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 user 2007-04-26 at 12:00:00 pm Views: 46
  • #18307

    Ink wars: HP’s glass half empty defense
    It 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.
    With 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.

    This 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 business.