HP Bungles Bucolic Bundling

Posted on January 31, 2008
Filed Under China Business, China Distribution, China Law |

In cooperation with China Telecom, HP has been offering a “Computer + Broadband” service in areas like Taizhou and Nantong of Jiangsu Province since December 2006, but the company is now being criticized by many Chinese users for the computers’ poor performances.

The program was initially hailed as a bundling innovation in China and as evidence of rural technology adoption. Doing the math, however, reveals that it’s not such a great deal:

Under China Telecom and HP’s “Computer + Broadband” service, a user will get a HP Compaq DX2308 desktop computer free of charge after they sign with China Telecom and pay RMB198 per month for a total of 27 months. The package also includes 150 hours of Internet access. However, based on the monthly ADSL fee of RMB60 for 150 hours in these areas, the total ADSL fee for the 27 months is RMB1420, which means that the HP computer the user receives costs them more than RMB3900.

And what kind of PC do they get for RMB3900?

…low configuration computers with 3.2G Intel Celeron D processors, 512M of storage, 80G hard disks and 17-inch CRT monitors

For about the same price, over at HP’s site you can get a dual-core chip (faster), double the hard drive space, and a slick 17 inch LCD monitor. What’s worse is that the Compaqs HP unloaded aren’t up to snuff:

Chinese chatrooms are ablaze with complaining farmers who have applied for the service and say the HP computers often crash and it is difficult to access the Internet.

If those Compaqs have Windows Vista installed with 512MB RAM that would pretty much explain their performance problems.

There’s nothing wrong with bundling deals like this per se. If done correctly they provide a valuable one-stop shopping, service, and support point for less tech-savvy buyers. But just because customers may be less tech-savvy doesn’t mean they’re suckers. The program has to provide some degree of value as well as service. HP blew it and should expect some blowback:

Cui Wu, a lawyer from Jiangsu Shengdian Law Firm, has told local media that HP taook advantage of the Chinese farmer’s ignorance of computer knowledge… Cui said that consumers should sue HP and ask it to cancel its agreement with them.

One bright spot in all this is that these farmers are actually using the internet to publicly complain. One company’s PR nightmare is another man’s technology inspiration.