Dell Marketing - Case Study Example

Report on Dell Marketing Dell Marketing Introduction Dell Inc is a multinational information technology corporation based in Texas, United States of America. It develops and sells computers and related products and services. It is one of the largest technological corporations in the world, and bearing the name of its founder Michael Dell, it employs more than 96,000 people across the world. Dell has grown by inorganic and organic means since its inception. Some of the notable mergers and acquisitions it has been involved in include that of Alienware in 2006 and Perot Systems in 2009. By 2009, the company had sold personal computers, network switches, servers, and software and computer peripherals. The company also into sells HDTVs printers, cameras, MP3 players and several other electronics built by other manufacturers in the industry. It is renowned for its novelty in supply chain management and electronic commerce. It is quite commendable that Dell is the second largest non-oil company in Texas behind AT&T (Dell, 1999, p.13). From the early times of Dell, it operated as a pioneer in the ‘configure to order approach’ to manufacturing that involves delivering individual PCs configured to customers’ specifications. In order to reduce the delay between purchase and delivery, Dell has a policy of manufacturing its products close to its customers; this also allows a just-in-time manufacturing approach which reduces inventory costs (Jacobs, 1999, p. 678). Therefore low inventory is one of Dell’s signatures of business model. The manufacturing process covers assembly, software installation, quality control and functional testing. Dell Marketing Strategy According to Mercer (1996, p. 12), marketing can be defined as the strategic business role that creates value by motivating, facilitating and fulfilling consumer demand. This is done by building brands, creating relationships, developing good customer service and communicating the benefits. Operating centrically, marketing brings positive returns on investment, fulfils shareholders and other stakeholders’ needs as well as those of the community and contributes positively to behavioural charge and sustainable business future. The American Marketing Association defines it as the process of organising and executing the conception, promotion, pricing, and distribution of ideas, goods and services to generate exchanges that satisfy individual and organisational goals (Kotler et al, 2008, p. 7). Thus, marketing can be summed up as a function within an organization, which is responsible for identifying and anticipating customer needs and advising the administration accordingly in order to design, produce, price and promote products and services in order to meet the needs of the customers. Dell has done this in a number of ways; for instance it has reduced its inventory to a 5 day supply, which compared to the 20 to 70 days for its major competitors, was a very low supply period. This gave them the competitive advantage they really needed. With the just-in-time approach Dell was able to provide better service with quicker turnaround period. Economies of scale were buoyed by reduction of the total vendor pool and the choosing of suppliers that are close physically to Dell’s plants, which increased brand loyalty (Pride & Ferrell, 2007, p. 303). Marketing oriented organisations have the major attribute of staying closer to consumers and ahead of their competitors. The fundamental objective of these organizations is to attract customers and outdo their rivals in the market. The characteristics of these organisations include shared values in terms of strategy, stakeholders and the organisation. All the decisions made by these companies consider the customers first before anything else as they share common value of superior quality of products (Guiltinan 1996, p.67). They also have an organisational structure that has a few layers and their policies are straightforward. The strategy of the market-oriented organisations is long term, participative and flexible to accommodate new ideas. The expectations of shareholders are considered first before making any significant decision. Dell exhibits these strategies in that their marketing strategies involve targeting where they know who is buying their computers and where these people are going and are thus considerate of their customers (Nancy, 2001, p.79). Dell also has to track results from advertising to see whether the process is effective, after which the company makes necessary adjustments. It also keeps track of its relations with consumers. Targeting the online market is one major adventure for Dell as it has invested in understanding its target market. It is easy to target customers when a company knows for instance that every person who goes to a certain website is very likely to buy a computer or peripheral (Kirk, 2009, p. 69). The marketing plan therefore should call for contacting the website for placing advertisements or simply have customers review the product range in the website. This is what Dell has done on their way to the top of the computer market. Dell has also been targeting marketing strategies though it has not been easy. Without online businesses and way of life it is very hard to determine how a TV, newspaper or radio advertisement is. When a company has online an online presence, it is very easy to track exactly every spate and adjust it to enhance results for the company. Advertising campaigns can also be changed efficiently as opposed to the offline world. Asking consumers what exactly they want is also a strategy used by Dell to market its products. This makes it deliver products that match customers’ tastes and preferences. The company achieves this by carrying out surveys to determine what customers want and delivering it to increase sales (Kirk, 2009, p. 94). Dell’s integrated marketing strategy Capitalising on discontinuities for attraction of new customers Dell capitalised on discontinuities or situations where the customer’s status quo is being interfered with. The company takes advantage of situations where the consumer is being compelled to make a decision to change due to interruptions, and directs the consumers to its brand. Focusing on winnable market segments The critical element in this practice is organisational planning around market segments. Starting a planning strategy from a market viewpoint hugely increases an organisation’s ability to comprehend what is required to win new customers while satisfying existing ones. Dell implemented this practice. Giving resource priority to developing the highest potential customers first ahead of others There are scanty resources to do everything simultaneously hence prioritisation is critical. Prioritising market segments is a starter; for instance Dell takes into consideration all features of the sales and marketing mix, including product development, channel mix, marketing communications, pricing and packaging costs (Pride & Ferrell, 2007. p. 303). Creating feedback loops for learning No firm is smart enough to initiate practices A-Z perfectly the very first time. Feedback is therefore important so that a firm knows what went wrong and then adjusts on it. This helps in determining why certain products are better accepted than others in the market. Dell SWOT Analysis Strengths Dell is considered to be world's largest PC maker. Its profit in July 2005 was over $1 billion, which was a growth of around 28 percent. The company has held its position as a market leader over the last few years. The brand is one of the best known computer brands in the world. Dell uses information technology and customer relationship management approaches to get data on its consumers. Parts are made by suppliers and not by Dell, and are later assembles in to final product according to market specifications. This models operation is shown in figure 2. Figure 2: Illustration of dell’s supply chain Source: Koehn (2001, p. 97). Weaknesses The company has such a wide array of products and components from numerous suppliers located in many countries; hence occasional product recall that can cause it embarrassment and a bad name. It purchases from a group of concentrated hi-tech component manufacturers – thus it does not harvest the whole benefits. Opportunities New ideas and a change in management thinking can lead the company to a new, more gainful and successful period. Dell is embracing a diversification strategy by introducing new products. This initially included peripherals including printers and toners but now includes even LCD televisions. The company is manufacturing and selling low-cost and low-price computers to PC marketers in the United States. The PCs are not branded as Dell at the time of purchase. Re-branding for retailers offers the company new market segments to capture with the associated marketing expenses (Antone, 2007, p. 124). Threats The biggest threat for Dell is the competition that prevails in the PC marketplace globally. Dell also outsources from eastern nations where labour costs are low, but there is nothing stopping competitors from following. It is exposed to fluctuations in the world currency markets that could leave it exposed to potential losses in parts of its supply chain all over the world. New products in a company must follow basic steps for marketing. This includes questions like who are the target customers, where do they hang out mostly and what are their exact preferences. Dell has this target in that whenever they launch a new product it ensures that the product is focused on the customers’ liking. The company then monitors the market to determine which aspects of the product they like. These Dell marketing strategies started way back with Michael Dell himself when he decided to be a paper boy involved in selling information. Dell realized that it is not easy to please everyone so he narrowed down his target market, thus reducing his scope to a smaller list of potential buyers but ended up with a big amount of business as a paper boy (Dell 1999, p. 78). The success of Dell Company lies in large part with market segmentation specialisation strategies that Michael Dell learned. Figure 3: Dell’s Market Segmentation Source: Dell and Catherine (1999, p.87). Dell’s main types of customers were distinguished through the process of buying as basically relationship or transactional customers as portrayed in figure 3 above. Selling and Marketing concept for Dell The selling concept holds that for a company to be profitable and successful, it must focus on increasing sales regardless of the rotation of the specific product. This is what became popular after the World War II and what many companies still stick to up to date. Marketing concept on the other hand is one of the recent notions in marketing that successful companies and businesses have applied and it states that a firm must identify the needs of the consumer and then plan, price, promote, and distribute its product according to the preferences and demand of the consumer (Pride & Ferrell, 2007, p. 11). Selling concept philosophy was common before the advet of the marketing concept. According to this concept, if customers are not often reminded, they will not be motivated by the product so it advocated for aggressive advertisement and campaigns to remain prominent in the market. Firms will be able to push products to the customers by being aggressive to increase sales. This concept though insinuates that customers are unaware and disinterested, something that is not true. Dell’s sales figures between 1985 and 2001 are shown in figure 4. Figure 4: Dell’s sales history Source: Frum (2010). Many computer companies could not continue to profit due to the flooded industry. In this regard, Dell’s gross margins plummeted rapidly as shown in figure 1 where total sales of units declined from 46.9 billion in 1999 to just around 30 billion in 2000. Dell came to overtake Compaq in desktops and portables sales by 2001 (Frum, 2010). The marketing concept is simple as it involves keeping in mind customers’ demands while designing and producing products. This concept is so customer-centric, leading to better sales and hence success. All that matters is satisfaction of the customers. Knowing costumers’ preferences can be done by frequent surveys that have been made easy online and this is what Dell has been doing to ensure success. Product, price, promotion and place are the 4Ps that form the fundamentals of the marketing concept. Micro and macro-environments of Dell Micro-environment consists of the stakeholder groups that a company has regular dealings with. The development of these relationships can affect the costs, success and quality of the business. These issues can include customers and are perceptibly the most significant part of sales. Managers must assess the needs of customers and anticipate how their needs will develop so that they can fulfil the requirements of customers both presently and in future. Dell has done that perfectively via conducting numerous surveys to determine the needs of customers and then designing their products to the specifications of the customers. The company also gathers data on shopping patterns and the preferential places of shopping which aids in realising the needs of the customers. As a way of holding customers, Dell has developed techniques to ensure that customers will come back and has loyalty cards that are rewarded occasionally. The Dell online marketing strategy has also been able to swing many potential buyers to the company’s side in the wake of internet revolution whereby some people literally live on the internet (Kraemer, 2002, p.140). Dell and other companies have therefore been kept on toes to produce quality products or risk losing their customers to other firms in the industry. Macro-environment involves factors outside the direct control of the company. These include economy, environment, politics, government policies and even social changes. Environmental factors that affect the market include weather patterns, temperate changes, climate change and so forth. Environmental awareness is becoming much of a chorus due to the global warming that occurs in the world today; therefore for companies like Dell to survive, they have to adjust and incorporate environmentally sustainable practices. This is important especially regarding the issue of electronic wastes. Dell is committed to reducing greenhouse emissions from its global practices by 40% by 2015 (Kirk, 2009, p. 67). Dell is also listed in the Greenpeace guide to greener economics because of its practices and policies on toxic chemicals, climate change and recycling. Dell was also the first company to state timelines to eliminate toxic polyvinyl chloride from the environment by 2009. Though it failed, it now plans to eliminate these chemicals by 2011. Technological factors are also macro in nature. New technologies create new products and new processes that significantly change the market. MP3 players, online gambling, computer games and high definition TVs are all fresh markets created by technological advances that have been witnessed over the years. Online shopping and computer aided design are all embodiments of progress in the way business is carried out as a result of better technology. Thus companies like Dell have to adapt to the new ways or risk losing out on potential or perennial customers. Technology can also reduce costs, improve quality of the existing products and lead to innovation of more advanced products. The developments exhibited by Dell can benefit consumers and the organisations providing the products on many fronts (Matt, 2003 p.109). Porter’s Five Forces Analysis (according to Hsu, not dated) Five forces analysis is used to analyse the environment. It helps the marketer to contrast to compare a competitive environment. It focuses on a single product as in the example of Dell where they would analyze the market for their computers which is one of Dell’s products. Porter’s Five Forces analysis of Dell Threat of New Entrants: Moderate This is occasioned by low capital investment for independent stores, low product differentiation, low economies of scale, and absence of legal or governmental barriers. Decreasing profitability indicates that there is a threat of new market players. Rivalry: High This is occasioned by high concentration, price wars, low product differentiation, and decreasing profitability. Threat of substitutes: Low This is as a result of the strong presence of PCs throughout the society and because there is only major substitute for PCs in the United States - Apple. Nevertheless, high price and lack of software prevent people from switching to Apple. Bargaining power of buyers: high This is so because consumers are highly price sensitive, and reliability and customer service are important factors. Dell has delivered in this aspect and this has enabled it to create brand loyalty. Bargaining power of suppliers: High This is the so because there are a large number of suppliers for a wide range of hardware associated with high switching costs. In addition, two essential components are monopolised: Microsoft and Intel standards for all PCs. Distribution strategy at Dell In the year 2010 Dell announced that it was expanding its strategy of selling and distributing its computers through retail outlets in an agreement with JB Hi Fi. This distribution strategy by Dell gives weight to research recommendations by Ben Bartlett for two years. This research pointed out that in addition to online strategies that Dell already had, it had to integrate it with the offline opportunities that existed. Then came the realization that 92% of internet searchers will end up purchasing these product offline so it was important not to let alone the offline potential (Lee 2010, p. 46). Dell is capitalising on its huge online presence while understanding that people want the tactile nature of having near them physical outlets where they can purchase its products. This is where Dell beats other businesses in the industry that do not balance online and physical presence (table 1) Table 1: Dedrick and Kraemer (2007, p. 9) The main pricing objective for Dell is to provide low price and profitable laptop for the customer thus very strategic in beating competition from other players in the industry. Many big companies produce quality computers but the pricing keep potential buyers away thus affordability is very tactical for Dell in the business. In the event that the low price will hugely affect the business, Dell has a backup strategy of strong promotional pricing in that it has a product with a high price but the promotion and advertisement in the market will ensure that the product is bought, thus maintaining sanity. This is in tandem with the company’s business objectives of being available to a wider market and not locking others. Dell has a strong web presence that enables it to promote its products online effectively considering the fact that many people in the world nowadays do computer shopping online. Massive media advertisements are also important for Dell in their promotions of products because there is always that audience that are not technologically savvy thus reaching these people. One would say that Dell really banks on the quality of their products, a fact that keeps the customers coming back to get other product from them. This is also aided by the fact that Dell also has customization services, designing and producing products to the customer’s preferences. Some of Dell Inc's marketing strategies involve reducing prices all year round, offering bonus products like as Dell printers, and providing free shipping in order to promote sales and to ward off competitors in the industry such as HP and IBM. Dell moved advertising agencies in the US from BBDO to Mother. Dell later released new advertising by Mother to support the Inspiron and XPS taglines. In 2007, Dell began using the slogan "Yours is here" to say that it customizes computers to fit customers' requirements and tastes (Dedrick & Kraemer, 2007, 112). 4Ps Analysis of Dell Product: The company believes that marketing is not about availing products or services; it is basically providing changing benefits to the dynamic needs and demands of the customers and buyers. It also provides a variety of both business class and consumer class products and services. It designs, develops, markets, sells, and supports a variety of products that in many instances are customized to individual customer preferences (Gonsalves 2010, p. 69). Exemplars of products for individual and professional consumers include Dell Precision workstations, Dimension desktops, and Latitude notebooks - thus targeting all the people. Pricing strategies change as the product passes through life cycle since there is constrains on the company’s freedom to price a product at different step. The main aim of Dell is to offer items at the lowest price while remaining profitable. Therefore Dell’s product pricing shows the affordability of the local consumers and also because Dell products are so customisable, the price is largely depended on the services added to the product itself. Dell is also beating competitors in price to rapidly gain market share. Place: Dell has been able to implement the location strategy of its marketing campaign, thus yielding results. Dell brands are available at the nearest dealer hence customers develop trust for Dell because it is locally available. Promotion includes all the tools available to the marketer for marketing through communication. Dell have not focused so much on intensive marketing campaigns but this changed in 1999 when the company changed its ways by engaging in marketing campaigns. It markets its items basically by advertising on television, print media, Internet and mailing or emailing a wide array of direct marketing publications. It recently started promoting its products through retailers like Best Buy, Carrefour, Staples ad even Wal-Mart (Dedrick & Kraemer, 2007, p.7). The most important thing in successful implementation for Dell has been a very early commitment to change. Segmentation has been done a number of times especially when it is a great idea that needs trial to see how successful it would become. Dell’s Promotional Strategy Notebooks are Dell products that are designed not only for students but also for domestic use and also working at home. The first segment to analyse here is students. The price of the notebook by Dell is very much considerate of the student therefore many students will prefer this product. Affordability is vital here and Dell via their notebook laptop captures this target. The product itself is very efficient in using especially for student, first because it is mobile and then unlike many laptop computers, it is light in weight and can be carried around easily, an ideal product for a student and freelancers. The product is a customized one with features that a student would prefer in studies thus making it the choice for students and other mobile users (Dedrick, 2002, p. 89). Dell notices that organisational consumers buy products in bulk of course as compared to individual consumers thus it is only natural that they focus a bit more on marketing their products to these organization in order to win the trust and then tenders resulting in greater sales. Worthy noting though is that the company does not in any way underestimate the importance of individual consumers, hence it has different marketing strategies for both organisations and individual consumers (Peltz, 2010, p. 345). The big-time machines like huge company computers will obviously be marketed to huge organisations that are in need of keeping big databases and a lot of information while the small computers and laptops like notebooks will target the individuals like students since they do not need such powerful machines. International marketing is important in the sense that Dell has to reach the global market. Therefore, its marketing strategies will differ from the local marketing so that it can adhere to the international marketing standard acceptable in all the countries. Dell has plants in countries other than the United States of America, though it only assembles personal computers and does not manufacture them. It acquires parts from other firms and then assembles a personal computer's different components such as motherboard, modem, wireless card, monitor, GPU, RAM etc in the plant. Manufacturing is basically the actual forging of a product from scratch (Joshi 2005, p. 71). Conclusion Dell has done really well through its marketing strategy to maintain the legacy it has at the top of PC industry in the world given that there has been stiff competition coming from companies like HP and IBM. The current market trends in the PC industry are driven by ever changing consumer demands, needs and wants. Dell has been forced to constantly adapt so as to meet customers’ needs. Taking advantage of its strengths, paying attention to its weaknesses and identifying both threats and opportunities, Dell has been able to position itself as a significant player in the industry. References Dedrick, J. & Kraemer, K.L. 2007, "Market Making in the PC Industry", Personal Computing Industry Centre, available from http://pcic.merage.uci.edu/papers/2007/MarketMaking.pdf (21 January, 2011). Dell, M. & Catherine, F. 1999, Direct from Dell. Harper Collins, New York. Frum, D. 2010, Consumer Price Index National Statistics, Bureau of Labour Statistics. Gonsalves, A. 2007, "Dell's EqualLogic Buy Could Drive Down iSCSI Storage Prices," Available from http://www.informationweek.com/news/hardware/desktop/showArticle.jhtml?articleID=202802668 (25 January 2011). Guiltinan et al, (1996) Marketing Management: Strategies and Programs", McGraw Hill/Irwin. Hudgins, M. 2003, "Dell space taken." Austin Business Journal. Friday May 9, 2003. 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