Dell Computer Corporation
Dell Computer Corporation
WHEN 19YEAROLD MICHAEL Dell began selling personal computers out of his college dorm room in 1984, few would have bet on his chances for
success. In those days, most computer makers sold their PCs through an extensive network of allpowerful distributors and resellers. Even as the
fledgling Dell Computer Corporation began to grow, competitors and industry insiders scoffed at the concept of mailorder computer marketing. PC buyers, they contended, needed the kind of advice and handholding
948 Chapter 22 Direct and Online Marketing
that only fullservice channels could provide. Mailorder PC sales, like mail order clothing, would never amount to more than 15 per cent of the market.
Yet young Michael Dell has proved the sceptics wrong. In little more than a decade, he has turned his dormroom mailorder business into a burgeoning, $8 billion computer empire. Dell Computer is now the world's largest direet marketer of computer systems and the world's fastestgrowing computer manufacturer. Last year, unit sales jumped by 71 per cent, five
times the industry average. Profits skyrocketed 9J per cent and the company's stock price tripled. Direct buyers now account for nearly a third of all PC sales and Dell's oncesceptical competitors are now scrambling to build their own direct marketing systems.
What is the secret of Dell's stunning suecess? Dell's direet marketing approach delivers greater customer value through an unbeatable combina tion of product customization, low prices, fast delivery and awardwinning customer service. A customer can talk by phone with a Dell representative on Monday morning; order a fully customized, stateoftheart PC to suit his or her special needs; and have the machine delivered to his or her doorstep by Wednesday all at a price that's 1015 per cent below competitors' prices. Dell backs its products with highquality service and support. As a result, Dell consistently ranks among the industry leaders in product reliability and service, and its customers are routinely among the industry's most satisfied.
Dell customers get exactly the machines they need. Michael Dell's initial idea was to serve individual buyers by letting them customize machines with the special features they wanted at low prices. However, this onetoone approach also appeals strongly to corporate buyers, because Dell can so
easily preconfigure each computer to precise requirements. Dell routinely preloads machines with a company's own software and even undertakes such tedious tasks as pasting inventory tags on to each machine so that computers can be delivered directly to a given employee's desk. As a result, about 90 per cent of Dell's sales now come from large corporate, government and educational buyers.
Direet selling results in more efficient selling and lower costs, which translate into lower prices for customers. Because Dell builds machines to order, it carries barely any inventory. Dealing onetoone with customers
helps the company react immediately to shifts in demand, so Dell does not get stuck with PCs that no one wants. Finally, by selling directly. Dell has no
dealers to pay off. As a result, on average, Dell's costs are 12 per cent lower than those of Compaq, its leading PC competitor.
Dell knows that time is money, and the company is obsessed with 'speed'. For example, Dell has long been a model of justintime manufacturing and efficient supplychain management. It has also mastered the intricacies of today's lightningfast electronic commerce. The combination makes Dell a
lean and very fast operator. According to one account, 'Dell calls it "velocity" squeezing time out of every step in the process from the moment an order is taken to collecting the cash.' By selling direct, Dell converts the average sale to cash in less than 24 hours. By contrast, rival companies which sell primarily through dealers take days, even weeks to do so. Such blazing speed results in more satisfied customers and still lower costs. For example, customers are often delighted to find their new computers arriving within as little as ,16 hours of placing an order. And because Dell does not order parts until an order is booked, it can take advantage of everfalling component costs. On average, its parts are 60 days newer than those in competing machines and, hence, 60 days further down the price curve. This gives Dell a
6 per cent profit advantage from parts costs alone.
With more and more competitors now following Dell's successful strategy of direct selling, the company is not standing still. Dell is taking its direct marketing formula a step further. It is selling PCs on the Internet. Now, by simply clicking the 'Buy a Dell' icon at Dell's Web site (www.dell.com), customers can design and price customized computer systems electronically. Then, with a click on the 'purchase' button, they can submit an order, choosing from online payment options that include a credit card, company purchase order or corporate lease. Dell dashes out a digital confirmation to customers within 5 minutes of receiving the order. After receiving confirmation, customers can check the status of the order online at any time.
The Internet is a perfect extension of Dell's direct marketing model. Customers who are already comfortable buying direct from Dell now have an even more powerful way to do so. 'The Internet', says Michael Dell, 'is the
ultimate direct model. [Customers] like the immediacy, convenience, savings and personal touches that the [Internet] experience provides. Not only are some sales done completely online, but people who call on the phone after having visitedDell.com are twice as likely to buy.'
If initial sales are any indication, it looks as though Dell has once again rewritten the book on successful direct marketing. The direct marketing pioneer now sells more than $2 million worth of computers daily from its
Web site, and Internet sales are growing at 20 per cent each month. Some 225.000 browsers visit Dell's site each week, and buyers range from individ uals purchasing home computers to large business users buying highend 830,000 servers. Michael Dell sees online marketing as the next great conquest in the company's direct marketing crusade, 'The Internet is like a booster rocket on our sales and growth,' lie proclaims. 'Our vision is to have all customers conduct all transactions on the Internet, globally."
This time, competitors are not scoffing at Michael Dell's vision of the future. It is hard to argue with success, and Michael Dell has been very successful. By following his hunches, he has built one of the world's hottest computer companies. In the process, he has amassed a personal fortune exceeding S4.3 billion. 1
Parts
» Book Principles Of Marketin Pleased
» I'hrce considerations underlying the
» The Information Technology Boom
» • False Wants and Too Much Materialism
» There is good reason to search a 2.4
» Levi's Strategic Marketing and Planning
» Analysing the Current Easiness Portfolio
» Conflict Between Departments
» Marketing Strategies for Competitive Advantage
» Principal actors in the company's
» • Persistence of Cultural Values
» McDonald's; Breaking into the South African Market
» Analysis of International Market Opportunity Deciding Whether or Not to Go Abroad
» Understanding the Global Environment
» Procter & Gamble: Going Global in Cosmetics
» Sheba: The Pet's St Valentines Day Pedro Quclhas Brito, Universidade do Porto, Portugal
» Individual Differences in Innovativcncss
» Influence of Product Characteristics on Rate of Adoption
» Selling Business Jets: The Ultimate Executive Toy
» • Systems Buying and Selling
» • Strong Influences on Government Buyers
» TABI.EI GOVERNMENT CODES OF PRACTICE IN VARIOUS COUNTRIES
» Qantas: Taking Off in Tomorrow's Market
» • Defining the Problem and Research Objectives
» CLOSEDEND QUESTIONS NAME DESCRIPTION
» Estimating Total Market Demand
» Estimating Actual Sales and Market Shares
» TimeSeries Analysis technology.
» Segmenting International Markets
» • Selecting Market, Segments
» 2 VOLUME BRAND SHARES (%) BRAND SHARE CoffeeMate total: 55.5
» 7 CONSUMPTION BY HOUSEHOLD SIZE (PER PERSON/WEEK)
» Preview Case Gastrol: Liquid Engineering
» Determine the Competitors'Positions One way of defining competitors is to look at
» Communicating and Delivering the Chosen Position
» The Need for Customer Retention
» The Ultimate Test: Customer Profitability
» 1 POTENTIAL PRODUCT FIELDS FOR AN EXPANSION OP THE UNCLE BEN'S BRAND
» 2 VARIETIES OF UNCLE BEN'S FEINSCHMECKER SAUCE
» Federal Express: Losing a Packet in Europe
» Close or Distant Competitors
» • Expanding the Total Market
» • The Customer Service Department
» What Governs NewProduct Success?
» Lufthansa: Listening lo Customers
» Managing Productivity CU _ C7 ^ •
» Mattel: Getting it Right is No Child's Play
» Internal Factors Affecting Pricing Decisions
» • BreakEven Analysis and Target Profit Pricing
» 1 CAR OWNERSHIP ACROSS THE EUROPEAN UNION
» Mobile Phones: Even More Mobile Customers
» Stena Sealink versus Le Shuttle, Eurostar and the Rest
» Preview Case British Home Stores
» • Selecting the Message Source
» Setting the Total Promotion Budget
» Factors in Setting the Promotion Mix
» Integrated Marketing Communications
» Setting the Advertising Budget
» • Selecting Advertising Media
» Standardization or Differentiation
» Media Planning, Buying and Costs
» IBM Restructures the Sales Force
» • Other Sales Force Strategy and Structure Issues
» 5 per cent sales elite apart from the rest is 'an astounding 60 per cent [are] just there for the
» Britcraft Jetprop: Whose Sale is it Anyhow? 1
» 1 COMMERCIAL SUCCESS OF THE JETPROP AIRCRAFT, 1992 NUMBER OF CONTINENT
» 1 PANEUROPEAN CONSUMER GROUPS
» Analyzing Customer Service Needs
» Defining the Channel Objectives and Constraints
» Identifying Major Alternatives
» Designing International Distribution Channels
» Evaluating and Controlling Channel Members
» • Building Channel Partnerships
» The Growth of Direct Marketing
» Customer Databases arid Direct Marketing
» DirectResponse Television Marketing
» Online Marketing and Electronic Commerce
» Germany, the UK and other countries in Europe 1997 to SI.64 billion or 7.5 per cent of global
» • Creating an Electronic Storefront
» • Participating in Forums, Newsgroups and IVcb Communities
» • The Promise and Challenges of Online Marketing
» Roberto Alvarez del Blanco and Jeff Rapaport*
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