HP Consumer Products Distributing Printers via Internet

HP History

Bill Hewlett and Dave Packard Founded HP in 1939 in Paolo Alto garage.

Hp was ranked 460 in the fortune 500 company in year 1962.

In 1985, HP’s net revenue was $6.5 billion and company had 85000 employees

HP was ranked 16 in the fortune 500 list in year 1997. In 1997, HP’s net revenue increase to $42.9 billion and

had 121900 employees.HP grouped their products in five general categories. Computer Products, Service & supports, Test and

measurement products & service, Medical Eloctronic Equipment, Electrinic components, Chemical Analysis & service.

Computer Products, Sevice and Support

Made 83% of HP’s Total Revenue. Include Product range from Palm top to super computers. Top four Companies Compaq, IBM, Dell and HP had combine

market share of 38% of PC market and Compaq held no.1 with 13% market share.

HP led into Printer industry after 1980s. Epson, Diablo and qume led the printer industry with Dot metrix printer.

In 1984, HP released Thick jet and Inkjet technology printer. Laser printer also launched in 1984 which has changed the industry dramatically.

HP was a leader in printer supply business which contributed $5 billion to its total sales of $42.9 Billion.

HP was credited with making two vital decision. - Move to sell via reseller channel. - Naming the Product.

The Printer Industry

In 1997, Trend was Distribute then printModel In 1997, Revenue of printer

Manufacturer were $8 billion for U.S and $ 22 Billion worldwide.

By 1998, Inkjet Models accounted for 70% of all units sold.

Strategy was analogus to the blade scenario – sell the razor cheap and then charge premium prices for the blades

Basic Three Types of Models

Ink Jet Printers : HP’s Market Share was 55-60 %, Cannon’s Market Share was 10-19%, Lexmark’s market share was 6-8%, Epson’s market share was 12-18%LaserJet Printers : HP’s Market Share was 85%, Lexmark’s market share was 8%,Multifunction Printers (MFP) All in one printer, Double the cost, Risky.

Consumer Buying Pattern At-Home Market

First Time buyersCharacteristics

- Shop about one month

- Quality, Sales and

After Sales Service

- Awareness Phase

- Consideration

- Purchase Behavior

Repeat buyersCharacteristics They tended to buy a

printer as a single purchase

Two Phase Mail Order They Behave like First

timer when introduced new printer

Consumer Buying Pattern The Home Office Market

Individuals with home offices became important to the printer market in the 1990s. The all-in-one peripherals, or MFP, were the most popular product

Buying patterns for thissegment were even more deliberate than in the at-home category because these people tendedto know exactly what they needed and had specific price in mind.

Channels of Distribution

HP had 7 types of printer channel distribution to customers.

Computer Product Superstore i.e. CompUSAConsumer Electronic Superstore i.e. Circuit CityOffice Product Superstore Corporate Account Dealers i.e. inacom Indirect mail-order companies i.e. Micro

Warehouse Mass merchants i.e. Wal-martDepartment Stores i.e. sears

Retail Account Management

Large retail accounts represented 90% of HP’s printer sales.

HP used an account team to do business directly with each account.

These teams worked with their assigned retailers on many fronts like.

Coordinating co-marketing efforts which included cooperative advertising and in-store displays

Providing merchandise development funds.Establishing category management.Managing logistics and inventory.Providing price protection.

Retailer Prices and Profitability

prices for printers ↓steadily. Margins both for retails and printer

manufacturers ↓. The retailer provided, cost of six weeks of

inventory in the retail channel The payment terms to the manufacturer set at

30 days. HP products were advertised frequently by

retailers, net margins on HP products were even less than those on competing products

Retail Disruption And The Internet

The goals of retailing were always to get the right product in the right place at the right price and at the right time.

internet created platform for retailers to offer a wide selection of products, 24 hours at low prices with significant time savings.

eChannels for Computer ProductsTraditional ResellersNew Virtual Stores

Multistage Model for E-commerce

Internet Retailing

Growth increased due to dissatisfaction with the level of service and lack knowledgeable sales people, increasing acceptance of the indirect mail-order channel.

Prospects :- Low Price- Increased gross margin.- possible channel disruption

Obstacles

The large investment for developing and maintaining a solid website

Security and bandwidth issues

Uncertain return on investment

Competitors having easy access to information

Higher rates of product returnCustomer-incurred shipping charges. The large investment for developing and

maintaining a solid website Security and bandwidth issues Uncertain return on investment Competitors having easy access to

information Higher rates of product returnCustomer-incurred shipping charges. The large investment for developing and

maintaining a solid website Security and bandwidth issues Uncertain return on investment Competitors having easy access to

information Higher rates of product returnCustomer-incurred shipping charges. The large investment for developing and

maintaining a solid website Security and bandwidth issues Uncertain return on investment Competitors having easy access to

information Higher rates of product returnCustomer-incurred shipping charges. The large investment for developing and

maintaining a solid website Security and bandwidth issues Uncertain return on investment Competitors having easy access to

information Higher rates of product returnCustomer-incurred shipping charges. The large investment for developing and

maintaining a solid website Security and bandwidth issues Uncertain return on investment Competitors having easy access to

information Higher rates of product returnCustomer-incurred shipping charges.