Dell Computers: Marketing Analysis - Case Study Example

 Dell Computers: Marketing Report 1.0 Introduction Dell Computers is currently experiencing high sales growth and has achieved revenue increases of nearly $20 billion between 2004 and 2008 (dell.com, 2008). The largest portion of this sales revenue comes from desktop personal computers sales. The company’s printers, considered a peripheral product, only make up a very small portion of Dell’s entire sales revenues. Where global personal computer sales make up 38 percent of total revenue, peripherals are only 15 percent of sales. Further, of that 15 percent, other peripheral items are considered including scanners and various wireless products, amongst many others. This represents a very small fraction of earnings potential for Dell as printers currently bring in such a trivial portion of total business revenue. For this reason, Dell must adopt an appropriate marketing model, focusing on printer sales in order to make these products contribute more to the profitability expectations of Dell. This report identifies the marketing concept, proposes positioning tactics for Dell Company as well as highlights the competitive and consumer environments which impact Dell’s future successes in marketing. 2.0 What is marketing? The technical definition of marketing is “the process or technique of promoting, selling, and distributing a product or service” (Henell, 2003: 1). From this definition, Dell is currently active in all of these activities in the course of daily business operations. The company utilises advertising and promotional strategies for most of Dell’s products and then determines the most appropriate retail environment to ensure highest sales volumes through strategic distribution planning. In terms of generic marketing efforts, Dell is succeeding at a foundational level. The faculty of one respected business university defines marketing as “the activities involved in commercial exchange and other commercial-like activities” (Quinnipiac.edu, 2008: 1). Further, marketing includes advertising, retailing, branding, price strategies, consumer behaviour research and channels of distribution (Quinnipiac.edu). Some of the key definitions which would be appropriate for Dell to consider are advertising, branding, and understanding the consumer through various research approaches to fully understand preferences and levels of existing brand awareness and connection with Dell products. In order to fully bring value to the objective of selling more printers and contributing more to revenue increases, this is the approach to proper marketing which Dell Company must consider. The marketing concept is more than merely making a product, constructing a variety of advertisements and then delivering the product to the retail environment in the hopes that it will sell in large volumes. The company must blend all aspects of business both internal and external and maintain an understanding of the consumer in order to be truly marketing focused. Further, Dell operates in a highly competitive environment and must price the printers in a way that brings competitive advantage and will not be rejected by consumers. This is one of the foundational efforts of marketing and, by taking a new marketing approach, the business can highlight issues of cost, capability and promotional reach to create a marketing strategy which appeals to their desired consumer demographic. 3.0 Segmentation, targeting & positioning High volume competition in the technology market and consumer trends appear to be the most significant environmental factors impacting Dell’s current marketing strategy. When there are a wide variety of competitors, the business must consider how to position the product in a way that will best appeal to the firm’s desired target consumers. Dell must identify specific market segments which will be most apt to buy the company’s printers by identifying elements of pricing, lifestyle and other individual demographics. Does the company believe it will sell more printers to University and higher education-minded students? Does the company believe it will have a better sales record by appealing to the urban consumer with a flair for the abstract? These are questions which Dell must consider when developing an appropriate segmentation strategy by identifying specific consumers who will bring the most value, long-term, for the business. Dell will likely find this value in the student consumer group, calling for a narrower targeting strategy. Additionally, Dell can take a broader targeting approach by creating advertising with a mass appeal to bring in a wide variety of consumers to the Dell brands. The current defect with Dell’s positioning strategy is a likely cause for why peripherals make up such a small portion of total yearly sales revenue at the company. Recent marketing phrases such as Dude, You’re Gettin’ a Dell (Vranica, 2002) clearly position the Dell brand by creating the perception of higher, competitive quality for all Dell products. Even more recent is the company’s positioning strategy of Yours is Here and Purely You (Lawton & Vranica, 2007) which is an attempt to create the connection between the business and the consumer by emphasising Dell and emotion. However, these positioning strategies are not bring enough value to the company’s growth objectives as peripheral sales are not high enough, suggesting that the company really does not understand its consumer audience. Dell Company must realise that the high volume of competitive products on the market create opportunities for consumers to buy from a wide variety of retailers if the business is not providing what consumers demand. When segmenting, clearly the university-minded student will have need for Dell printers but likely lack large financial resources in an environment where costs are high and inexperience and youth create less personal income. The generic consumer household, in a variety of ways, have potential uses for Dell printers, allowing for a wide variety of advertisements to be created to create multiple connections with different target groups. All of these factors must be considered prior to developing positioning strategies to appeal to these desired groups of consumers. Dell should reposition the company’s printers with less of a focus on product quality (as these claims are made by many competitors) and less focus on the consumer attributes. Instead, even though the company is developing printers which are quite similar to competition, the business can consider a product class positioning strategy which makes the product appear superior to competition. Marketing slogans such as The Ultimate Inkjet Experience can develop the consumer perception of higher quality, over time making the consumer willing to spend more to get the quality product. This would serve to enhance profitability and allow printer sales to create more value for Dell Company. 4.0 The Dell marketing mix The printer product itself is developed using cost-effective raw materials in a variety of manufacturing environments owned by Dell. There is, of course, an existing system in place for parts distribution as related to the supply chain. Printers and other technological products have continuously-shrinking product life cycles (Annual Report, 1995), making it crucial for the company to have a strong emphasis on product development and lead time for new product entry into the market. Dell understands this and works toward improving manufacturing to sustain competitive advantage. Distribution is direct channel, which Dell cites as bringing great value to the business’ cost-savings efforts (Annual Report). For obvious reasons, distributing product directly from the manufacturing environment to the business or consumer user would avoid the cost of additional retail mark-up and give the business control over the selling environment. There are no recommendations for distribution and logistics improvements at Dell Company. Customers are currently able to order product directly from the manufacturer via the Web and product catalogs with the assurance that the product will be delivered. Having ownership over the manufacturing process is likely a portion of why Dell is able to price its printers at or below competitor pricing. In terms of price, as previously identified, Dell must consider competitor pricing as well to ensure that consumers are not dissatisfied with Dell printers. When a consumer browses through several websites carrying various printers, they will encounter very similar pricing across the entire competitive environment. If Dell, in an attempt to boost sales revenues on peripheral devices, were to add an additional $20 per unit, it would be a noticeable increase in price over competing products and may ensure diminished sales volumes. This is why it is vitally important for Dell to recognise competition in their pricing model. The company maintains an objective of growth, thus if the company cannot raise the price of printers to lose competitive edge the logical course of action is to sell more printers. This is where promotion is also lacking in Dell’s current marketing approach. In trying to create a connection with the consumer through lifestyle and the firm’s historical focus on the product, the company has somewhat lost focus on proper promotion. It is evident that Dell realised this as the company created a unified marketing pact with various advertising agencies and search engines to boost Dell’s image within print and television advertising (Allison & Edgecliffe-Johnson, 2007). Dell’s desire to grow would require additional promotion and, through the marketing expenditures, the ability to reach a wider consumer audience was created. Should the business take the recommended course of action by positioning the brands by product class, various forms of advertisement which illustrate a change of attitude at Dell would be beneficial. The Dell Experience could be sold as a whole brand philosophy, allowing the company to price the printers higher as consumers would associate the brand with higher quality. This would serve the profit objectives and the marketing focus for Dell Company. People make all of the difference at Dell and the business appears to understand that its internal staff and the customer are involved in business operations. Dell states: “Dell's performance reflects the spirit, dedication, individual contributions and collective hard work that permeate our organization. We believe our people are successfully blending the entrepreneurial spirit of Dell's first decade with the requirements of a multinational corporation in our second” (Annual Report, 1995: 6). Dell’s internal corporate culture is one of cooperation, which likely has made the firm a leader in personal computer sales. The business recognises all people involved in the process of product manufacture to final sale; and beyond. Dell offers additional customer service features as part of the extended marketing mix such as technical support with purchase of new printer peripherals. If a company is making a claim that products are superior, the consumer demands physical evidence that such services will actually be provided. Dell requires no improvements in recognising these consumer demands. Customers who have customised computers at Dell are going to expect accuracy in process, including the efficiency of the ordering website. This is why Dell provides chat support help during the ordering process and provides detailed information regarding peripherals products. There is no evidence that Dell has experienced negative outcomes due to process-related failures. 5.0 Different recommended approaches The university student and the 30-something, male household user are the two appropriate segments identified for Dell Computer. In terms of pricing, the company would require careful planning to ensure that competitive pricing is built into the company’s pricing model due to their demographic characteristics. The 30-something male household user may have a broader ability to pay higher prices and may also demand specific features be available which are not required of the university student. Price would need to be established congruent to the consumer’s needs and whether high-quality is in demand. Promoting the printers would be appropriate with trade show, below-the-line marketing type of promotional efforts where Dell participates on university campuses. This would accomplish both word-of-mouth advertising and to let Dell create a genuine connection with student needs by responding to real-life questions and comments. For the 30-something, corporate business demonstrations and presentations would bring Dell into the business environment and create a connection with professionalism and the Dell brand. In relation to marketing to businesses, Dell must maintain a different marketing strategy. For instance, with direct marketing approaches such as the on-site trade show and other promotional efforts, Dell can allow the brand to be more flexible and down-to-earth in the minds of the consumers of university age. Marketing to businesses requires a more rigid brand positioning strategy where issues of budget, quality, time saving, etc. might be elements in demand in this environment. Thus, issues of distribution are factors in terms of cost and delivery size as well as whether pricing in paid in full on delivery or on delayed accounts receivable invoices. This would impact working cash flow more than direct sales to consumers which provide instant sales revenues. Dell (2007) highlights Dell’s international marketing strategies as the business now operates in areas across the world. Internationally, the company has a different distribution focus and delivers products to various retail outlets. This represents improvements over the past decade at Dell, showing that the business has a flexible business model and the cash/leverage available to make sizeable changes to market strategy and the supply chain. International marketing requires customised messages for a different group of consumers, who have unique backgrounds and cultural beliefs. Dell recognises customer demand for personalisation of their products and the ability to get product where it needs to be internationally. However, the business must work with various, foreign legislation which is unique to different areas which makes the process of global marketing a complicated effort. 6.0 Conclusion Dell is clearly performing well year after year which is attributed to their competitive pricing model, their international marketing focus, flexible business philosophy and ability to manage operational efforts efficiently. However, Dell’s largest weakness appears to be related to positioning strategies and should consider adopting the product class strategy to ensure a higher price tag on printer products when competition will not allow a flexible pricing scheme. Since only a small portion of Dell printer sales are included in total yearly sales revenue, this is an appropriate marketing strategy for the company. Dell maintains competitive edge with an efficient distribution system and a strong focus on internal dedication and performance. The only noticeable defect in marketing strategy related to sustaining this edge is in understanding consumer preferences and creating the appropriate brand-building exercise which puts the product in a class by itself. This requires creating a new attitude within Dell Company and does not require a great deal of cost to the marketing budget. Finding the right position amongst heavy competition and declining product life cycles would be the most appropriate method to achieve expectations of growth currently in demand by Dell leadership. Dell has only recently extended the firm’s direct distribution channels in an attempt to reach a broader consumer audience. It will likely take time to determine whether these existing retail partnerships will be of value to increasing sales on peripheral items such as the printer. In the short-term, this decision will likely create increased value for the customer by providing in-store selling services and (hopefully) knowledgeable sales staff, further adding to the company’s competitive edge. Despite any recommended improvements for marketing success, Dell is well on its way to becoming a marketing leader in a highly competitive marketplace. Bibliography Allison, K. & Edgecliffe-Johnson. (2007). “Dell marketing pact worth Dollars 4.5bn to WPP”. Financial Times, London. 3 Dec 2007: 27. Annual Report. (1995). “Dell Computer Corporation Annual Report”. Retrieved 8 Nov 2008 from http://www.dell.com/downloads/global/corporate/annual/1995_Annual.pdf Dell, Michael. (2007). “Fiscal year 2007 in review”. Retrieved 8 Nov 2008 from http://www.dell.com/content/topics/global.aspx/about_dell/investors/financials/07_yir?c=us&l=en&s=corp Dell.com. (2008). “Dell FY08 Financial Highlights”. Retrieved 8 Nov 2008 from http://www.dell.com/downloads/global/highlights_2008.pdf. Henell, Tom. (2003). “The Importance of Marketing Your Law Firm”. NAPLIA Organisation. Retrieved 8 Nov 2008 from http://www.naplia.com/Attorneys/PDF/THE%20IMPORTANCE%20OF%20MARKETING%20YOUR%20LAW%20FIRM.pdf Lawton, C. & Vranica, S. (2007). “Dell Pushes Reset Button on its Image; Pc Maker Ratchets Up its Hipness to Regain Sales Edge”. Wall Street Journal, NY. 10 Jul 2007: B.7. Quinnipiac.edu. (2008). “Journal of Historical Research in Marketing”. Quinnipiac University. Retrieved 8 Nov 2008 from http://faculty.quinnipiac.edu/charm/Docs/JHRIM%20Announce%20and%20CFP.pdf Vranica, Suzanne. (2002). “Another Advertising Star is Born as Viewers Embrace Dell’s Pitchman—Dude, You’re Getting A Dell is in Gen X’s Vernacular, Echoing Where’s the Beef”. Wall Street Journal, NY. 10 Jan 2002: B.1. Appendices A: Financial Highlights – Dell Company 2008 DELL FINANCIAL HIGHLIGHTS             FY04 FY05 FY06 FY07 FY08 Revenue 41,327 49,121 55,788 57,420 61,133 EPS $ 1.00 $ 1.18 $ 1.47 $ 1.14 $ 1.31 Cash Flow from Operations 4,064 5,821 4,751 3,969 3,949             Revenue by Geography 41,327 49,121 55,788 57,420 61,133 Americas 28,520 32,903 36,325 36,380 37,369 EMEA 8,472 10,753 12,887 13,682 15,267 APJ 4,335 5,465 6,576 7,358 8,498 FINANCIAL DATA TABLE         FY07 FY08 Change Revenue 57,420 61,133 6% Gross Margin 9,516 11,671 23% Operating Income 3,070 3,440 12% Diluted EPS $ 1.14 $ 1.31 15% Cash and Investments 12,445 9,532 -23% All data except per share data is in $M Source: http://www.dell.com/downloads/global/corporate/about_dell/FY08_Financial_Highlights_xls.xls Read More