, but there is nothing proprietary about it either, it's a standard Windows load.

[alan]

I am not a professional builder but a hobbyist. I have a buddy who insists on buying store built PCs because he can get it within 5 minutes of paying for it. For me to build one takes a weeks or so because I have to purchase the parts. Eventaully he will need an update to something. What? No support for 7200PRM HD? No more available expansion slots? No AGP slot for a video upgrade? I finally got him to understand that by personally selecting every piece of equipment I already have an upgrade path planned in my mind. Plus I know every piece of equipment I select is quality and not some offbrand hidden inside the case.
I agree with everything everyone above stated about customers who seek price and others who seek quality. It's tough to convince many people that there is some value-added benefit to paying a little more for quality.

[Nuclear Krusader]

Down here it's not only we custom system builders against PC brands; but we legit system builders against pirate system builders.

Wanna know why my sales are so low? Because my systems always "cost" about 150 bucks "more" because of the legal versions of Windows and Panda Antivirus. And if I ship them with Office XP the price increases by about 350 bucks.

So, Joe Public prefers to buy with Morgan Systems where he can buy a very cheap computer with all the SW he wants.

-And the licenses, Joe? What about them?

-Licenses? Who needs that? Why should I pay thousands of bucks when I can get everything for free?

So, being an enemy of PC Chips and pirated SW, my future as a system builder is not very promising.

[AzCoastie]

How does one go about getting into this business?

I'd like to start offering machines to build too... Where do you guys get your parts? Do you use distributors? Can you buy the parts wholesale?

Thanks for any info!

[glc]

It's tough, Coastie - I pay more for parts from my distributors than the public can buy them for on the Web. All I get for my premium is a dedicated salesperson, 30 day net terms, and easy RMA's - and local will call service.

Nuke - we have that type of builder here too - PC Chips junk and gray market or outright pirated software - and they DO get busted eventually.

We have a few lawyers for customers. One of them - I think this was about 3 years or so ago - wanted 2 new computers for his office and set them up simple Windows 98 peer to peer to replace an ancient 486-based DOS and Lantastic network. Well - we shot him a quote for somewhere around $1500 a machine - this would have been a P2-400 with 64 ram and 6 gig drives, hardware modem, CD drive, NIC....the usual. Well - the cheap SOB saw an ad in the paper (buried in the small computer ads of course) for a local shop - they sold him the following machine for $800......(this is what the AD read)

Mid tower ATX
P2-400
BX motherboard
6 gig hard drive
1.44 floppy
64 megs ram
8 meg video
32x CD
56k modem
Soundblaster-compatible sound
Windows 98
Keyboard, mouse, yada yada

Well - he asked me to come put nics in them and set them up.........

The case was so flimsy that the sides almost bent when I popped the cover off. It had a PC Chips motherboard with a "BX Pro" sticker covering a SiS chipset. It was not ATX - it was AT with an "ATX Card" for the keyboard and mouse and USB. It had a 145 watt Deer power supply. The hard drive was a Quantum Bigfoot. The CD was a Delta that sounded like a cement mixer. The modem was an AMR and the sound was onboard something - total junk. SYSTEM ram as reported by Win98 was 56 megs - the 8 meg video was SHARED memory, and the video was the crappy onboard SiS. I tried to install a plain jane Kingston nic in it - and all the sucker would do was bluescreen.

I told this guy how bad this box was - and pointed out the false advertising. He called the shop, put them on the speakerphone and they swore up and down that it was a BX board - I told them in no uncertain terms that I could not find a single chip ON that motherboard that said "Intel" on it. He asked them for his money back - they refused - he then told them he was going to dispute his credit card charge and told them to send him instructions for returning the computers. He got the chargeback and never heard squat back from them. He then ordered 2 new computers from me, which are running perfectly to this day, the only warranty issue was a premature death of one of the CD drives. He waited 90 days and gave one of the junk boxes to his kid and the other to a lawyer buddy - both boxes are long dead now.

About a year later, I read that this shop had been busted by the software cops for selling pirated software. I *thought* that something looked funny about the Win98 CD and certificate.........

[Blankman]

I know alot has been said already but ultimately it's the buyer and their perception of what they're getting. It's like a friend of mine who bought a Dell. When things went bad he came to me. I opened the box and it looked empty. Integration City! He barely had enough slots to add another card. Don't get me wrong. Higher end Dells are great systems but once you start spending that kind of money you definitely can do a better and more efficient job on your own.

[bosco]

What about leasing computers to businesses? Is there alot of that going on. Is there any money to be made in leasing? What does a computer cost to leas now a days?

[BFD Deadeye]

Yahoo for you, GLC! I hate these shops that sell overpriced crap. Really gives us legit guys a bad name. Personally, I would never sell crap, even if the customer wants cheap crap. I would say "go somewhere else". Nothing more frustrating than a POS computer.

*EDIT*

I would also like to add that I do somewhat enjoy the "average user" and their problems. I remember what it was like for me when I first got into PCs. I had a buddy that taught me some stuff and really got a fire going in my belly. I feel truly inspired to help the "average user", and hopefully they develop a love for the world of computers.

Montanans are pretty good about spending a little extra dough to support a local business. And in turn, I give them the service and support they need without pillaging their wallet. I truly feel that computer knowledge should be widely dispersed, and if I can contribute to somebody's knowledge a little, then I am doing my part. Money is great, but not nearly as great as the feeling of satisfaction I get when I solve a problem for a computer newbie. The fact is, that computers are becoming such a commonplace in the lives of so many people. I feel a certain sense of duty to share my knowledge with as many people as I can.

[glc]

We offer leasing through our builder (I think they use American Express) - it's essentially a 3 year note and the computer is the customer's for $1 after the lease is over. Monthly payment averages 3.75% of the purchase price. Minimum purchase to qualify for a lease is $3000. The only advantages to leasing is that a business can use it for a tax advantage and the interest rate is lower than buying it on a credit card and making the minimum payment each month. If you want to offer a lease, hook up with a leasing company, you will get your cash fairly quickly and I believe there is a small nominal commission offered (not sure about this - I dont get involved with our business's books).

[alan]

As a manager of a huge global corporation we find convenient to lease our PCs. First of all they should be indentical models, so the techies don't have to decipher every individual PC around the world. They all match. In the end the nominal cost is about the same as if you buy, but because you are paying monthly leases you get to manage most of your money for 3 years rather than giving it all up front if you buy. Any interest or premium paid is offest by easier asset management, upgrade and disposal considerations. At the end of the lease you simply get (in our company) Dell come in to take them all away and get a new Dell PC put on your desk that is 4x more powerful than your old one.

[Computer Hobbyist]

Leasing is just a financing arrangement. It's not really an answer to the $600 Dell computer. Computers last 3 to 4 years anyway. After that much time they are simply obsolete.

Most businesses are on a 2 to 3 year cycle. That is why the good people at Intel think there is going to be a tech recovery at the end of the year. RememberY2K, well a lot of companies bought hardware in anticipation of Y2K. That hardware is still in the system.

Some companies are talking about slipping the cycle for an additional year or two. They think they can get away with it because, from a purchase manager's standpoint, there hasn't been any real improvement in existing hardware/software during the last cycle. The current machines are still functioning well. The old version of Office will do just about the same things as the new OfficeXP. The internet is still the internet. No need to spend on hardware/software when such expenditures come straight off the bottom line, and the bottom line has been weak for the last year. That has Microsoft and the rest of the industry nervous.

The real purchasing push this cycle, if any , is for palm held devices. That is where change has really taken place since 2000.


CH

[LawyerRon]

George,
I know were you’re coming from. Much of my work is in Estate Planning (Revocable Trusts, Wills, etc) and a simple Estate Plan “starts” at about $1000 in my office. They go as high as $3000-$5000 or so. Every once and while a potential client will come in and whip out an ad for a $495 “Living Trust” from one of the “trust mills” (sound familiar Computer Hobbyist?).

Here’s the great deal they get for $495:
They get to fill out a worksheet and a clerical person plugs the data into a “one size fits all trust”. They also get some sort of a pour-over will. Next, they get “instructions” on how to “transfer everything to the trust”. This includes their home. They may or may not have spoken to an Attorney at this point.

Now let me ask a question PCMech Members:
Does anyone’s 70 year old grandmother know how to properly draft a grant deed or quitclaim deed and properly record it?

Next, they get sold a bunch of “extras” they are told they should have (my fee includes these BTW) like Durable Powers of Attorney for Health Care and Durable Powers of Attorney for Finance.

Finally, after spending about $1000 to $1500 (depending on the “commissions” paid at the illegal trust mill) they pick up a beautiful $30 binder with all their clerical-staff generated documents on beautiful paper. An Attorney may or may not have reviewed the plan.

When you spend the same $1000 (or more) with me you get to meet with me 2-4 times (or more if necessary) to discuss the Estate Plan. I (a real Attorney) decide the best way to proceed with your Estate Plan based on current tax law. Maybe you don’t need a Trust. If you do, I include the Trust, Pour-Over Wills, Powers of Attorney, and my office drafts any necessary Deeds to transfer real property and my office records the deeds. My office assists the client with the transfer of any other assets into the Trust. The client doesn’t really have to do anything except write me a check. I’ll even return their phone call.

So which is the “better deal”? I’ll tell you this; I’ve never lost a client to a $495 trust mill when they’ve had a consultation with me first. And I don’t even advertise. My business is nearly 100% referral and repeat clients.

[Computer Hobbyist]

Listen to LawyerRon. He knows from where he speaks.

Right on Bro.

CH

[LawyerRon]

Hey Ron,
And you were right when you said "Don't be known as the cheapest Lawyer in town". That is so true.

Another very wise Lawyer told me this one: "I never started to actually make money in this business until I learned how to turn away cases".

When you're a young Lawyer just starting out, you want to take everything that walks in the front door, but that bit of advice has saved me many thousands of dollars over the years.

[RayH]

It's hard to compete with the larger manufacturers' entry level system. It always has been. But when the category start moving up in quality, there can be some competition.

I"m just a home builder to buys his parts mostly from the small computer shop across the street. I pay a bit more. But the shop more than makes up the price difference in service.

[HAL9000]

Originally posted by LawyerRon Hey Ron, And you were right when you said "Don't be known as the cheapest Lawyer in town". That is so true. Another very wise Lawyer told me this one: "I never started to actually make money in this business until I learned how to turn away cases". When you're a young Lawyer just starting out, you want to take everything that walks in the front door, but that bit of advice has saved me many thousands of dollars over the years.

That is SOOOO true.

I helped a friend start a computer business and we made the mistake of being the cheapest labour rate in town at $15 per hour. What a mistake that was. You get every cheap screw in town through your door that complains that it should only be a 1/2 hour job to load windows as you're just sitting there half the time. So not only do they want it done for $7.50, if Windows makes ANY kind of glitch, they naturally expect you to redo it for free.

We had one guy come in getting quotes for over a year. Well, he finally did come in to actually buy a machine. After settling on what he was getting and the final price of $2100CDN, he demanded that I take $500 off for a discount AND throw in Microsoft Office 97 Professional (the latest at the time) for free (my cost at the time was $550)! I told him that was impossible as our total profit on the system was cost + $150. He just gave me a disgusted look and said "Ya... right". So I finally told him to go somewhere else to which he argued that I couldn't do that and that I "had" to sell him a computer, that it was his "right" to buy it where he wanted to. I finally had to physically remove him from the store. He came back only a few months after I had quit for a different job and finally bought a machine from there, his little victory I guess. Well, the store has been shut down since 1999, but he still gets a hold of my friend wanting free help with his machine.

Even computer sales or service, there are some that I will just turn away as they aren't worth the time and hassle. When you know they're gonna be troublemakers, I turn them over to a competitor that I don't like

[troysvihl]

When you know they're gonna be troublemakers, I turn them over to a competitor that I don't like.

lol. clever idea; i like it.

[Sauron]

So true, all of you. When my family first moved here, we had a really bright tech...and he was here for the first 5 years I was here, taught me a lot of stuff. My first system was bought from him, so is my moms. They are good machines also Actually, I have found that name brand stuff is not always the best (something like Sees and Bolivia *I think its called that* ) I recommend Dell or IBM. Or sometimes Alien...but they aren't terribly well known. HP I would stay away from, same as Emachines, or Compaq or anything else I can think of. You have to let the word spread. Somehow I would go to a lawyer like umm LawyerRon then go to one of these guys you see in the phone books...I will believe that about home users *grin* I think most home users want a good cheap machine, and it doesn't come that way. You can go to a junk yard and buy a body of a car for $20...doesn't mean its going to run. You want quality, you have to pay for it. Rolls Royces are supposedly the best cars in the world. They are hand made, and you can't get one for under 300k. Well its the best...

[KronoLeginaire]

I like computers.

[Hot Rod]

Thanks LawyerRon for the advice. I'm actually going through that phase right now. My business is relatively new and I feel like I should do all the work that I can get. I give people breaks on charges and I have suffered for it. I was originally doing it with the idea to generate more work. But what I have found is there is a difference between giving good customer service and cutting your own throat. The work that it generated was people coming to me "expecting" to get breaks in charges.

I also made the mistake of helping a friends wife for free. I installed a CD ROM just for the price of the CD ROM. No problem right....wrong. Then she wanted to upgrade to a newer PC. She wanted me to build it but got upset when I mentioned the price. She was comparing it to the $599 Dell. I tried to explain to her but then just recommeded that she get the Dell. THEN...she wanted to get the old files off of her old PC and onto her new PC. She ordered the software and cable from Dell to do this. No problem right.....wrong! I stopped over just to find out that she hadn't even set up the PC yet. I set up the PC, got them back on the internet, and showed them how to do a few things. About an hour later, we get around to the transferring files. Turns out that her old PC is so old that it doesn't have a USB port. Fine I'll just take it home, slave the hard drive to mine, and burn the files onto a CD for her. It started locking up my PC and I couldn't even boot up mine then. I'm sure I had something hooked up wrong....but it dawned on me....wait a minute...I'm going through all this hassle and NOT EVEN GETTING PAID FOR IT!!!! Brought the hard drive back and said that she was out of luck unless she wants to pay me for my time. She completely took advantage of the situation.

I'm learning my lessons.

[LawyerRon]

Hot Rod,
That's OK, just consider it a learning experience. Now you know.

Another older and wiser Attorney gave me this litte gem:

"You are better off to not do the work and not get paid than to do the work and not get paid."

Lawyers incur the same professional liability whether or not we're paid or even if we do the work for free (pro bono).