Key Success Factors That Relate to Online Retailing - Dell - Essay Example

INDEX Concept of services. What is service marketing What is relationship marketing Key success factors that relate to online retailing. Case study. Learnings from the study. Recommendations for successful relationship marketing online. References. Concept of Services The core offerings of hospitals, hotels, banks, public utility services and transportation services etc comprise primarily deeds and actions performed for the customers. Such action or deeds or performances are reffered to as services. What is service marketing Marketing of services is a function by which a marketer plans, promotes and delivers goods and services to influence and satisfy the customer or users. Services are provided by service generating organization and cutomer in true sense are buying knowledge, skills, time and resources. Marketing a service means marketing something Intangible. In actual sense it is marketing a promise rather than selling yourself. The American Marketing Association defines services as "services are activities, benefit or satisfaction which are offered for sale, are provided in connection with the sale of goods". What is relationship marketing Path Marajals defines relationship marketing as the process whereby the seller and the buyer join I a strong personal, professional and mutually profitable relationship over a time. The American Marketing Association defines "Relationship marketing is marketing with the conscious aim to develop and manage long term and/or trusting relationship with the customers, distributors, suppliers or other parties in the marketing environment". Key Success Factors that relate to Online Retailing : These are some of the success factors which are useful for the online retail business to succeed, it identifies the essential elements of an effective business plan for achieving results selling online. The seven key factors for success include: 1. Selling goods at sufficient gross margins to sustain a profitable business model. 2. Offering online customers a convincing and compelling value proposition. 3. Ensuring customer acquisition costs are in line with average sales amounts. 4. Providing customers with a user-friendly Web experience that engages visitors. 5. Achieving significant visitor traffic while simultaneously managing high conversion rates. 6. Managing cost-effective and efficient product fulfillment. 7. Providing impeccable customer support through multiple touch points. CASE STUDY Introduction Dell is one of the world's top providers of computer products and services such as servers, storage, workstations, notebook and notebooks computers, to businesses and consumers. The company has revenues of $38.2 billion worldwide and employs over 41,000 staff worldwide. Ireland is home to Dell's European manufacturing operation, with a plant in Limerick, and a UK/Ireland sales and support operation in Bray/Cherrywood. Dell's success has made it the number one PC supplier in Ireland*. The company is the State's biggest revenue generating technology firm. During 2002, Dell's revenue equated to 5.8 per cent of gross domestic product. During the same time period, Dell's exports of EUR.7bn account for 7.8 per cent of all Irish exports. Michael Dell founded the company back in 1984 when he was just 19 years old. He had $1,000 and the unique idea to sell computer systems directly to customers. Now he heads up one of the world's most successful corporations with his direct sales approach acting as the cornerstone of the company's global success. This case study will look at the impact of the internet and e-commerce on Dell and how the company has successfully managed the new ways of doing business that e-commerce has created. What Is E-Commerce Firstly, let's take a look at Electronic commerce (e-commerce). E-commerce refers to business transactions and communication that are carried out through computers - over networks and the internet. This includes buying and selling goods and services, funds transfers and other commercial communications. It creates a new way of buying and selling - one that uses technology to make the transaction. E-commerce can take place in different situations: Between businesses and consumers (B2C), as when you purchase from a shop's website. You, the consumer can now do everything over the internet from banking online and using email to shop for computers, books, clothes, games, holidays, concert ticket etc! From one business to another (B2B), as when one company buys its supplies from another company online. E-business has transformed how the business world operates from the supply side to the selling side and all the banking and commercial transactions in between. This affects everything from small family-run enterprises to international stock exchanges. From consumer to consumer (C2C), for example, when you buy something from your friend and pay for it by transferring money from your bank account online to your friend's. Many websites such as e-bay.com enable consumers to buy and sell second-hand items to and from each other. E-commerce offers many benefits to businesses and consumers in their purchasing activities. It changes the purchasing process from being a physical transaction to being a virtual transaction where no paper is involved. This saves time and money for everyone and opens up a virtual global marketplace - for example you could live in Cork and buy online from a shop in New York. It is also convenient as you can access the Internet 7 days a week, 24 hours a day, at your own convenience. However, it requires whole new business methods and infrastructures to meet the demands of the buyer and the needs of the seller. How Does Dell's Supply Chain Work Due to its efficient supply chain management, Dell is capable of shiping a PC within 24 hours of receiving an order. This introduction of the internet and e-commerce has helped Dell improve this efficiency and profitability. First we need to understand what is involved in a supply chain. A simple supply chain covers the whole process of the production of the goods for sale. Once the goods are produced, they lie in stock at the outlet until an order is made. When an order is processed, the specific goods are delivered to the buyer and payment is received by the seller. A computer manufacturer depends on suppliers for parts when designing and manufacturing a PC for the mass market. The completed stock will then be sold to a distributor, who in turn, he would sell it to a retailer who would eventually sell it to the end customer. Let's say Liam walks into the retailer's shop and decides to purchase a PC. The PC has been manufactured well in advance at this stage. When Liam pays for his order, the PC is taken from the stock and handed over to him. At Dell, the traditional supply chain has two fundamental differences: disintermediation and real-time production. Dell sells directly to its customer, cutting out the middle man, the distributor and retailer. When a layer that exists between two other layers is removed like this, it is known as disintermediation. Dell manufactures the products and then sells them directly to the customer, Dell creates disintermediation - the outside retailer is cut out of the process. This reduces time and costs in the process and also ensures Dell is better positioned to understand its customers' needs directly. Crucially, Dell's supply chain costs are reduced on the storage side too by its efficient relationship between orders and production. Each individual PC that is ordered is only manufactured AFTER the order is received and only using the freshest raw materials, which are delivered to the factory several times a day. This is known as just-in-time production or real-time production. There is no warehouse for either raw components or finished goods. Each computer has been paid for and has been built for a specific customer before it is shipped. Real time production ensures no costs are incurred from rising inventory stocks. Output is always driven by actual customer demand. Each individual product is created with the latest technology and each product is custom-made to exactly what the customer wants. Dell's direct selling started off using the customer channels of mail order and ordering using toll-free phone numbers and this has grown to embrace online sales channels too. How Dell's E-Commerce Focus Improve Customer Service Dell has created many features and services online to help the customer see the whole purchasing process clearly. The premise of Dell's business is selling directly to customers - customers tell Dell exactly what they want and Dell provides them with the goods directly. As well as being able to customise the product, customers can track the progress of the order as it is produced and delivered. This can help the customer see the stages of the process and likely delivery times. Customers can create and view their service records online. This includes product support, shipment and delivery dates. Each purchase comes with a service tag code, which can track the model bought and its service requirements. This allows Dell customer service representatives to quickly and efficiently handle requests. This level of 24 hour customer service and fast response time helps Dell build strong customer relations, which of course is crucial for the company in its understanding of consumer needs. It is also a very cost-effective way of providing sales and support - cost savings which can be passed on in the form of better prices to customers. Success depends greatly on the efficient management of the website. The customer must have a convenient experience when shopping online and have faith that Dell will successfully complete the order and safeguard financial details. Customers need to be comfortable using paperless transactions without face-to-face contact. It is crucial that customers consider purchasing online as an alternative to the traditional method of going into a retailer and buying a product off-the-shelf. Dell is focussed on enhancing its image and relationships, not only with customers, but also with employees and the wider community. To do this, the website is also used as a communication tool for news, press releases and general information to help customers, employees, the media and prospective employees find out more about the company. Learnings from the study: 1. Benefits of e-commerce for business and consumers. E-commerce helps the business to get the order from around the world.It has no geographical barriers, it helps the business to grow at a rapid pace and acquire customers from around the world. A customer from any part of the world can directly order a product using the internet by sitting in the comfort of his home. The customer can directly purchase his product from the manufacturers and reduce the cost of middlemenship on his product 2. The term disintermediation. When a product is manufactured it is sold to the distributor and from the distributor to the wholesaler and the wholesaler to the retailer, then it reaches to the end-consumer. When the process of middle men is removed and the end-user directly purchases it from the manufacturers is called disintermediation. 3. Internet and e-commerce contribute to customer service levels. The internet and the e-commerce contribute a lot to the customer service levels, it helps the customer to track his order, product shipment and delivery dates. The customers can view their service records online where their order is right now. The internet and the E-commerce helps to improve the efficiency of customer service departments, Each order is coded with a service tag code which enables the customer service to solve the queries of the customers promptly and efficiently. Recommendations for successful relationship marketing online: As retailers realize that it is economical to retain an existing customer than to acquire a new one, there has been tremendous focus in this area. Customer relationship management and service has seen a total transition from call center and helpdesk based services to more comprehensive and innovative customer loyalty programs and personalized service management. Usage of smart loyalty cards and intelligent shopping carts are all initiatives to attract the customer and enhance loyalty. The new areas emerging here are customer retention management and appreciation management. Marketing Campaigns. Reaching to the prospective customer through various promotional media. Devising of launch or promotional packages. Loyalty Programs Customer Service. Quality focus. Staff Awareness and Personal touch in interactions. Order status on mobile phones and PDAs. User manuals and guides Warranty and SLAs Remembering customer preferences and important occasions using smart cards. Assurances and measures on information Privacy and mutual respect. In my view all these points are taken care by DELL and it carries out its online business very effectively. References: www.business2000.ie Read More