TECHiNSIGHT - Three Ways to Win with Whitebooks Story

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Moving a mountain is not impossible. You can do it with wind and rain or bulldozers and dynamite or, if you have a shovel and enough time, your own two hands. With a near strangle hold on the notebook market, tier-one OEMs seem to be feeling no pressure from the system builder channel. Overall notebook sales continue to rise, but the unit gains through retail make whitebook efforts look infinitesimal.

I don't think this is a fait accompli. There are plenty of resellers succeeding with whitebook designs and marketing, but their comparative numbers are still small enough to be ignored within the channel as a whole. The trouble is that most whitebook builders are using shovels, taking a brute force approach to sales based on "me, too" marketing. When a customer sees a Sunday paper insert filled with price point-oriented notebook SKUs and you hold up your whitebook to say, "Look, I've got one just like that!" you're using a shovel. You'll sell units here and there, but it won't take very long before you wipe your brow, exercise your profanity skills, and declare that there must be a better way.

There are better ways. And this is normally the spot where we'd say, "You'll never win in a price war against the tier-ones." Well, that turns out not to be entirely true, because once you disregard systems that come off of retail shelves, the whole price point arrangement goes out the window. Just engage a customer long enough to say, "If you'll tell me what you want your notebook to do, I can promise you that this $599 name brand machine will leave you unhappy." That's a bold statement, but the law of averages is in your favor. Current Analysis shows that, as of last November, the average selling price of retail notebooks hung just below $1,000. Price points are often bait and switch hooks, buyers get upsold left and right, and in that process the customer often finds less and less value in each added dollar. This is the nature of tier-one notebooks. It does not have to be the case with whitebooks.

Because tier-ones are trying to hit as large of a target as possible, they sacrifice precision in their SKU designs and messaging. Their strategy largely boils down to price and hype. There are so many weaknesses in the tier-one approach that you can exploit; all that's necessary is the insight to recognize them and the creativity to capitalize on the openings. To help get your whitebook motor revving, we've explored three such openings below.

Communicate solutions with clarity

In all things--new business opportunities in particular--we should question preconceptions and traditional ways of operating. For our discussion here, it's fair to say that we generally assume tier-one notebooks will be less expensive than whitebooks. Also, we assume that tier-one salespeople are, to put it nicely, undertrained. Both points are worth investigating in order to better know your competition. Thus I did a little investigative window shopping in search of a notebook that would address the following consumer-ish bullet points: some gaming, kids' software, Web surfing, MS Office, DVDs, very good audio output for high-end headphones, widescreen monitor, and something called ExpressCard.

With a conscious effort to forget everything about L2 cache, signal-to-noise ratio, and disk seek times, I hopped on the Web site of a particular tier-one and almost immediately got lost. From the notebooks landing page, I guessed that I wanted something entertainment-oriented. And with prices starting at $599, how could you go wrong? Click.

At the next screen, I saw three models, and the middle one (15.4" LCD) noted "affordable widescreen entertainment" starting at $743. Click. And that's where I got lost. There are no comments anywhere about audio quality, suitability for gaming, or much of anything else. So I called the company's 800 number looking for clarity and guidance.

I read the sales rep my criteria list just as given above, and he suggested a Model X, the same $743+ unit I'd been examining. Then I asked a question: "Do I need this thing called Core Duo?" He explained that Core Duo meant the notebook had two processors and asked in turn if I did much multitasking. I answered that I usually keep three or four browser windows open, do some MS Office, and occasionally stream from subscription services, especially when traveling. "You don't need dual processors, but it could only help," he said, then knocked me into a Model Y without saying so. Choosing a Core Duo reset our base price to $1,127 and saddled me with a 17" screen.

Then I asked my second question: "What should I do to keep this from being obsolete in a few months?"

"We can pretty much customize for it not to be obsolete," he answered. "A little more RAM, more hard drive, already got the dual-core processor. That's pretty much top of the line right now. We'll get you XP Pro on here so you can get all the free upgrades from Microsoft. So it's just a little bit of upgrading, not much. We'd upgrade the operating system, upgrade the hard drive, put in a CD/DVD burner, probably do a better wireless card, and then do the basic stuff like security software and warranty."

This was essentially the end of the upgrade discussion, and the final price was $1,804.80. We're definitely a long way from $599, Toto.

OK, let's clarify some points. The Model Y comes with an 8X DVD burner by default, as well as the "FREE!" upgrade to 1GB of memory. The "upgrade" of operating system--from MCE to XP Pro--has me completely baffled. This is a $119 upcharge that jettisons a ton of multimedia functionality (and didn't I identify myself as a multimedia enthusiast?) and in return gives me Domain Join and Cached Credentials functionality, neither of which any consumer needs. There is no other benefit in owning XP Pro, period. The guy upsold me $28 for a 5,400 RPM, 80GB hard drive but didn't offer a 100GB for $32 more despite my request for future-proofing. Despite two references on my part to hotel traveling, he never offered items such as a larger or spare battery, travel mouse, or carrying case. And with zero discussion, I got hammered $192 for a three-year on-site warranty and another $63 for an antivirus/firewall security suite.

He did ask about Microsoft Office, to which I said I owned a copy for my desktop system. He rejoined that I could just install that on the notebook. "Will I have the Microsoft police after me?" I asked. No, he answered, I could install it on up to three systems. Just for giggles, I called Microsoft later in the day and confirmed that retail copies of Office can be installed on "one desktop and one laptop." All OEM versions are single-install only. Academic versions can be installed on three systems, but I never indicated having an academic copy. Oops.

I could go on and on about how messed up this sales session was. Another huge flub was that, after I pressed him for information on what audio adapter was being used and he insightfully replied that the notebook featured a sub-woofer, he stammeringly noted that the notebook uses a Sound Blaster Audigy. I confirmed with Creative that there is no such thing as an integrated mobile Sound Blaster product.

Ultimately, trying to replicate the quotation he emailed me, I could only arrive at $1,789, not $1,804.80, but who's counting? The point is that I as a consumer got used and abused. This was a classic case of a scripted salesman piling on $1,300 of upsells without engaging in a real dialog to see if this is what I really need. At so many points, our phone session lacked clarity, and the result was that the customer got railroaded into a poor solution.

Some people say that the whitebook builder's only advantage is service. This experience disproves that. You will generally lose on a toe-to-toe pricing battle, but you can still be a cost leader if you fit the product to the customer's needs. I didn't want a 17" screen or any of that warranty or software business. I definitely wanted more storage capacity and a better audio solution, but none was offered. Yes, you can excel with personal, local support, and, perhaps even more importantly, you won't lie to your customers out of ignorance. Neither will you bait and switch them with $599 promises that suddenly triple based on a couple of questions.

Your greatest asset with selling whitebooks is communication. If you can engage customers in a dialogue and clearly show them the solution-based approach you take versus a tier-one, you can and will win this business.

Once more with feeling

iPod comparisons are overused, but one more won't hurt. The iPod is a largely emotional purchase. Competing products from the likes of Creative and Samsung offer the same or better functionality, but the iPod has a mystique and chic about it that Apple has cultivated to perfection. When I talk to teens who want iPods, they're clueless about any of the product's technical merits or detriments or whether it offers competitive value per dollar. It's an emotional decision largely guided by social and media perceptions.

Very rarely is this line of thought applied to notebooks. Second-tier OEMs like Falcon NW and Voodoo PC get it, but their audience is high-end enthusiasts, particularly gamers. Whitebook sales are practically Vulcan in their emotional content. Are you going to build a Ferrari red thin and light like Acer? Probably not. But emotion can be subtle. The key is to have the buyer associate the product with his or her identity, and one of the best ways to accomplish this in a whitebook context is with accessories. One of the most visible accessories, of course, is the carrying case.

"A case is something that's part of you," says Al Giazzon, vice president of marketing for Targus. "It's on your person. It reflects your personality. That's why the women's case market is growing so quickly and why we offer so many different styles."

Targus currently offers 13 different notebook case SKUs in the women's category alone, and Giazzon states that the bags come off the same manufacturing lines as some of the top purse brands in the world. This is a tremendous differentiator and a smart item to bring before business reps who have been given notebooks accompanied by tasteless bags--or no bag at all.

That's the interesting thing. Giazzon states that "over 70% of notebook cases are purchased after the primary notebook purchase." This applies across all reseller segments and all sizes. Resellers simply neglect to offer the option, and no one seems to understand why. Moreover, IDC and NPD numbers show the gap between notebook case and portable PC units sold increasing into the future.

"A big part of our incentives to our resellers," adds Giazzon, "and what we're trying to work with Intel on right now, is promoting the attach--building a solution around that primary notebook purchase. Take a mobile optical mouse, a great case, and power. Those are three logical accessories, and they probably provide as many margin dollars as the notebook."

Targus currently owns about half of the carrying case market, and company data indicates that 80% of all units sold are Top-Loading, Messenger, and Backpack styles, with backpack designs gaining share the fastest. Targus offers a woman's convertible backpack, several "sport" design models, and even a canvas backpack that clearly conveys "rugged" and "outdoorsy" connotations.

Bags are only one example of emotion-related accessories. Those little USB reading lights clearly appeal to late-night workers or book lovers. Tricked out mini mice are obvious, but what about notebook-optimized webcams for "family" types? Pen scanners for execs? A portable photo printer for camera buffs? How about a snap-on privacy filter? Link your product to the buyer's identity and lifestyle. Sure, such add-ons won't create a sale from thin air, but if a customer is on the fence, a gentle emotional nudge may be all that's needed to tip a purchase your way.

Make It Safe

Security is definitely not a one-size-fits-all affair. As alluded to above, my tier-one sales rep simply hooked me up with a low-end consumer security suite. He never asked if I already owned a firewall or antivirus product. Nor did he pause to try and upsell me to something more robust and better suited to a network environment. Security is now a ubiquitous computing need that transcends market segments. Antivirus is a great start, but it gives me no peace of mind when I leave my notebook open in a hotel room while I run out for a quick lobby meeting and room service wanders in.

The term "security" is something of a catch-all these days, but we can loosely break it into the categories of hardware and software.

On the hardware side, authentication is an increasingly big concern in the enterprise space. Hitachi's FLORA Se210 notebook integrated a finger vein pattern sensor, which is even harder to dupe than a conventional fingerprint scanner. (It's not like you can stick on a rubber set of veins.) For those who are content with nearly bulletproof authentication, fingerprint biometrics remain increasingly popular, and Fujitsu, Lenovo, Motion Computing, Toshiba, and most recently HP all offer models with fingerprint scanning built in. I have yet to see a whitebook that has taken this leap, but PC Card-based fingerprint readers from APC and Targus can turn any laptop into a mobile Fort Knox. In addition to acting as a login gatekeeper, these two cards also come with software that can associate the user's fingerprint with passwords. Thus, rather than have to remember and type a slew of passwords for every application and secure Web site, the user need only touch the sensor to gain admittance. Even convenience buffs without much regard for security can appreciate this.

In the past, I tested a ThinkPad with built-in face recognition software, but the number of false negatives I received left me underwhelmed, and I haven't missed not seeing such solutions on whitebooks at all.

More encouraging is the coming whitebook implementation of the Trusted Platform Module (TPM), a small, motherboard-mounted chip that serves to identify a PC to other PCs. This is a much more secure, foundational approach to locking down networks that accommodate notebooks. You can spoof a MAC address or password; TPM chips, along with their encrypted data, are essentially impregnable. Vendors add in more value through applications that tie into the TPM to help lock down user data and communications. The first TPM-enabled whitebook I'm aware of to hit the market is the just-released ASUS Z62F, which is also the channel's first Centrino Duo barebones model.

If physical theft is a security priority, there are plenty of locking solutions. Kensington pioneered the desk locking field, wherein a steel cable with attached lock loops around a desk or similar fixture and then connects into a special slot in the notebook. Plenty of other companies have followed suit, including Belkin, Digital Innovations, Fellowes, Guardian, and Targus. I particularly like Targus' DEFCON 1 ($49.99), which adds a 95 dB alarm that goes off based on motion detection or severing of the cable--very handy for environments where you can't see people walking through with cable cutters.

On the software side, yes, a general client security suite from the likes of McAfee, Computer Associates, Symantec, Trend Micro, and others is an obvious first suggestion, but be aware that some clients may already have a suite license. They may have antivirus and firewall but still need an antispyware utility. If the notebook is going to be used almost exclusively between a small office LAN and a home LAN, perhaps a pair of gateway security appliances, such as D-Link's SecureSpot, is the highest value solution for covering the most PCs at the lowest cost. You need to probe the client's current situation and needs and be aware of a full spectrum of options.

Only The Beginning

Here are three strategies for making your whitebook sales sizzle. Put some creative thought into it and you could probably come up with another 13 in no time. Whitebooks are a tremendous opportunity that only keep getting better. As volumes increase and parts become more standardized, pricing will continue to fall and make you even more competitive with the tier-ones.

Not that you're likely to ever reach price parity with the big names. As mentioned before, in the end, volume still wins on a spec-for-spec basis. But the tier-one efforts are riddled with strategy holes. Play your own price game, not theirs. Help the customer identify what he really wants for a solution, not a clamshell, and you can be the cost leader, because no major OEM can match your configuration flexibility. Just listen to your clients, be imaginative, and you'll cash in on the trend toward mobility throughout the market.