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Dell Direct and Not-So-Direct
When the Texas-based Dell computer company started in 1984, its creator Michael Dell was interested in having a completely different distribution approach from his competitors. In order to keep costs low, minimize inventory costs and cater to customer needs, Dell sold directly to customers. By 1997, Dell’s distribution model was working extremely well for the company and brining in $1 million a day in sales. Based on the model and the success of direct distribution for consumers, Dell expanded its target audience to large companies, small businesses and government agencies. Dell’s competitors were interested in the same markets, but unlike Dell used both direct and indirect distribution methods.
In 1990s Dell tried the option of retail distribution. It tried selling Dell PCs through a number of large U.S. retail chains, but did not realize the profits it was expecting. The company also tried using branded kiosks to communicate with consumers in order to answer questions, resolve issues and place orders. Neither of the trials was very profitable for Dell, so very quickly after initial implementation both experiments didn’t last long. In 2007, Dell realized that consumers outside of US were not as interested in purchasing PCs from the internet. Dell ended up selling its products both through US and through international big chain stores. By 2010, these experiments showed enough profit to make Dell start entertaining other retailing opportunities.
In addition to beefing up its retailing strategy, Dell also is a pioneer in the use of social media for marketing and makes a significant profit from posts on Facebook and Twitter. In addition, Dell continues to use its tried direct distribution strategy at the very core of its business.
Key Marketing Issues
* Speed of innovation – The reality of the computer market today is that as soon as someone has a great idea, immediately someone else comes up with a greater idea. For a computer giant like Dell, staying on top of what’s latest and greatest and being able to make quick changes is key to staying in the game. Dell’s marketing organization needs to continuously work on new ways to market their products in this environment. One huge advantage that Dell has is its direct marketing strategy. Because of this strategy the company does not have a backlog of inventory or even parts and builds the product to order for its customers. The lack of inventory and parts backlog allows Dell to be more agile and roll with the punches in today’s computer sales environment. * Distribution time– Dell has been lagging behind its competitors HP, IBM, Acer and Lenovo in the speed of distribution to consumer. Because of Dell’s ‘build-to-order’ approach and lack of distribution channels, it takes Dell longer to deliver the product to consumers. Competitors on the other hand use distribution partners and thus make distribution much faster. By direct-selling through its website, Dell’s consumers have to wait 5 to 7 days for their purchases, unlike 24 to 48 hours for HP, IBM, Acer and Lenovo purchases. * Technological expertise – Dell’s key business approach allows consumers to build computers to their own specifications. That works extremely well for technically savvy consumers, but what about those consumers who don’t know what it is that they need? In order to market to the average consumer, Dell needs to continue to make its website more user friendly and give more average user explanations to all of the features and options of Dell’s computers. If an average consumer can understand what their options are, they would be a lot more willing to build their own computers through Dell’s website.
Personal Case Analysis
Dell computers are a household name in both consumer and business markets. Dell has been...