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 user 2007-04-26 at 12:02:00 pm Views: 53
  • #18270

    Ink wars: HP’s glass half empty defense
    seems somehow fitting that on the very day I took delivery on Kodak’s
    new EasyShare 5300, a multifunction ink jet printer that boasts lower
    cost consumables, Hewlett Packard decided to respond with its first
    return volley in the ink jet wars. But does HP’s choice program offer a
    lot for a little or a little for a lot?

    Kodak recently released
    a new line of ink jet printers that turn the Gilette model of marketing
    on its head. Instead of giving away the razor (printer) and charging an
    arm and leg for the blades (consumables), as HP and other established
    players do, Kodak is gambling that users will pay a little more for the
    printer up front in return for ink cartridges that cost up to 50% less
    per page than other brands (see Kodak printer sellout: Are consumers
    are voting for lower ink prices?.

    With a cry of “We heard you,”
    HP appears to be offering not so much a discount on ink but the
    opportunity to buy less ink a lower price. Having driven out its
    competition with an exclusivity contract with at least one retailer -
    Staples (see The great computer ink rip off)- HP is now throwing
    consumers a bone by offering three new cartridge packages at different
    prices. According to HP, “..the new cartridge options will deliver
    value by offering low purchase prices to customers who print a little,
    and lower cost-per-page to customers who print a lot.”

    It’s also a great way to take up that shelf space at Staples, where those competing products used to sit.
    three new packaging options, HP will offer a “blue” cartridge for
    customers who only print occasionally and “still want access to
    high-quality printing, but don’t want to pay a lot at the point of
    purchase.” The “green” package, by contrast, offers users 30 to 45%
    more ink, which is another way of saying that blue users are getting
    about 30% less. This appears to be the the buy a half a tank school of
    marketing in which HP hopes to entice consumers with a competitively
    priced ink cartridge by providing less ink per cartridge.

    strategy is akin to ExxonMobil telling car owners who complain about
    the high price of gasoline to buy two thirds of a tank and drive less
    miles to save money.

     If this is the approach HP is taking, the
    net cost per page for the value line of consumables will not drop. HP
    will keep its ink supply hegemony and high profit margins intact,
    protecting its $7 billion a year cash cow business, all the while
    countering Kodak’s lower cost consumables by creating the appearance of
    lower costs.

    Will it work? Creating three brands of consumables
    where one existed would seem to just create more confusion, rather than
    a “a dramatically simplified shopping experience” for the consumer, as
    HP positions it. But creating confusion in the market might just work
    in HP’s favor. I’d like to think consumers are smart enough to know if
    in fact they’re not getting more value for the money on a cost per page
    basis. On the other hand, befuddling the consumer with tricky unit
    pricing comparisons have long been common practice in the grocery