The Gillette Business Model is simple and successful. Give away razors for free. Sell the blades at a huge profit.
Dell Computer Corp seems to be trying a twist on the Gillette model: Sell defective computers at cost. Make profits on overpriced service contracts.
Rocky recently purchased a new Dell E6510 Laptop. The machine’s specs looked excellent, and Dell priced it well below the equivalent Apple and HP computers. On Day 46 (one day after the expiration of the return period) the laptop fan died.
Rocky to Dell: “I need to get a service call on my new E6510. The fan died.”
Dell: “You didn’t purchase an on-site warranty. You need to ship it to the Dell Service Depot for repair.”
Rocky: “I need this computer for work, and cannot tolerate a two week turnaround time. Can I upgrade my warranty to on-site repair?”
Dell: “Sure. A warranty upgrade will cost you $829.55 plus $61.18 tax = $890.73″
Rocky: “But I can buy a spare machine for that, and just keep it in the closet!”
“Dell: “Thank you for choosing Dell.”
Fortunately, Dell didn’t tell Rocky that the hardware problem was caused by Rocky performing too many difficult math calculations. That’s what Dell told the University of Texas Math Department, and resulted in a large class action lawsuit. See: http://www.nytimes.com/2010/06/29/technology/29dell.html
[Disclosure: The good news is that Dell's customer service representative spoke perfect English. The bad news is that Dell is on the same downward trajectory that has plagued every PC manufacturer since the early 1980's. Rocky has no position in Dell stock.]