Lenovo seeks prestige in price-sensitive market

The perception of Lenovo as a laptop innovator has paid dividends in the enterprise space, but the reputation may not effectively translate to buyers who focus on price over features in the consumer space, analysts said.

This week Lenovo announced the ThinkCentre K210 desktop, and it recently started shipping IdeaPad consumer laptops. The PCs include designs and features the company hopes will establish Lenovo as a "prestige" brand among consumers and put it in a better position to compete with rivals Hewlett-Packard and Dell.

One consumer feature Lenovo is betting on is VeriFace, a face recognition technology where a camera recognizes a face to log a person into a computer. The feature absolves users from remembering lengthy and complex passwords. It has also included an antibacterial keyboard in its new ThinkCentre desktop.

Lenovo may not be a well-known consumer brand in the U.S. yet, but the company is trying to find out what consumers want as it snakes its way up the ladder, said Stephen DiFranco, vice president of the consumer group for the Americas at Lenovo. "Our goal is not to be just another low-cost assembler. Our goal is to put an established set of features that are meaningful to people," he said.

But in a U.S. economy where buyers are price-sensitive, a few extra features may not attract customers who are looking for lower-priced PCs, and Lenovo could lose momentum as it tries to enter new markets with products like low-cost PCs or mobile Internet devices, analysts said.

Lenovo's new PC products don't differ that much from what Dell and HP offer, and consumers typically are willing to give up on features to get a cheaper PC, said David Daoud, research manager at IDC.

Jack Gold, principal analyst at J. Gold Associates, agrees that the ailing U.S. economy could be an issue for Lenovo. Lenovo has seen success in distributing low-cost PCs and consumer products in China and other emerging countries, but with the U.S. economy on a downturn, the company chose an odd time to enter the market, Gold said.

Lenovo needs to establish itself as a brand with mass appeal, and it needs to shed the reputation of a high-end vendor, which it got after acquiring the ThinkPad brand from IBM in 2004, Daoud said. ThinkPad will bring goodwill to consumers in the short-term, but send a wrong signal to those who worry about pricing in the long run, Daoud said.

The company also faces challenges in its retail strategy. It can't match the distribution of PCs of HP or Dell in North America, nor does it have a product allegiance like Apple does, which has products -- like the iPhone and iPod -- and services revolving around the Macintosh and media services, Daoud said.

"If they can acquire channels as opposed to companies, that's a successful strategy," Daoud said.

Lenovo is in talks with U.S. retailers to distribute its products, which could expose the PCs to consumers to build brand reputation, DiFranco said. Lenovo is already sponsoring the 2008 Beijing Olympics.

It is also extending the strong ThinkPad support and services model to consumers, DiFranco said.

"Our intention is to make Lenovo easy to find and easy to experience," DiFranco said.

The analysts also cautioned that approaching the U.S. consumer market now could slow down Lenovo's overall momentum. The company has a good worldwide business, but it will need additional resources to sustain the consumer space during the economic downturn. It will need to spend millions of U.S. dollars to establish a brand name and build a distribution channel, Gold said.

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