About the company
Dell Inc. (formerly Dell Computer) is an American multinational computer technology corporation based in Round Rock, Texas, United States, that develops, sells, repairs and supports computers and related products and services. Bearing the name of its founder, Michael Dell, the company is one of the largest technological corporations in the world, employing more than 103,300 people worldwide. Dell is listed at number 44 in the Fortune 500 list. It is the third largest PC vendor in the world after HP and Lenovo. Dell has grown by both increasing its customer base and through acquisitions since its inception; notable mergers and acquisitions including Alien ware (2006) and Perot Systems (2009).
As of 2009, the company sold personal computers, servers, data storage devices, network switches, software, and computer peripherals. Dell also sells HDTVs, cameras, printers, MP3 players and other electronics built by other manufacturers. The company is well known for its innovations in supply chain management and electronic commerce, particularly its direct-sales model and its “build-to-order” or “configure to order” approach to manufacturing—delivering individual PCs configured to customer specifications.
Dell is the sixth largest company in Texas by total revenue, according to Fortune magazine. It is the second largest non-oil company in Texas – behind AT&T – and the largest company in the Greater Austin area. Some key moments in Dell’s history:
- 1984 — At the age of 19, Michael Dell found PC’s Limited with $1,000 and a game-changing vision for the technology industry.
- 1988 — Dell completes their initial public offering, raising $30 million and increasing market capitalization from $1,000 to $85 million.
- 1992 — Dell debuts on the Fortune 500, making Michael Dell the youngest CEO on the list.
- 1996 — Dell.com launches, generating $1 million in sales per day just six months after site is live.
- 2001 — Dell becomes the No. 1 computer systems provider worldwide.
- 2005 — Dell tops the list of “America’s Most Admired Companies” in Fortune magazine.
- 2010 — Dell is ranked the No. 1 healthcare information technology services provider in the world according to Gartner, Inc.
Target market
Dell currently has a number of computers that target 2 particular markets.
Large- to Mid-Size Business
- 36 to 50 year old
- White males
- Upper-Middle to Upper Class
Consumers, Students, Small Home Office
- 18 to 35 year old
- White males
- Middle Class
The corporation markets certain brand names to different consumer segments. It typically sells the Optiplex, Latitude, and Precision names to mid and large business customers, where the company’s advertising emphasizes long lifecycle, reliability and serviceability.
The Dimension, Inspiron, and XPS brands have an orientation towards consumers, students, and small home office environments, emphasizing value, performance and expandability (large focus in this consumer base). Dell recently reintroduced the Dell XPS brand to target the lucrative gaming market. Dell XPS desktop systems use blue rather than the black cases found on newer Dell PCs.
Prospective Target Markets
- Women
- Minorities (particularly African-Americans, Latinos, and Asians)
Both in:
Large- to Mid-Size Business
- 36 to 50 year old
- Upper-Middle to Upper Class
Consumers, Students, Small Home Office
- 18 to 35 year old
- Middle Class
Dell stays in the same demographics for the business and consumer class as Dell is currently pursuing. The only difference is that they will replace the “white male” in each category with women and/or minorities. The reasoning behind this is that women are becoming equal decision makers in the home and in business and minorities tend to show brand loyalty. Since the components of Dell computers are similar to other PC manufacturers (because the components rarely vary that drastically across manufacturers) Dell needs to build the current customer base and maintain a strong customer loyalty.
The Four P’s Of Marketing
Product
When discussing marketing strategies the basics are summed up by the four P’s, and of those who have never heard of this still can probably identify that product must be one of them. This is simply because when you go to purchase something it is the product you receive in exchange for your money. Without a core product you do not have a something to price, place or promote. To clarify the product is most scrutinized by the consumer, copied by the competitor and most crucial to the proprietary business or creator. Dell offers customizable desktop and laptop computers allowing pricing to be dependent upon components included. Dell computers usually come equipped with Microsoft based operating systems but are capable of running Unix, and Unix-like operating systems, such as Linux and Solaris, which are all PC based operating systems.
The variety of software products available for Dell is not limited to specific compatible components, as is true with Mac, but to only what exists in the market place. Dell computers are designed to be affordable and customizable for whatever the end user’s desires are. Applications are limited to what is requested by the customer, keeping price controllable. Package deals are available for large-scale orders expanding deliverability of the product.
Dell does most their business online or via phone and are built to order. If purchased this way the product configuration is your decision not theirs, enabling customers to feel more at ease with their purchase and limits Dell’s need for sales staff to convince the buyer. Many low-end needs and small budget customers like this because you can avoid feeling buyer’s remorse.
Dell’s product therefore can vary drastically, allowing no two computers to necessarily to be exactly identical. When building your Dell laptop you can begin by limiting what you want with whatever criteria you deem most important.
Choices can be narrowed by choosing model like XPS, Inspiron, or Studio Laptop, to what operating system you want to run, your memory needs, the optical drive requirements, your processor desires, hard drive size, or by other consumer interests like weight, screen size, or price. These limiting selections can be done in conjunction with each other to let the customer see options as they go.
Also, the customer has the ability to build a desktop or laptop as they go choosing each part along the way and watching their selections modify the price in real-time. For example I can pick the Inspiron base model, then I can decide on what size hard drive I want, say a 250 Gigabyte hard drive; right then the other choices will show add 50 dollars for 320 G or subtract 30 dollars for 120 G, and if I decide to change to one of those options my running total on the website reflects these changes.
The same holds true for desktops but with one addition and that is the Gaming model, which offers top of the line computational speeds, memory, liquid cooling systems, and more to maximize the gamers’ experience. Dell specializes in personal computers and laptops, but recently they’ve branched out to include a variety of different consumer electronics. Although they still focus mainly on computers for everyday and business consumers. Dell offers its customers a wide range of computer systems workstations, servers, desktop computers and notebook computers as well as storage products and solutions.
Dell also extended their selection by adding computer hardware peripherals, computer software as well as support services. Nevertheless, Dell does not manufacture the components of its final products, but instead it relies on a number of trusted suppliers who have convenient warehouse facilities within 15 minutes of Dell’s production centers. Analysts at Data monitor and Valanium associates have been critical about this approach and considered Dell’s dependence on third party suppliers as a major threat to its long term success, however Kraemer and Tuckwell have praised this cost effective approach and its positive impact on Dell’s pricing strategies.
Price
The four P’s that are crucial to targeting the right market are product, place, price and promotion. While all four P’s are important a lot of the stress is put on the price, this is because it does not matter how great the product is if it’s not priced correctly. Your company might have the best product, but if is overpriced no one will buy it. The same is true for under pricing. If you under price a product too much, the customer will not take the product seriously. This is why it is so important to price your product correctly. It depend on to whom you sell to and for what purpose.
The bulk of Dell’s laptop are around 800-900 dollars and the lowest pricing laptop start off at about 500 dollars. Dell has desktops that are actually less than 400 dollars and increase to over 1,000 dollars. While Apple’s lowest pricing laptop ranges from 900-1000 dollars and most of Apple’s laptops shoot up to around $1500.
As for Dell someone might think the opposite of a Mac. One may think that if Apple is so cool and great and cost quite a bit then Dell must not be a very good computer because it is cheap. The reason Dell is so much cheaper is because they target and really try to cater to affordable priced computers. Apple has pretty much abandoned the low price computer so Dell is trying to fill that niche.
One of the reasons why Dell’s are able to sell at such a low price is that the bulk of their sells are done either online or through the phone. This means that they do not have to spend additional money to keep a store open with employees in it. Dell is able to save a lot of money by doing online and telephone orders because it allows them to have low inventory.
Dell is really big into marking down their computers. For example right now they are offering 25% off all their 19 inch screens. They are also offering 35% off of their refurbished computers, which once again shows how Dell is trying to create affordable options for people who want computers. Someone who might not be able to afford a new computer could probably afford a refurbished one at 35% off. Dell also offers rebates on a variety of different models. They try to give affordable options to the everyday kind of guy as well as business man.
Place
Being well-known in the period of 1990s and the beginning of 2000s as one of the most successful IT companies with the excellent series system of product supply and distribution, Dell, however, is currently facing so many severe business issues that recently its founder, Michael Dell had no choice but sought for the assistance from Microsoft and Silver Lake to transform Dell back to a private company in order to more easily solve problems. Dell was the first computer company to provide direct marketing to their customers.
The idea of a computers being sold directly to the user was revolutionary at the time. To offer this service in a totally online experience made it radically different from any offerings in existence. Making goods available, in the right quantities, in the right locations, when customers wanted them, caused Dell to become a success in the world of e-commerce as well as making them a strong competitor in the world of computer sales. In 1983, Michael Dell, 18 years old, dropped his study at the university to spend the whole time with his own company, which was established when he was a fresh man at university.
The company was in charge of updating hardware for target types of customers including companies, corporations. Within one year, the willing to take risk of Dell had been rewarded by the annual revenue of $6,000,000. In 1985, Dell started to change his strategy by beginning selling out computer models that were installed based on customers’ requirements. At the same time, the company acquired $70 million revenue. 5 years later, that figure had risen up to $ 500 million. In the end of 2000, the revenue of Dell reached its peak at a desirable amount, $25 billion.
The incredible growing rate of Dell was mostly thanks to the innovation in the procedure of the supply and producing series as well as the application of the unique distributing strategy. From the very beginning, Dell provided a direct customer service, and was one of the first suppliers applying the taking-order -by-mail system that later has become the basement of developing the online order system by taking advantage of the Internet power. Before Internet usage getting popular, Dell started to combine online statuses and techno assistance so as to improve its customer service.
In 1997, Dell successfully got an amount of $4 million per day in internet sales. While the majority of PCs sold at that time were all installed beforehand at retailers, Dell provided a superb customer service by allowing them to freely choose computer configurations at significant lower levels of price, which was achieved by removing mediate retailed channels. The action of being unique and standing out from the traditional marketing model at the time played an important role in the beginning success of Dell. Moreover, another advantage of using the online direct selling model was that it released an accurate market data. From that, the company could make a rough reliable hypothesis about the trend, customer’s demand and releasing respective appropriate strategies.
The data boosted the efforts to developing manufactures and allowed Dell to benefit from key factors of particular customer target types. However, according to Gartner, a US consulting company in 2012, compared to last year, the annual global sales decreased by 12.3%. It is essential to remind you readers that the producing and computer retailing models, at that time, used to be considered as ideals to learn from.
The activities of direct service, flexibly lowing prices for products, perfect marketing and warranty, together with the slogan of fast delivery to customers and low inventories, Dell had become the top computer supplier and distributer. This story again rises up the worries of the collapse of the private PC industry by the non-stopping invasion of hand electronic devices including cell phones and Tablets.
The global sales of private PC are steadily reducing day by day. Going back to the administration in 2007, foreseeing this trend, but after several useless efforts of getting back the market shares from other components, Dell decided to switch its business into a new direction. Based on that, Dell step by step transformed from a private PC/ main server PC supplier into a service and full solution giver to companies such as storage, network system, security, software…etc In order to carry out this strategy, in 2009, Dell purchased Perot Systems operating in service field at a price of $3.9 billion.
Dell also spent billions of USD into small companies creating IT storage manufactures or security software. July 2012, Dell acquired Quest Software, a company supplying software for data center. In spite of that, Dell still continues to maintain its old business activities. Revenue earned from both activities are quite equivalent (supply and produce take up to a percentage of 45 while service accounts for 55%)
Promotion
The final one of the 4 P’s is promotion. This includes all the tools available to the marketer for ‘marketing communication’. Dell in the past have not concentrated on extensive marketing campaigns but these revolutionaries in 1999 when Dell changed its tactics by engaging in extensive marketing campaigns. Dell markets its products primarily by advertising on television and the Internet, advertising in a variety of print media, and mailing or emailing a broad range of direct marketing publications, such as promotional materials, catalogs, and customer newsletters.
Dell has recently started promoting its products through retailers like Best Buy, Staples, Wal-Mart, GOME, and Carrefour. Promotion is the most important component of the four P’s so it is crucial to understand and be able to promote a product. Here it can be seen how Dell uses many different promotional methods to market their products, such as advertising on television, on the internet, in magazines and newspapers as well as direct mail ad campaigns. It even uses sponsorships in professional sports as well as product placements in films and television in the marketing techniques.
Perreault et al suggest that direct sales channels and direct customer relationship approach has enabled Dell to fully understand its customer’s requirements and preferences as well as to maintain its competitive edge. (Perreault et al, Essentials of marketing, 12th edition, 2009)
It is clear from the above details that Dell’s current marketing mix is one of the main factors that contribute to its competitive advantage. The way the company is able to use its marketing strategy should allow the company to leverage its competitive advantage in its core market segments. However, Dell should take advantage of the market opportunities that could potentially increase the business revenue and strengthen its market position. These opportunities will require changes in the market strategy in order to fulfil the market demands, hence increasing profits and market share. These suggested changes are further elaborated in the following section.
Promotional Pricing
Dell has a history in Promotional pricing. In the slump in the early 2000s, PC sales were expected to reduce annually. Dell, in an attempt to outdo its competitors HP, Compaq and IBM slashed the prices of its products even higher to steal the market share. This also drove down overall prices in the market. Dell’s direct supply model made it easier for them to provide lower prices without denting their finances too badly but for its competitors, it must have been a force to reckon with. (Business week, Sept 24th, 2001) Kotler, Armstrong most accurately summarize Promotional pricing as, “Promotional pricing can be an effective means of generating sales for some companies in certain circumstances.” However, as the scenario changed and as peoples’ priorities changed, competitors started regaining their positions in the market.
How Dell promotes its products
Promotions are used by an organization to draw attention to its products. Simply put, you start a company and create a product that you would like to sell. But how do you let people know about these developments? How do you tell people that your product is what they need for xyz reason? That’s where Integrated marketing communications comes in the picture and there the sun rises on the Promotional/Communications mix. An organization as large in scale as Dell does not employ a single promotional strategy, they employ several. Let us look at the various elements of the Promotional mix that are relevant to Dell.
Sales Promotions
Sales promotions have emerged to be one of the key elements in the communications mix. Buying decisions are often impulsive and hence take place in the time spent at the supermarket or retail outlet. In Dell’s case, the retail presence is still work in progress. Hence, it is essential that the Dell websites worldwide simulate the retail shopping experience and capture the attention of the shopper in the first few seconds/clicks. Dell uses various techniques in sales promotions. Apart from the usual season sales and festive discounts, dell tries to entice customers with monthly and weekly offers. Apart from this, there are the classic “Buy one and get the second at a discount” offers which is an alteration of the BOGO (Buy one get one) concept. To maintain customer loyalty and goodwill, Dell issues some coupons to its existing or returning customers. Patrons may utilise these coupons to buy products at discounted prices.
References
- http://www.businessteacher.org.uk/free-marketing-essays/dell-marketing-approach.php#ixzz2PGkR36pB
- http://ivythesis.typepad.com/term_paper_topics/2009/08/the-marketing-mix-of-dell-inc.html
- http://www.marketing91.com/marketing-mix-dell/
- http://www.leavingfingerprints.com/FH-Dortmund/archive/Dell%20-%20best%20practice%20for%20Relationship-Marketing.pdf
- http://www.dell.com/downloads/global/corporate/iar/20050601_summit.pdf
- http://ekantipur.com/2011/09/21/business/new-series-of-dell-products-in-market/341150.html
- http://jobs.dell.com/atlanta/marketing/jobid3388225-product-consultant-dell-secureworks-jobs
