Marketing mix analysis for dell

The following paper submitted is a report on Dell, which gives an insight about the company’s Marketing mix, STP and Business Environments have been presented and Recommendations been made based on the Analysis.

The marketing mix and STP have been simultaneously talked about as it would be easier to comprehend.

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Dell Inc (Public, NASDAQ : Dell) is an American based Multinational company, who conduct business in computer manufacturing, selling and providing IT and Consulting services across the world. Dell was founded in 1984, by Michael Dell in Roundrock, Texas. Currently Dell is 3rd largest PC seller globally, and has its presence in over 180 countries. Dell has been immensely applauded for its supply chain strategies and e-commerce business models. Dell was First from IT industry to take green initiatives and has garnered lots of appreciations through the initiatives being implemented. However in the last few years Dell’s Equity has gone down and has lots of challenges to regain its Top Spot at the Rooster.

THE MARKETING MIX

Dell Primarily focuses on FOUR SEGMENTS for its Marketing and Selling of Products (Dell Website, 2010).

Consumer Segment.

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Small and Medium Business.

Public Sector.

Large Enterprises.

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2.1 PRODUCTS, SEGMENTING & TARGETING

CONSUMER – The Target Market being Household customers.

Dell has generated strong revenue of $3 billion (Dell Website, 2010), from Consumer Segment, through a very wide range of products offered to the consumers in this segment.

The list of Products offered is (Dell Website, 2010):

Inspiron Laptops, Netbooks and Desktops in which various models are offered which are more like daily use laptops with basic configuration.

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Studio XPS Laptops and Desktops, which are the premium laptops and Dell’s main stream of product in this segment which again comes in various models and types.

Alienware Laptops and Desktops which are the gaming line of products from 2006 after Dell acquired Alienware on March 22, 2006 (Betanews Website, 2006).

Projectors, Printers and Ink which include Dell’s own manufactured brand and other third party brands as well like Epson, Kodak, brother to name a few.

Security Softwares, Computer accessories and peripherals which are Dell manufactured and Dell recommended.

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Dell has recently started offering to its consumer base Dell Streak which is a 5″ tablet as well as a Smartphone.

SMALL & MEDIUM BUSINESS – The Target being Small & Medium sized Firms.

Dell has had an increase of 24% of revenue in this segment by generating $3.7 billion through sales in this Segment which consists of products like the following:

DELL Precision Workstations and mobile Workstations.

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Vostro and Latitude line of Notebooks and Netbooks.

Servers, Storage and Networking Equipments.

Services like Asset and Data Protection, Configuration and Deployment, IT Consulting, Outsourcing and Managed services, ProSupport.

PUBLIC SECTOR – Being Targeted at Universities, Governments.

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Public Sector poured in revenue of $4.4 billion through Services and Technology Provision to their Segments which include State and Local Government, Federal, K-12 Education, higher Education and Healthcare. Dell offers:

Rugged Solutions, Digital Forensics, e-Government, Data Center Efficiency.

Civilian and Defense Agencies, Intelligence and National Security, Federal health, Consulting and Deployment Services.

Teachers, School Administrators, Professional Learning, Connected Classroom, Private Cloud Computing, Wireless Classroom.

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Learning Management systems from Blackboard, Academic Computing, Virtual computer labs, Instructional technology.

LARGE ENTERPRISES – Targeted at Large Corporations.

The revenue from Large enterprise was $4.3 billion with Dell introducing its Virtual Integrated system Architecture and Services and existing products it had to offer which Include:

Blade Server Solution, Server Consolidation, Client Migration solution, Virtual Clients.

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RISK Migration, Storage consolidation, Cloud Computing, Mobility Solutions.

Business Consulting, Managed Infrastructure, IT Consulting.

INTANGIBLE PRODUCTS – Target Market includes all the four SEGMENTS.

Apart from selling the tangible hardware products, Dell also sells Intangible products, warranties to all of its manufactured products which can be purchased either at the ‘Point of Sale’ or the customer has an option to extend it online by visiting Dell’s website or by calling a sales representative in Dell. And parts replacement, any repair and service of the computer is done based on the type of contract the customer is entitled to. However the warranties are categorized into being Onsite Hardware Services, On-phone (Remote Controlled) Software Services and in addition in the consumer segment Premium Service called ‘Your Tech Team’ which entails of both Hardware and Software Services provided the product has the basic warranty.

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The Prices of the Onsite Hardware Warranty depends on the model of the product, and works on the concept ‘Higher the model, greater the price’.

PRODUCT PLACEMENT – Dell heavily relies on E-Commerce.

DIRECT TO CUSTOMER

Dell sells its products mostly on the internet, which would be a Direct to Consumer selling discarding the need of a third party vendor and a great advantage to its customers is that they will have the option to build the computer system according to their requirement through their ‘JUST IN TIME’ approach (Zigmag Website, n.d) . There are also options provided to the customer to add a personal touch through models like Inspiron which allows the consumer to get the skin of his choice available from over 200 designs and Alienware Laptops would allow having the customer have his name inscribed while configuring the computer. By this Direct approach Dell were able to build a relationship which made it quick and easy for the customers to do business with Dell, and also Dell could identify the customers trend early and respond with the desired products before its competitors can (Scribd Website, 2000).

Dell.com reports they have 4 million visits to the page every day, resulting in an order placed every 2 seconds. With the Strategy of build to order, a customer gets exactly what he needs and what can be looked upon here is the customer is paying the money even before he gets the product.

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However in 2007 Dell restarted distribution into retail Markets as well and has been doing that since.

PRICING STRATEGY

As Dell involves Direct Selling to a very large extent, its Inventory costs are reduced, thus helping the cause of selling its products at a comparatively lower price than its competitors. However they would not be able to provide a constant price on a product on all the time as the Demand in the product may fluctuate and the costs of Manufacturing may vary depending on the availability of the Components required to integrate the Computer or Server, or simply because the supplier has upgraded their products. For Example we can notice the price increase when ‘INTEL’ the primary processor supplier to Dell, upgraded its Core2Duo processors family to the latest i-core processors. So Dell’s primary Pricing Strategy would be “Based on COST”.

DELL FINANCIAL SERVICES – Dell has incorporated a system of their own financing into the selling products where a customer can buy a product on credit through ‘DELL FINANCIAL SERVICES’, and repay the cost of the product in 12,18,24 or 30months. Before offering DFS to the customers, Dell does a credit check on the customer for Eligibility for the Sanction of credit after the customer applies to avail the facility and based on the report the Customer is availed of certain ‘CREDIT LIMIT’ through a ‘DELL PREFERRED ACCOUNT’ which could be used any number of times to purchase any number of products only on Dell Website, however this cannot be benefited for any purchases from the retailers (Dell Website, 2010).

As Dell allows the customization of the product as the customer would want, there really is no specific ‘PRICE TAG EFFECT’ on the mind when a customer wants to buy a product from Dell, Hence it can partly be classified as a “Pricing Strategy Based on Customer’s Needs” as well.

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POSITIONING & PROMOTIONS

PUSH and PULL Deployed

Dell is currently working on the strategy which is been described as “more Push than Pull”, by Steve Felice, Dell’s president of consumer and small and Medium Business and hence coming up multimillion dollar global rebranding campaign which is anticipated to run throughout 2011. And in the course Dell has come up with ads without any product specifications or the price being highlighted in contradiction to its previous campaigns.

Also with this view Dell has come up with a new tagline – “You can tell it’s Dell”- . Commenting on this advancement Liz Mathews, Global Director of Dell’s Consumer Brand Business states “We wanted to show that our technology enables something important – Relationships – and forge an emotional connection with viewers”(Dellstreakshacks Website, 2010).

Figure 5.1 DELL’s COMMUNICATION MODEL (Solomon ET AL., 2009)

Apart from TV ads, Dell heavily promotes its Limited period sales on its website with various offers on most of the products on its website with various themes like ‘Beat the Crowd on Friday’ which could be seen on 28th November 2010 and ‘celebrate the holidays with Dell’ on 30th November 2010 on www.dell.com. Dell customers can also subscribe/unsubscribe timely updates through mail through Dell’s mailing list, through which they could get a complete overview of the new products launched and available on the website. Also various ads can be seen in newspapers, magazines and in the forms of banners and posters. Dell has also positioned its products in Movies like – A Nightmare on Elm Street, Ironman, Ironman2, Kick-Ass, He’s just not that into You, The Recruit, The Social Network, Wall Street: Money Never Sleeps amongst several others (BrandChannel Website, 2010).

Dell has Substantial presence on Social Networking sites with over 1.5million followers on twitter alone(Twitter Website, 2010) with an overall more than 3.5 million members belonging to Dell Social web community which includes, Dell.com, Twitter, LinkedIn, Facebook, SINA, Orkut (Brazil) and so on. In 2009, the company revealed that about 100 employees send tweets through 35 channels, reaching customers in more than 12 countries. Dell, which operates more than 80 user groups, reported generating more than $6.5 million in business through Twitter deals during 2009 (AustinBusinessjournal Website, 2010).

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Dell’s website suggests that they have nearly 2 billion customer interactions every year, which is a staggering number for any company.

Buzz Marketing plays a vital role as Dell mostly sells electronic commodity, as most consumers prefer to get know what they would buy through a review on a recommended website, like cnet has positively reviewed one of Dell’s latest offering, Inspiron Duo (cnet website, 2010).

5.2 IDEASTORM

This receives a Special mention, after having launched in February, 2007 IdeaStorm has been a creative tool through which Dell can always talk to its customers (IdeaStorm Website, 2010). Dell claims that they have already implemented more than 400 ideas out of 9100 presented till date (Dell Website, 2010).

5.3 RETAILING (For Consumer Segment)

However from 2007 Dell added another Dimension to its Marketing( Applying PUSH Strategy ) by selling its computers through Wal-Mart – Major retail stores in the United States (cnet Website, 2007) and from then Dell has been selling consumer segment products like Desktops, Laptops, Netbooks and Printers through various other retailers like Staples, Costco, Best Buy, Officeworks as well.

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BUSINESS ENVIRONMENT

6.1 MACRO ANALYSIS – PEST Analysis

(a) Political factors

Dell Inc (Dell) being a multinational company which ships out is products to 180 countries is bounded by laws and regulations in each country into which Dell ships its products.

Principles for Product Recovery Legislation, which primarily says that, “At the End of an IT product’s useful life, any customer should be able to return that product to the manufacturer at no charge by a process defined by the manufacturer”,(Dell Website, 2010). According to Dell’s website they have recycled more than 275 million pounds of computer Equipment.

Manufacturers of Computers, display and Printing devices must be required to include a label on their products sufficient to identify the brand.

Figure 6.1

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Dell has successfully filed for and holds 2190 patents as of 03 December 2010 (United States Patent and Trademark Office Website, 2010).

Dell has been involved in Lawsuits often and most recent of one being in Taiwan, in which Dell was forced to honour the bargain price, which the company said it was mistakenly offered on the Internet ( The Economic Times Website, 2010).

(b).Economic factors

Global demand for all commercial products and services and solid supply-chain execution led to strong operating income for Dell in its third fiscal quarter, with GAAP operating income of $1.02 billion and record earnings per share of 42 cents. On a non-GAAP basis, operating income was $1.17 billion, or 45 cents per share.

Dell has expanded its Global Workforce to over 96,000 Employees in 2010.

On 2nd November 2010, Dell has announced that it has agreed upon to acquire Bhoomi (market-leading provider of on-demand integration technology and the creator of AtomSphere®, the industry’s No. 1 Integration Cloudâ„¢) which would help them further in offering Cloud computing business solutions.

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Figure 6.2 Source (Financial News – Dell Website, 2010)

Dell has previously acquired many companies and ‘Perot Systems’ acquired on 21 September 2010 has been the biggest till date for $3.9 Billion, whilst other majors include Equal Logic, Alienware (Wikipedia website, 2010).

Some of the Major trade Organizations Dell belongs to as of 2008(Dell Website, 2010):

United States Chamber of Commerce.

National Council of State Legislatures.

Texas Tax Payers and Research Institute.

National Governors Association and is bound by the Regulations of these Governing Bodies.

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Figure 6.3 Revenue from Individual Segments 2010 (Figures in $bn)

(c) Socio-Cultural Factors

In 2004 Dell became the first US computer company to publicly release a global recycling goal (SocialFunds Website, 2004).

On June 5, 2007 Dell set a goal of becoming the greenest technology company on Earth for the long term. The company launched a zero-carbon initiative which would try to reduce Dell’s Carbon Intensity by 15% by 2012 (Wikipedia Website, 2010).

When a Customer purchases Dell(PRODUCT)RED signature products, Dell contributes directly to the Global Fund to help eliminate AIDS in Africa, with a view of zeroing down the AIDS affected born. 100% of the contribution is invested in HIV/AIDS treatment, prevention, and education programs in Africa.

Technological Factors

As Dell does most of the business, Customer interactions online throughout the world, it’s very necessary for them to have a very strong Technological Infrastructure with Efficient Servers, Huge Database Management system, and since they have about 90,000 employees at least the same number of computer accounts management.

A Dell Case Study “Managing a Vast Technology Infrastructure” shows how DELL Efficiently manages to upgrade 100,000 quick enough to get their systems faster and Run IT Better.

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6.2 MICRO ANALYSIS

(a) Competitor Analysis

Dell, once a Market Leader is now losing ground to its Competitors – Primarily HP and Acer. As from the report suggested Dell’s Market Share has reduced from 13.30% to 11.50% and the growth rate is a mere 5.70% compared to the Industry average of 22.10%.

However, Dell is Focussing to succeed as no.2 again with the help of its sales in Indian and Chinese Markets. What’s also important to make a note of here is Acer is shipping out huge in numbers but makes very less Operating profit ( Bloomberg Businessweek Website, 2010).

Prelim Worldwide PC Vendor unit Ships for Q4 2009

Company

Q4 09

Market Share

Q4 08

Market Share

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Growth

HP

17,792.20

19.80%

14,239.90

19.30%

24.90%

Acer

12,188.20

13.50%

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8612.7

11.70%

41.50%

Dell

10,397.10

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11.50%

9839.3

13.30%

5.70%

Lenovo

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7,836.50

8.70%

5509.3

7.50%

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42.20%

Toshiba

4,811.90

5.30%

3668.1

5%

31.20%

Others

37,008.50

41.10%

31855.4

43.20%

16.20%

Total

90,034.40

100.00%

73724.7

100%

22.10%

Table 6.1 Source (Techeye Website, 2010).

Suppliers

Dell being a Premier company has over a hundred Suppliers who supply various parts for Integration at Dell Facilities, Few to name are Intel Corporation, AMD, Fairchild, Fujitsu, NVIDIA, Sonix, Texas instruments ( Dell Website, 2010).

Dell urges Social and Environmental Responsible Principles to its suppliers which would have had greater impacts on its suppliers like Intel Corporation and AMD which supply processors to Dell (THE TIMES Website,2010).

SWOT ANALYSIS

 

STRENGHTS-S

WEAKNESSES-W

 

 

1] Brand Name/Equity

1] Decrease in Market Share

2] Loyal Customer Base

2] Slower Growth Rate

3] Excellent Promotions

3] No Actual Stores

4] Good Investor Relations

4] Frequent Lawsuits Failure

5] K 12 Programme

 

OPPORTUNITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

1] Vastly Unexplored Education Sector in Asia

1] Expand Virtual Classrooms

1] Develop DELL Stores

 

(S5, S3, O1)

(W3, O3)

2] Limited Product life of Electronics

 

 

 

 

 

2] Selling 2nd machine and thereafter

 

 

 

3] Greater Impact with Market Presence

(S2, S3, O2)

 

 

 

THREATS

 

 

 

 

 

 

 

 

 

 

 

 

 

1] Rapid Price Drop on Technology

1] Arrange for Multiple Suppliers

1] Deliver Customer Satisfaction

 

(S4, S1, T1)

(W4, W3, T3)

2] Fierce Competition

2] Customer Retention

2] Expansion in Limited Markets

 

(S1, S2, T2)

(W1, W2, T2)

3] Customer Complaints/Dissatisfaction

 

 

 

 

Table 7.1

RECCOMENDATIONS

It would be hard to get the customers already using different brands, hence it could be suggested that Dell works more on Customer Retention.

Entertainment line products like XPS laptops are on the higher price compared to Voodoo laptops of HP, both of them offering same capability – Hence Pricing Strategy needs to be reworked.

Dell has mastered in re inventing classrooms with products like k12, it could be suggested that, they expand the market into other Asian countries where there are no virtual classrooms.

Tough they have kiosks, Dell doesn’t have specialist Dell store like Apple or Acer has, Hence it could be recommended that they come up with the facility which would help in gaining more customer confidence and reach.

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