It was thirty years ago today

I joined Compaq! For your entertainment, here’s Compaq UK’s desktop price list from June 1987 …..

For the youngsters and those who knew but have forgotten:

  • desktops didn’t come with monitors in those days;
  • nor did they have an operating system: choosing an O/S was a conscious decision then, and Microsoft wasn’t an automatic default for everyone;
  • when a PC booted up in MS-DOS all you got was C:\ prompt and an otherwise blank screen: no GUI, no start menu, no mouse, nothing;
  • a fixed disk drive of 130MB (or 0.13GB) was a huge and seemingly unfillable amount for a PC;
  • and 4 MB of RAM (or 0.004GB) was just colossal.
  • And although they were called Personal Computers and were used mainly as personal productivity devices, they were also beginning to be used as workstations and servers. So today’s equivalent of some of the prices below will be found on a server or workstation price list, not that of a PC.

The prices are UK List Prices – or Suggested Retail Prices as they were called then – and are in £’s. This means – rather coincidentally and conveniently – that it’s pretty much the same number that you would have paid in US$ as an end-user: list price less dealer discount + dealer mark-up @ prevailing X-rate ….

As a pricing person now (and not then), I’m intrigued why 6 of the 10 prices end with an 81.

Anyone not from the UK notice anything unusual on the price list?

I think the stand-outs are the 70MB fixed disk drive for £2,795 …. followed closely by £2,495 for 4MB of RAM. Now while these prices are probably more than you’d pay for a desktop today let alone for a single option or upgrade, they wouldn’t look out of place on a server or workstation price list for an enterprise SSD or memory module.

And here are the desktop options:

Any pricing lessons to be learnt?

The pricing strategy itself was – if I recall it correctly – a thing of simple beauty and is something that is worthy of consideration today even if only as an aspirational goal. It was built around the premise that Compaq’s product quality was as good as if not better than IBM, then:

  • Compaq would have list price parity with IBM plus one or two major features would be significantly better, such as a faster processor and/or larger hard-drive and/or more RAM. This would effectively ensure that Compaq provided much better value for money.
  • Compaq would offer two or three extra points discount to the channel: 41% discount from Compaq v 38% from IBM, meant that a reseller could sell a Compaq product at the same price as they could IBM (they would typically carry both) but with a better spec, while not having to worry about losing the deal to Compaq’s direct sales-force (because – unlike IBM – Compaq didn’t have one), and at the same time make more money
  • A 5% channel rebate program called Salespaq to fund channel co-marketing. If a 5% channel rebate seems like a lot, don’t worry, it was. But as important as the £s were, what was almost as important was that the activity preoccupied the channel dealers’ small marketing teams to the exclusion of IBM, Apricot, etc. who didn’t offer as big a % rebate or as much support.

So Compaq had the perfect pricing trifecta which is to:

  • beat the competition in delivering demonstrably superior value for money both at list price and end-user price level;
  • provide increased channel discounts for improved channel profitability with clear vendor-channel demarcation;
  • and more co-marketing dollars and support to squeeze the competition out of the channel’s marketing efforts.

The first two components are still the key elements that businesses should be striving for today if they really want to grow their businesses: the third one less so today in terms of material impact. All three of them though, need to be continually monitored versus the competition.

Those were the days. Or at least they were until the wheels fell off the bus around 1990 indeed partly due to the pricing strategy which hadn’t been updated and adjusted to take account of newcomers like Dell. If it had been, then Compaq might have realized more quickly and less painfully than it did that it’s product strategy needed changing as well in order to deliver more cost competitive products. Perhaps that’s a second lesson.

All this has been done from recollection following the old maxim: Se non è vero, è molto ben trovato: if it’s not true, then it’s well invented. So let me know if I’m off-track and need to adjust my medication.

 

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