The Hindu Business Line : Price tag alone won't sell

The last few months have seen much fanfare about low-priced personal computers, which you can get for Rs 10,000 downwards.There's a brand available for even Rs 7,000 now.

Why haven't we seen a deluge of these PCs in the marketplace? Sure, the PC market has grown, but these low-priced PCs have not contributed to that growth as much as they promised to.

Let's examine what went wrong.Instead of the Indian consumers' needs dictating the features of such PCs, the product features were predicated by the pre-decided price.

The standard features of a normal PC were reduced to arrive at a product that could be priced at Rs 10,000 or lower.

The final versions of some of these PCs have antiquated features, including `green-screen' monitors, no audio capabilities, unknown software, etc.

A low-priced PC that compromises on features would have its price tag as the Unique Selling Proposition (USP).

The ad-on costs of software, annual maintenance, Internet connectivity, UPS, etc, would result in the total-cost-of-ownership of the PC becoming considerably more.

For the first-time PC buyer, this would come as a rude shock.

In an already low-margin market, dealers had little incentive to push such a PC as margins on the product were virtually non-existent. In the past, not many dealers stocked a low-priced product and those that did tended to try and convince the buyers to purchase from the higher priced PC range.

The marketing campaign, for these recent `low-priced' endeavours, focused only on price, thereby conveying a subtle message that the PC was for those who could not afford the higher-priced PC range.

Phrases such as `low end computing device' used to categorise such PCs further exacerbated this. Instead of making the buyer feel good, such PCs probably ended up belittling his ego.

The question to answer

For any product to be successful, it has to address a fundamental issue - how does the product help the user to improve his quality of life? Irrespective of the level of its sophistication, the fact is that a PC today does not materially improve the quality of life of an Indian household consumer.

Apart from providing Internet connectivity, the PC is often used as a surrogate entertainment device and used for playing games, DVD, songs, etc. There is very little content available that enables a consumer to improve his daily productivity.

Can we pay all our monthly bills through a PC especially if we are not credit card holders? Can we avail Government services without queuing up for hours in dilapidated Government offices, e.g. applying for a driving licence/ration card, etc? Can bank transactions be conducted without visiting the bank? Can students receive education if teachers are not available? Unfortunately, except for select cases, the answer is no.

Increasing the PC penetration in the household segment in India will require innovation, not only in making the PC but also in the entire business model used to deliver PC-based services.

Today, the PC is purchased from one supplier, the Internet connectivity is provided by another and content comes from a wide variety of suppliers, ranging from large multinationals to small suppliers.

The consumer segment targeted by the 10K PC product category was mostly the first-generation PC users who find both operating the PC and dealing with multiple suppliers complicated and expensive.

This leads to an interesting question - Is the objective of the 10K PC program (and other similar programs) to increase the number of people who own PCs or is to increase the number of people who use PCs?

Cable TV - successful model

To answer this conundrum, let's examine another technology device that is ubiquitous in Indian homes cutting across all geography/income/caste/religious boundaries - cable TV. In the cable TV business model, the content from various channels is `collected' by the local cable operator and sent to each home through a fixed-line cable.

The consumer owns no content and deals with one supplier through a monthly subscription fee. With the Internet becoming increasingly pervasive and the de facto delivery channel for most content, is ownership of a PC a precursor to using a PC? Nobody owns Google but everybody uses it!

Imagine there is a device that provides access to the Internet and other typical PC software, including word-processing, e-mail, etc. The device can be connected to any display unit ranging from a sophisticated TFT display unit to an ordinary TV/monitor and is used through a normal keyboard and mouse.

Apart from this device, the end-consumer does not have to install any other computing hardware or software at his end. The local Internet operator deploys all the required software at his end and apart from providing software and Internet access to the consumer, also provides facilities, including data storage, to the end-user. This device is a PC for all practical purposes except that the end-user does not own any hardware or software and instead subscribes to a bouquet of services on a monthly fee model.

Distinct advantages

The advantage of this service-based model versus the ownership-based model is that, first it encourages a first-time user to try home computing much more easily as he is not investing a substantial sum in a relatively unfamiliar area.

Second, the consumer is not dealing with a multiple set of suppliers. Third, the cable TV model is well accepted in India and the Internet PC business model will be an extension of it.

This is not a scenario out of Star Trek. Such devices are already available in India and there are entrepreneurs approaching the market with some very innovative business models.

Let me hasten to add that the PC in its current state is not on its way out. But Indian consumers need to be provided with alternatives, especially if IT adoption has to increase in India among first-time users.

Past experience has shown that while the Indian consumer has the reputation of being price-sensitive, price alone is not the only buying criteria. A product with price as its raison d' etre will find success elusive.

To be successful, the next avatar of the PC meant for India has to address the needs of the Indian consumer, both through technology and appropriate business models. Most important, it has to provide an answer to the basic question - does possessing the PC improve the quality of life of the consumer?

The author is Vice-President, Nasscom, and the views expressed here are personal.