The Home PC Invasion

The Home. According to IDC (India), the home PC market has grown at an average rate of over 80% in the last three years. For most PC vendors, this market segment represents the veritable double-edged sword with success not automatically assured for everybody.
Competing in the extremely price sensitive and brand conscious home segment has proved to be a challenge for majors like HCL, Compaq, HP and IBM. Survival depends on availability of feature rich models, retail outlets, ruggedness, promotions and other activities applicable to fast moving consumer goods.
Through an exhaustive survey involving over 1,000 households, DQ Insight presents details on what makes this explosive market segment tick. Who the customers are, what they want, how much they spend, what they do. Read on for this first-ever exposition of how the PC has invaded our homes.

Enter the consumer PC

The PC in the
urban household is fast approaching the status of a consumer product. Out of a
random sampling of 872 households with monthly household income (Mhi) exceeding
Rs10,000, 21.2% of the households were found to have purchased a PC. From the
installed base of PCs in the home, the city of Mumbai was found to have maximum
penetration, followed by Delhi, Bangalore, Chennai and Calcutta.

Households with intention to
purchase a PC amounted to 19.2%. This indicates an increase in the penetration
of the home PC from 21.2% to 40.4% of the households. From the sample, the city
with the highest number of households indicating a future intention to purchase
a home PC was New Delhi, followed by Bangalore, Calcutta, Chennai and Mumbai.
From the installed base of home PCs in the sample, approximately 8% of the
households indicated their intention to purchase a second home PC.

From the installed base of home PCs in the random
sample, internet penetration was found in 41.1% of the households. Across the
complete 872 households, internet penetration was found to be 8.7% in comparison
to a PC penetration of 21.2%. From the installed base of home PCs in the sample,
Calcutta had the highest internet penetration followed by Bangalore, Chennai,
Mumbai and New Delhi.

PC most prevalent in
Rs30-40,000 Mhi

The highest penetration of the PC
was found in urban households with an Mhi (monthly household income) between
Rs30,000 and Rs40,000. The penetration was also found to increase in households
with higher Mhi. But since the number of such households decreases rapidly with
increasing Mhi, the statistical accuracy and market opportunity dynamics also
reduce significantly. The home PC is virtually absent with an Mhi below

Printer, the next most
ubiquitous device

While internet
penetration was found to be 41.1%, printer penetration was found to be 56.2% of
the PC owning households. In other words, more than half the households with a
PC in the random sample had purchased a printer. Also, the penetration of modems
and internet connections were at par. Other office productivity devices like fax
machines, scanners, photocopies and handhelds were found to have a low
penetration of below 2% of the households.

Looking at future intention to purchase, internet
penetration is expected to increase from 41.1% of the installed base of home PCs
to 65.8%. From the other devices, demand levels for fax, photocopier and scanner
are expected to remain static or reduce. However, the demand and interest levels
for handheld devices are clearly on the upswing.

Highest intention to purchase
in Rs30,000-40,000 Mhi

The highest percentage of
households with a future intention to buy a PC, lie between Rs30-40,000 Mhi.
With increasing Mhi, there is a relative reduction in the percentage of
households with future intention to buy a PC. This could be because of two
reasons. First, since households with higher Mhi were early adopters of the PC,
they would also tend to get saturated earlier. Second, with the PC changing from
a novelty product to a career enhancement device, households with relatively
lower Mhi but higher mobility and aspirational levels would exhibit enhanced
purchase intentions. Vendors should also not ignore households in the
Rs20,000-30,000 Mhi segment, with increasing PC purchase intentions being

Notebooks are not for the home

A portable PC is not the
preferred type of household device. Less than 1% of the households surveyed
indicated that they would purchase either a portable PC or a palmtop. In other
words, for households making a PC purchase decision, the portable variety are
low-down on their wish list. What is right on top is the multimedia PC.

Road shows, brochures,
outlets, weakest for decision making

Amongst the information sources
with the weakest influence on decision making were road shows, exhibitions and
brochures from vendors and recommendations at retail outlets. The primary
information source for decision makers in households appears to be PC computer
magazines and general newspapers. PC computer magazines include publications
like Computers@Home, PC Quest, PC World, Chip and others. However, word of mouth
was also found to be a strong enabler for decision making.

No snappy buyers here

Amongst the households with
intention to purchase, the most prevalent time period is between 6 and 12
months. Thus indicating that decision makers in households are still in the
process of understanding the benefits, usage and cost implications of the home
PC. The number of households with intention to purchase in less than three
months is less than 10%.

Wipro, top in aided brand

The respondents were aided with a
card, listing PC vendor names. In this aided recall, Wipro was again the most
frequently recalled PC brand. HCL, Compaq, Hewlett Packard, IBM and Zenith were
other brands recalled with decreasing frequency.

Wipro, top-of-mind and most
recalled brand

The PC brands with the highest
top-of-mind recall was Wipro. IBM, HCL Zenith, Hewlett Packard and Compaq were
the other brands. Household respondents were also asked to list all brands that
they could recall. In order of frequency the most recalled PC brands were Wipro,
HCL, Compaq, IBM, Hewlett Packard and Zenith. Both these results were from
unaided recall. In the last six months, Wipro, HCL and Compaq have been active
in print, electronic and road show promotions, leading to higher recall rates.
Hewlett Packard has been active in building retail branding and strong product
associations and it has resulted in improving its top-of-mind consumer recall.
Other PC brands recalled, with statistically low frequency were Vintron,
Toshiba, PCL, Acer.

Compaq, most preferred PC

When household respondents were
asked which PC brand they would prefer to purchase, if they were considering a
branded PC, Compaq was their first preference. This was followed by Zenith, IBM,
HCL, Wipro and Hewlett Packard. While Wipro is the most recalled PC brand it
does not appear to be the most preferred. Zenith appears to have a relatively
high preference since it has an association with low cost PCs. HCL and Hewlett
Packard have a low preference since they are associated with relatively higher
cost PCs.

Large PC budget span,

Close to 80% of the households
surveyed are ready to spend between Rs25,000 and Rs45,000 to acquire a home PC.
Out of this, 37.7% of the households indicated that they would spend between
Rs25-35,000 and 40.4% indicated that they would spend between Rs35-45,000. A
remaining 20% indicated that they would be ready to spend above Rs45,000. Since
the price-point of a souped-up home PC or a branded PC lies above Rs45,000,
there is very clear need to get below this price point and address almost double
the market size. The respondents also indicated that they were not flexible in
their PC spend budgets with only 5%-10% as acceptable variation.

Assembled rules over branded

Household respondents were asked
to rate their likelihood to purchase an assembled PC versus a branded PC on a
five-point scale. The likelihood to purchase an assembled PC was rated at 4.1
versus 3.2 for a branded, on a scale of 0 to 5. In other words, households first
consider an assembled or unbranded PC for purchase before a branded PC.

Branded PC, household income
in inverse relationship

An obvious relationship
appears to exist between Mhi and the intention to purchase either of two
categories of PCs–branded or assembled. The intention to purchase an assembled
PC was highest in the lowest category of Rs10-20,000 Mhi. To recall, this
category has the lowest intention to purchase and the highest number of members.
This Mhi category primarily purchases assembled PCs
. The intention to
purchase an assembled PC decreases with increasing Mhi. For a branded PC, the
intention to purchase was highest in the above Rs40,000 Mhi category and lowest
in the Rs10-20,000 Mhi category. To recall, the intention to purchase and the
number of members decreases in higher Mhi categories. The main demand segments
for both assembled and branded PCs therefore lie in the Rs20-40,000 Mhi

Chennai, best for branded PCs

The intention to purchase a
branded PC was highest in Chennai and lowest in Mumbai. Conversely, the
intention to buy an assembled PC was highest in Mumbai and lowest in Chennai.
Out of the five metros, Delhi and Calcutta appeared to have the lowest purchase
intentions for either of these two categories of PCs. Bangalore had the best
balanced purchase intentions between these two categories of PCs.

Shoe string, Come easy,
Dynamite PCs

What is the
typical home PC configuration? Most households with an intention to purchase a
PC are quite clear about their specifications. And a number of home PC
configurations emerge–the Shoe String budget PC, the Come-Easy PC and the
Dynamite PC.

Shoe string PC:
Intel Celeron, 16MB RAM, 1.2GB and below HDD, Monochrome monitor, Win 95 or

Come Easy PC:
PII or PMMX, 32MB RAM, 2.3-4.3GB HDD, 14″ color monitor, Win 98.

Dynamite PCs:
PIII or Power PC, 64MB RAM and higher, 8GB and higher HDD, 15″ or 17″
color monitor, Win 98 and other OS.

While the primary demand lies for the Come-Easy
PC, sufficient demand exists for the Shoe-String and the Dynamite PC to make
vendors consider these market segments with some interest.

Bundled software expected by

Will the home PC consumer pay for
software? Probably not. 50% of the respondents with an intention to purchase a
PC indicated that they expect software to be bundled with their PC. Above 40% of
the respondents indicated that they would pay for the operating system and the
office suite applications. Above 25% of the respondents indicated that they
would pay for computer games.

Multimedia, internet, printer

What else goes into the
home PC? 82% of
the households with an intention to purchase a PC
indicated that a CD-ROM would be part of their configuration. 60%-70% of the
same respondents indicated that a complete multimedia add-on would be part of
their configuration. 45% of the households with an intention to purchase a PC
indicated that an internet connection would be part of their configuration. A
printing device also appeared to be a high priority, with close to 30%
indicating preference for a mono inkjet printer.

At the heart of PC purchases

What is driving the home PC
consumer? The primary reason driving the intention to purchase a PC is the
realization that it is a necessary device for the home. The need to understand
and learn how to use a PC extends from the wage earners to the children of the
household. Amongst the expected users of the PC at home are the primary wage
earner, college going children, children in other stages of life and the
secondary wage earner. From this we can generally rank members of the household
in terms of expected usage as the male head of household, children and the
female head of household. In terms of involvement in decision making for PC
purchase it is the main wage earner and college going children followed by the
secondary wage earner. In terms of frequency, the primary wage earner will be
the PC decision maker in 65% of the households surveyed. In 24% of the
households, the secondary wage earner will be the decision maker. Generalizing
this further, the female head of household, will be the decision maker in
out of three PC purchase decisions.

Home PC, not for business or
work at home apps

Households will
not dominantly use the PC for any business or work at home applications. 77% of
the households with an intention to purchase a PC indicated that they would not
use any business application. Financial applications would be used by 21% of the
households intending to purchase a PC. Similarly, 88% of the households
indicated that the home PC would not be used for any work at home applications.
Another significant fact is that less than 3% of the households with an
intention to purchase a PC would use it in professional areas like medicine,
chartered accountancy and legal applications.

The home PC would be extensively used by
households for word processing, spreadsheets and other office suite application
areas. Email and web browsing were indicated by less than 20% of the households.
Other areas where the home PC is likely to be used extensively is in
edutainment, including children education, games, music and movies.


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