DELL RISE

Since its foundation in 1984, Dell Corporation has been the fastest growing entity in the
computer industry in the world. It is considered a pioneer and has set benchmarks in direct
marketing. The PC industry is a very unique industry as rapid innovations and super fast
product life cycles forces the companies to keep up with continuous innovation and varying
trends. Such rapid adoption of new technology also means that unsold old stock would be of
no use and had to be discarded or sold at heavy discounts. It is one of the most difficult
industries to maintain a competitive edge over the competitors. From the beginning Dell has
been focused on customer service by understanding the customer’s needs and providing the
most effective computing power to meet those needs.   Even until this day Dell has held on
to this viewpoint and they have gone from a dorm room based business to a multibillion
dollar giant of the industry.   The Dell Company maintained their competitive edge by using
their easy to use customization interface along with maintaining relatively low costs by
shipping directly from the supplier to the customer.

To analyse DELL’s initial marketing strategy which led to its establishment as the market
leader in the PC market, it is necessary to understand Dell’s initial marketing mix.

Marketing Mix can be defined as a planned strategic mix of controllable elements of a

product marketing campaign that a marketing company can use to influence consumer
perception favourably towards its product or
services so that consumer and organizational objectives are attained, i.e. Marketing mix is a
model of crafting and implementing marketing strategy. There four elements are commonly
termed as the 4 P’s

1. Product
2. Price
3. Place
4. Promotion

PRODUCT
The product decision involves deciding what goods or services should be offered to a group
of customers. Some examples can be product decisions about Brand name, functionality,
styling, quality, safety, packaging, repairs and support, warranty, accessories and services.

Customization

PRICE
This key element represents what a company would receive on a unit basis for the product
or services being marketed. Pricing decisions can be about pricing strategy, suggested retail
price, volume discounts, wholesale pricing, cash and early payment discounts, seasonal
pricing, bundling, price flexibility and price discrimination.
Dell’s pricing strategy decisions were normally about achieving advantage for the
organisation over competition from others. For example, Dell felt that the margins earned
by many competitors were too high and that made them vulnerable to a strategy of lower
prices and tighter margins. With its lower costs, Dell sets out to undermine profits in the
markets it enters and destroy the margins that sustain its more entrenched competitors.
Their goal was to shrink the profit pool and take the biggest slice of it. Consumer electronics
companies, often with gross profit margins of more than 30 per cent, make an obvious
target for this ruthless approach whereas Dell’s gross margins are in the 18–19 per cent
range. Dell also benefits from the standardisation that brings down the cost of components
and removes the advantage once enjoyed by companies that invest in their own technology.
Dell prices were lowest due to the Dell’s cost structure which was the lowest in the industry
as a result of eliminating distributors, very little R&D and keeping overheads to a level of less
than 10% of sales. They directly transferred the savings to the customers and hence
exploited the low pricing strategy.

PLACE
Place is about delivering products to the customers. Some examples of distributions
decisions are selection of distribution channels, market, specific channel members,
inventory management, warehousing, distribution centres, order processing, transportation
of goods and reverse logistics

Dell’s knowledge of internet selling was fundamental to its success. Internet became the
major sales channel and they became one of the first companies to exploit internet as part
of its marketing strategy. They had extensive experience in direct marketing which they
continued on internet as well. Dell had a just in time inventory system where the parts are
not ordered or assembled until an order is made. This means that the pricing is lower, but
the benefit of having computers on display in a store is not available. Order processing times
were reduced as a result of virtual integration of the supply chain which further reduced
coordination and communication costs.

PROMOTION

This element is regarding communicating information about the product with the goal of
generating a positive customer response. Marketing communication decisions usually
include promotional strategy (push, pull, etc.), advertising, personal selling, sales force, sales
promotions, public relations, publicity and marketing communications budget.

Dell has been a pioneer in Direct Marketing. It’s simple but effective idea has been to sell
standardised electronic products direct to customers, usually over the internet or telephone
lines. That removes most of the research and development that is normally required, while
also cutting out retailers and other middlemen. Armed with the information it gets from
taking orders directly from customers, Dell has gained two other powerful advantages. One
is the ability to build products to match orders as they come in, slashing its inventory costs.
The second is a highly efficient marketing machine that can adapt its message based on real-
time results as orders arrive. The company has sold mainly to corporate customers: only a
fifth of its sales in the US are to consumers, and much less than that elsewhere.

At the height of success, DELL was positioned as the market leader in the PC market ahead
of the main rivals like Hewlett Packard and IBM. The phenomenal growth was a result of an
effective marketing mix. An effective marketing mix was achieved as they had a well
blended mix of the four elements (Product, Price, Promotion and Place), had successfully
created a competitive edge like low cost model, and matched the customer needs and
corporate resources as well. It had major successes in business and educational market
segments apart from the consumer segments. Dell’s share price was the top performing big
company stock of the 1990’s as it rose from 23 cents in 1990 to $68 in 1998!

 Today Dell Company has seemed to be taking a step back from being such an aggressive
competitor, to being just another company in the market.  
To regain our place at the top in the modern day Computer industry, we are very much
looking forward to our many innovations and new products.   Of these new innovations we
will be opening up new retail stores at key locations that will also serve as sites to bring
broken computers and desk tops to be repaired.  We will also be branching the company
into two separate directions Dell Home and Student, and Dell Professional to better serve
these two markets with their vastly different needs and wants.   With this separation the
two departments will begin to work independently on several new product lines and
software contracts so we can offer the...