Dell Computer s Marketing Strategy.

The CIM defines marketing as The management process responsible for identifying, anticipating & satisfying customer requirements and profitably According to Kotler et al (1996) marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others

1. Concept & Process of Marketing The function of the marketer is to satisfy the customer s needs and wants. A successful marketer must create & satisfy the needs and wants of the customer and be able to anticipate what future requirements may be and ensure that they re met. Organisations can be categorized into 4 distinct orientations. These determine how a business is focused and how services are marketed however, some overlap will occur.

1) Product Oriented 2) Production Oriented 3) Selling Oriented 4) Market Oriented

Product Oriented Organisation These organisations base their business strategies on the development and innovation of new products without having a clearly defined market. Food manufacturers continue to develop and improve products to attract new buyers. These include new toppings for pizza, new flavourings etc. There are advantages to this type of orientation; it produces innovative products and will have a motivated staff as they are encouraged to be creative. However, their innovations will not be market or customer focused and thus may be prone to failure. Coke Cola s Dasani launched in 1985 and Guinness light in 1979 both failed in the marketplace. Production Oriented Organisation. These organisations focus on effecting economies of scale by producing goods in large quantities. Companies with a production focus operate in markets where demand exceeds supply and the final market is guaranteed. They focus on constantly improving production techniques and costs and optimising distribution channels. The weakness with this strategy is that the end user s needs are not addressed. Electronics manufacturers for example, enjoy profits through economies of scale but they will be led by product and distribution costs. Sales Oriented Organisation Sales oriented businesses are focused on the short term profit. They are centred on the Sales team who are encouraged to make the sale . Little thought is given to aftercare services or customer satisfaction. Although high profits can be made in a short amount of time, a sales oriented company can quickly falter when competitors enter the market. Without a loyal customer base, sales will dwindle. Real Estate agents come under the Sales Oriented strategy. Marketing Oriented Organisation A Marketing Oriented organisation focuses its business strategies around the customer. They support the idea that the customer is king and focus activities on understanding the customer s needs and answering these needs by developing products & services accordingly. This business is profit orientated but profit is seen as a long term strategy which will be achieved 2

by understanding, meeting and anticipating the customer s needs. To succeed in the long term, they must focus on both profit and market presence. A marketing oriented business will adopt this strategy in order to embed their products and brands in the market and will be able to face competition through customer loyalty and strong brand and company image. This orientation does have its limitations, if the workforce is not fully accepting that the customer is king, the essence of the marketing concept will be lost. Kotler et al highlights the differences between the selling and marketing concepts.

Starting Point

Focus

Means

Ends

Factory

Existing products

Selling & promoting

Profits through sales volume

The Selling Concept

Market

Customer needs

Integrated marketing

Profits through customer satisfaction

The Marketing Concept

Dell have adopted the Marketing Orientation as they target the needs and wants of their target market and strive to meet demand more effectively and profitably than their rivals. Dell could have been classed as a product or p roduction oriented organisation, however they continue to create variations of their products to meet the customer demand, continue to attract new customers through media advertising, and provide a one stop shop where potential customers can visit a user friendly website and purchase all their computer needs in one go.

Dell also adopt a 2nd marketing approach Societal marketing, where an organisation continues to provide for the needs and wants of a target market but also lives up to certain expectations. Under Dell s Corporate Responsibility banner, it lists what the company is doing in the following areas: Protecting the Planet Dell is committed to supporting the work of the Intergovernmental Panel on Climate Change (IPCC) to reduce emissions levels by between 50 & 80% buy 2050 Empowering Youth Dell s focus is to link up with NGOs to bring technology to the world s neediest children. They have donated more than $8 million USD to this cause. Supporting communities worldwide. Dell are active in supporting diverse communities

worldwide. They support those with disabilities, transgender, gay and lesbian communities with the aim to achieve innovative solutions for a diverse customer base.

However, such a strategy requires an understanding of marketing at three distinct levels: as a philosophy as a process & as a management function. Dell s marketing driven philosophy can be evidenced in their vision statement.

It s the way we do business. It's the way we interact with the community. It's the way we interpret the world around us-- our customers needs, the future of technology, and the global business climate. Whatever changes the future may bring our vision -- Dell Vision -- will be our guiding force. (Source: http://www.dell.com/) 4

Marketing as a philosophy starts at the very top and must filter down in the company through every department. In order to keep the marketing philosophy of a company alive, it s essential that these businesses carry out regular marketing or process audits.

One valuable tool that can be used in a marketing audit is a SWOT analysis. This highlights the Strengths, Weaknesses, Opportunities and Threats to a business. If done regularly, SWOTs allow companies to keep abreast of their place in the market and highlight the threats facing them. Dell s SWOT analysis may cover the following areas:

Strengths:

Weakness:

Brand Name Customers build own model Leaders in internet sales Technology leaders

Lack of retail presence No warehousing Dependency on component parts suppliers

Opportunities:

Threats:

Expansion worldwide due to increasing internet coverage Expansion into all segments from private consumer to multi nationals

Competition: new technology constantly evolving. HP has excellent R&D department working on new innovations

While auditing, it is essential that a company looks outside to the environmental threats that exist. In Dell s case
y y y y y y

The competition HP, Toshiba Suppliers manufacturers of component parts. Political environment as they expand globally, this is a key factor Economic environment fluctuating currencies affect profit margins in new markets. Legal environment potential lawsuits due to poor quality goods Social & Cultural environment Dell is deeply committed already to the social & cultural

environment but must continue to address this area.

Use of both SWOT & PEST (environmental) analysis help an organisation to develop its strategic options. Using the points highlighted, the organisation can build its strategy, set its budget limitations and place themselves in a comparable position to its competitors. However, organisations come up against constraints while setting their marketing objectives. As the focus of any for profit organisation is profit, financial constraints may mean that a company has to compromise between a utopian marketing strategy and a healthy profit margin. Other constraints may be more pragmatic and include staff that are not sufficiently skilled in marketing or experienced in a particular market. Constraints may also involve the political and legal climate of a potential market which the PEST analysis should highlight.

Final objectives must also be set so that the ultimate goals are clear. Increased and sustainable profits are key. Other goals are increased productivity, increased expenditure on R&D, rationalization of SKUs, penetration of new markets, & increased market share.

Once a company s strategy has been put in place, the target market and marketing mix can be set. Dell s marketing strategy in this area is clear target all areas of society from individuals to

companies to multi nationals. Their marketing mix is diverse and they make much of their inclusion of all segments of society and advertise their lack of bias based on money, culture, able bodied or sexual orientation. www.dell.com

Using all of the appropriate tools and being mindful of the constraints, a company should now be able to implement its marketing plan.

2. Segmentation, Targeting & Positioning Any company s strategy or marketing plan, while intrinsically linked to profit margins, budgets and market growth will be affected by environmental influences over which they have little or no control. These areas include the political climate of a market, the legal, economic and social climate and the emerging ecological and technologic factors. In the micro environment, influences including the competition, customers, share holders and suppliers will determine the success or failure of a marketing strategy.

Two areas from the Macro Environment that will directly affect Dell s approach to the market are Political & Economic factors. As Dell targets emerging markets such as China & India, the political and economic issues in these markets will be key to its success. Traditionally, both markets favour locally manufactured goods & government tenders in both markets favour national brands.

In the latter half of 2009, Dell announced its intention to target users in the emerging markets with an android phone handset. Dell launched the Mini 3i Smartphone in conjunction with China Mobile which has an established market presence and claims to have over 500 million subscribers.

The economic climate of emerging markets such as China is significant. According to Economy Watch, China's economy is expanding rapidly. In the last 30 years the rate of economic growth has averaged 8% growth (GDP) per annum. China is currently the world s leader in the mobile phone market but the political influences of government strictures and low cost rivals will continue to be a threat to Dell s dominance of this market.

Michael Dell said in March 2008 that while growth in the U.S. market for PCs would be "OK," Asian markets would grow more . In 2008, Dell unveiled its low cost Vostro brand targeted towards the emerging market of India.

To help with the successful launch of two so disparate products such as the Smartphone and Vostro one aimed at those with a high level of disposal income and the 2nd marketed as a low cost affordable item, it is vital that market segmentation is carried out. This allows a tailored approach to each market segment for each individual product.

Once Market Segmentation is complete, targeting and positioning will follow.

Market Segmentation

Identify segmentation variables and segment the market Develop profiles of these segments

Target Marketing

Evaluate the attractiveness of each segment Selects target segments

Market Position

Identify a differential advantage for each segment Formulate the marketing mix to be used in the marketing plan for each segment

The major segmentation variables are clear. When launching the Dell Vostro PC into India, Dell focused its plan on affordability using the following variables segment and target the market:

Geographic

much of India s population live in very rural areas outside the main cities.

Reaching these remote markets will present a challenge for the marketers. Cultural & religious divides between different geographic areas must also be addressed. Democratic According to the FT, over 50% of the Indian population is younger than 25.

This is a powerful demographic for Dell to target for aspirational goods such as PCs. Personality traits The emergence of companies like Dell establishing manufacturing plants locally will influence the spending power of the Indian consumers, offering a chance to move from single to two income households. Aspiratonal or lifestyle consumption will increase allowing Dell to increase its market share of the PC business. Lifestyle the Bollywood & cricket culture in India have a significant impact in people s

lifestyles and these areas can be successful in marketing sought after items such as PCs to BOP markets. Benefits Sought this category represents those who may want specific things from th e

consumer goods aimed at them such as social media access, online sports coverage, Bollywood movie downloads.

In order to create the required target markets, it s necessary to focus on how existing markets are already served. It is easier to enter a market with no competition than one with an existing strong brand. In Dell s case, the Compaq, HP & Acer are the largest brands in the Indian market. The market size must also be considered and projected growth patterns and the strength of the brand offered. Dell is a multinational company with a strong global brand which makes it attractive to the market although the demographic and economic segments will determine who the target market will be educated and high earners will be more likely to be targeted than others for high end goods such as PCs.

Positioning of the product is the final step in the marketing process. Positioning or perceptual maps can be used to highlight a company s position in the target market. In Dell s case, the areas for positioning may be price and brand awareness.

HIGHER PRICE

Nokia KNOWN BRAND HP

Cisco

UNKNOWN BRAND

Dell

Accenture

LOWER PRICE

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As well as the emerging consumer markets, industrial markets must also be segmented, targeted and positioned. The industrial market has a more specific set of requirements than the consumer, as in the case of PC sales, they will be seeking to service an industry rather than an individual. One of Dell s foremost marketing tools is its ability to design and adapt its systems to suit the end user this is especially significant in an industrial setting. When positioning into the industrial sector, there are 9 divisions of categorisation set out by the Office of National Statistics in the UK. These classifications include construction, transport, financial, hospitality industries among others. Identifying the correct division or category is essential in getting the segmentation and eventual targeting and positioning correct. Industrial segmentation is more challenging than consumer segmentation due to the complex issues existing in the financial, regulatory sectors. The differences between the consumer and industrial requirements can be simplified by considering the considerations for both in purchasing Dell products. It s crucial that Dell understand the reasons and requirements of both. The considerations for a student consumer target and a small business user target will be different and should be analysed using buyer behaviour techniques. According to Stokes 1997, Purchasers involvement in decisions can be broken down into 5 categories: Low Purchaser involvement in decision High

Routine

Impulse

Regular

Irregular (small)

Irregular (large)

A laptop is categorised under Irregular (small) as the purchaser has had a high level of involvement in deciding to purchase the item and significantly for Dell, which laptop to purchase. Marketing stimuli help the consumer to decide which laptop to purchase and the role of the marketer is to ensure that these stimuli are understood and satisfied by their product. The initial marketing stimuli of the 4ps tie in with economical, technological, political and cultural stimuli to begin forming the 11

process. These stimuli are affected by the individual buyer s characteristics and decision processes and the final purchasing decision is further affected by choice of product, brand, finance, company name, etc. For the student, the biggest driver is financial. The student is driven by the cost of the laptop and is in the low cost market segment. The compromise here will be build quality and performance. The individual consumer is influenced by the aesthetics of the machine colour, design, etc. Dell is extremely effective in this segment with its aggressive media campaign advertising its flexibility of design and offering individual branding of its laptops. The small business user is less interested in aesthetics and more concerned with performance and reliability. Dell has a business range of PCs, the Optiplex brand, targeted at this market. Dell understands this buyer s motivation and demographics and offers them laptops that are small and sturdy for travel, have excellent connectivity for ease of connection when not in the office & have extra battery life. Dell will further segment this market into the basic business PC and those needing specific hardware such as design or graphics companies. Positioning of the product as mentioned above will also be a driver. Businesses will gravitate more towards the well known brand and compromise on price to ensure and excellent after service while the student may be prepared to gravitate towards a lesser known brand to ensure a cheap deal.

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3. Extended Marketing Mix The goal of any business is profitability and for a marketing oriented organisation, in order to achieve these goals; they need to address the 7 Ps of marketing or otherwise known as the Marketing Mix. http://www.cim.co.uk/resources 1. Product 2. Price 3. Place 4. Promotion 5. People 6. Process 7. Physical Evidence.

1. Product: instead of simply sitting back and enjoying the initial profits of its successful computer business, Dell has continue to strive toward innovation and market based improvements to the products it offers. It has 1,386 patents listed on its website proof of true innovation. 2. Price: A product is only worth what a customer is willing to pay for it. A 'want' can be described as "the form that a human need takes as shaped by culture and individual personality" Kotler et al (1996). Wants are described in terms of objects that will satisfy needs. When the means exist for these wants to be met, a market is created for products or services that meet this market demand. Meeting this demand leads to customer satisfaction. In order to meet these needs, Dell has cut out the middle man and sells its products through the internet. This allows them to remain competitive in the market while still offering latest technology. 3. Place: The means in which an organisation sells its product must be appropriate to the product and meet customer demand. Dell s exploitation of the internet to sell their 13

computer based technology is hugely appropriate and allows all sectors of society including those disabled or living in remote areas to access the same range of products as those with access to the traditional high street. 4. Promotion: Promotion is seen as traditional marketing. It is the way in which a company advertises its product to entice the customer to buy. Promotion includes media advertising, PR, branding, exhibitions, mail drives, and special offers among others. The aim of all promotion is to get the customer to buy your product instead of competitor s. Dell successfully promotes its products through highly successful media advertising which is broadcast during peak time to TV or radio audiences. According to The Business Journal, Dell gets It and it is the it that elevates them above their competitors.

5. People: Having motivated and trained staff is essential for promoting both a business and its products. After sales service offers added value to a product and will draw a consumer to a business for future orders. oriented business. 6. Process: The process in which a product is developed, marketed and eventually sold to a customer is essential to the final level of satisfaction of the customer. The process of marketing should be audited regularly by any business to ensure that market trends are being followed. 7. Physical Evidence: Customers expect a high level of presentation from a company s store or in Dell s case, its virtual store - their websites. They must be well presented and easy to navigate in order to invite return custom. Building customer loyalty is a crucial part of a marketing

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4. Marketing Mix The Vostro brand of laptop discussed above is aimed at the small business markets. It is targeted towards the more affordable end of the market rather than its costlier counterpart the Insprion line. The Vostro can be marketed in 2 diverse markets by successfully segmenting the markets and by choosing the correct Marketing Mix. A useful tool in determining this marketing mix is a mind map as illustrated below.

Although 7ps are addressed in this map, we will focus on the principle 4 Price, Place, Promotion & Product. Using the USA & India as the 2 target markets for the Vostro, 2 disparate marketing mixes can be used to determine the requirements of both markets. This market segmentation will also address issues relating to international marketing.

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CaseSnippets/Update

Dells market share in U.S. and Worldwide (in Q1 2009) compared to other top PC makers

http://www.casestudyinc.com/Dell-Supply-Chain-Case-Study

Mix 1 USA

Mix 2 - India

Price: The established market here will be Price: With much less disposable income, able to sustain a higher price and thus the price for this market must be lower to greater margins for this product. As an achieve sales. As an emerging market, the established brand, Dell can afford to pitch price will need to be low enough to ensure the item at a competitive price. In the graph good market penetration. Considerations of above, it can be clearly seen that Dell, along using it as a lost leader to gain this with HP enjoys most of the market share in penetration and brand recognition may be the US. The level of competition in the made. Dell s lack of market share outside the domestic market will make moving into US can be seen in the above graph. emerging international markets an attractive option.

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Place: Dell s traditional distribution channel Place: In 2007, Dell began production in its is online marketing which allows it to do new manufacturing plant in India. Now it has away with the middle man in the retail or more than doubled its production output. In wholesale outlet enabling Dell to keep its 2008, Infosys, one of Dell s largest customers pricing competitive. However, in the US, it was presented with the first made in India has recognised the power of leading retail PC which allowed Dell to overcome the outlets and has begun selling its products government s strategy of promoting national out of Walmart, which in itself is considered products over imports. Lower production a well branded and affordable outlet, costs in India will help Dell with Porters cost perfectly matching Dell s ethos. leadership strategy. This strategy also ensures Dell s high level market entry. Promotion: In the technologically advanced Promotion: This is a bigger challenge for Dell market of the USA, promotion of the Vostro as a much smaller percentage of India s will be carried out by a wide range of multi target population will have access to the media advertising campaigns. All sectors of technology available in the US. Door to door the market can be reached through campaigns, free gifts, leaflets and radio sophisticated marketing channels such as TV campaigns will have a much greater reach. & computer marketing. Social networking Among the more educated segments, social sites reach thousands of users for minimal networking will have the same effectiveness outlay. Using social marketing sites engages as in the US big impact for minimal outlay.

customers in conversation and allows Focusing on a small product range for instant feedback. The return of investment international markets complies with Porters vs traditional marketing is high. Focus strategy.

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Product: The product from a marketing Product: In India you sell one cigarette at a perspective should reflect what the product time, not a package. So there is a lot of means to the customer or what the localisation. The biggest mistake companies customer s requirements are from the product. Marketing of a product in 2 distinct geographical areas needs to address the The marketing of the Vostro in India must individual characteristics of these markets. take into account the difference between Within the USA, the expectations may be the emerging markets and well established higher due to the vast number of PCs markets such as USA. The expectations of a available and the sophisticated marketing new market will be different and emphasis campaigns already in place. High may be on value for money over high end performance, value add ons, aesthetics will models. Due to the vast size of India and its all be factors in this market. cultural differences from state to state, focus must be on what the customer s
make often, is to assume that the way they sell a product in their own country is the way to put it into another country Philip Kotler.

expectations are from this PC. Using differentiation strategy from Porter, Dell can position itself against existing similar

technology in this market.

According to Ansoff s matrix, Dell will be adopting a Market Development Strategy and as such will need to identify new distribution channels and new market segments. Once the marketing mix has been recognised, the segmentation of these markets must be further broke down into consumer n and business markets.

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The consumer market can be broken down into sections; Convenience, Shopping, Speciality & Unsought Goods. Dell s products will come under the Shopping category and it is Dell s job to ensure that the consumer is offered what they want in terms of price, build quality, performance, looks and after service. Buyer behaviour as covered above will be an important part of the marketing focus for this market. Selling to a business is categorised as organisational marketing. This category includes businesses, institutions, government and distributors. Dell s computers are considered Accessory Equipment and the decisions regarding purchasing will depend on the industry itself but will primarily be driven by budgets and price. The buyer behaviour discussed in section 2 above will be relevant in this marketing sector. Dell s online presence makes it very easy to target this market. There is no need to deal with distributors or retail outlets, the entire transaction can be done online the ease and

speed of this is particularly relevant to the industrial section. This type of marketing will not be appropriate for the governmental market as they work predominantly using tenders. Dell will submit a bid which will include pricing and delivery dates, service commitments, and quality assurances. The tender is awarded based certain criteria. Likewise, non-profit businesses must be targeted differently. Although the line between this sector and the private sector is becoming blurred, cash flow will always be an issue and thus Dell may have more success marketing the low end Vostro model. Although Dell offer an excellent after care service package, the product that they re selling is tangible and sales can be monitored and tracked. In s ome industries, the product that they re selling is a service. This can be seen in the hospitality sector. This sector is very susceptible to variability of the sales team, seasonality and even the weather. No two services will be identical and they are even susceptible to perishability as certain offers may be centred on calendar events such as bank holidays and as the consumer will not actually be taking ownership of the product it s vital to persuade them to purchase the perceived value of the service. The 7ps of marketing as outlined

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above can also be applied to the marketing of a service industry although the People, Process and Physical elements will be especially significant.

Reference: http://www.economywatch.com/world_economy/china/ http://www.dell.com/downloads/global/corporate/environ/Opti_Enviro_Brochure.pdf http://news.cnet.com/8301-1001_3-10026957-92.html 20

http://moodle.bl.rdi.co.uk/file.php/608/output/MarketingPrinceples/01_02_04_001.html http://www.indiamag.in/dell-launches-%E2%80%98venue%E2%80%99-and-windows-7-phone%E2%80%98venue-pro%E2%80%99-in-india.html http://www.consumerpsychologist.com/cb_Segmentation.html http://www.statistics.gov.uk http://www.bizjournals.com/triad/stories/2005/01/10/editorial3.html www.dell.com http://future-business.info/michael-dell-exclusive-interview-with-small-business-advice-tv-episode2.html http://www.thetimes100.co.uk/theory/theory--the-extended-marketing-mix-(7ps)--319.php http://www.ft.com/cms/s/0/cd516aa8-749a-11db-bc76-0000779e2340.html#axzz1GImblZQM

Bibliography: Business Studies, 4th Edition

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