Background: Dell Incorporation
Dell Incorporation (Dell, Inc.) was established in 1984 as PC’s Limited by Michael Dell. Nowadays, scope of Dell, Inc. products and services include PCs, servers, networking, and storage-related services. According to Hughess (2013), “Dell’s impact on the overall IT marketplace is substantial, with corporate revenue of almost $57 billion in fiscal year 2013” (p. 1). Despite ongoing world economic recession, Dell, Inc. “has been a leader in the compute, networking, and storage market space for almost three decades” (Hughess, 2013, p. 1). However, intense competition and constant changes in IT market require deep analysis and new approaches in Dell, Inc. marketing strategy regarding its market segmentation, targeting, and positioning.
Problem: Historical Market Segmentation
Since its foundation, Dell, Inc. announced “a consumer concentrated approach” avoiding intermediates so that “the company was able to pass the benefit to the consumer while reducing the cost of the product” (Dissanayake, 2012, p. 27). Originally, customers were segmented “by verticals (e.g., consumer, corporate, government and small business) as well as regions and size” (Davis, 2010, p. 8). Hence, Dell, Inc. has used direct sales channels (phone, Internet, and mail) to sell customized products not dividing these four segments into narrow sub-units.
Nonetheless, since 2009 Dell, Inc., management decided “to look across an aggregated view of these existing groupings to identify shared values relating to product features and supply chain capabilities” (Davis, 2010, p. 8). The need for the change came from “demand for commoditized products, changes in customer channel preferences, emerging market growth, component cost declines, a more capable supply base and globalization” (Davis, 2010, p. 3).
Therefore, to preserve Dell’s value chain as “cost effective and directly linked with customer’s satisfaction” market segmentation of customer groups like “privates, small businesses, large businesses, public/state organizations” had to evolve (Bose, 2012, p. 115). Hence, new marketing strategy required new market segmentation and targeting depending on demographics (customers’ age, gender, income, cultural background, education, and job), psychographics (customers’ social class, lifestyle, personality, opinions, and attitudes), geographical parameters (continent, country, state, province, city or rural areas), and behavior characteristics (customer buying motifs, habits and patterns, brand preference and loyalty, prior purchases) (Bose, 2012).
Nowadays, customers need cost reduced products and services fast, so Dell, Inc. now offers “Smart Selection, Ready to Ship”, “Built to Order, Standard Shipping”, and traditional “Customizable” options on their website (Dell, 2015). Moreover, Dell’s website highly recommends using “Smart Selection” with “best value, ready-to-ship systems prebuilt based on customer insights” because this way customers “get a simplified ordering process and fast shipping” (Dell, 2015). However, Dell, Inc. is still struggling to balance its original and new marketing strategies.
Introducing its brand philosophy and mission, Dell, Inc, states, “Listen. Learn. Deliver” (Dell, 2015). However, target markets are not yet evidently reflected in Dell’s marketing strategy, “Dell empowers countries, communities, customers and people everywhere to use technology to realize their dreams” (Dell, 2015). Hence, “everywhere” as geographical parameter is vague for market segmentation. Moreover, no demographic factors are taken into account when referring to “people” in general. However, psychographics are considered because a slogan “use technology to realize dreams” refers to customers’ lifestyle and personality (Dell, 2015).
Furthermore, behavior characteristics, namely buying motifs, are reflected in the following statement: “customers trust us to deliver technology solutions that help them do and achieve more, whether they’re at home, work, school or anywhere in their world” (Dell, 2015). Consequently, Dell, Inc. should tailor its traditional customer-focused marketing strategy by defining new target markets and place particular customers’ demographic, psychographic, geographical and behavioral characteristics in the center.
Solution: New Target Market
Customer-focused marketing strategy requires “a plan that put all the focus on the needs and expectations of particular customer segments and organizations” to satisfy customers and maintain their loyalty (Bose, 2012, p. 116). Hence, Dell, Inc. should “move from a single supply chain to a customer segmentation supply chain approach” (Davis, 2010, p. 1). After Michael Dell, the founder, and private equity firm Silver Lake Partners bought back Dell from public shareholder, new Dell’s strategy called Project North Star was announced: “to accelerate our solutions strategy and to focus on the innovations and long-term investments with the most customer value” (Dell, 2015). Hence, Dell, Inc. now focuses on IT solution services opposed to PCs for home and work.
A few years ago, though, Dell, Inc. was forced to acknowledge demographic, psychographic and behavioral characteristic of its young and social networks active customers “when its poor reputation routinely contributed to the virality of angry blog posts and memes” (Dilworth, 2013, p. 27). In 2006 Dell, Inc. experienced a battery problem with one of its product. Since it was impossible “to ignore the online howls of customer discontent”, marketing team had “to go out and participate in these forums that were just incredibly unpleasant” (Dilworth, 2013, p. 27).
The lesson was learnt when Dell, Inc. met a new type of customers, and @DellCares Twitter account was created to satisfy needs of the new target segment. Moreover, today “the company’s aggregated social media sites on Twitter, Facebook, LinkedIn, YouTube, Slideshare, Flickr, Pinterest are so extensive that Dell has a webpage explaining the different accounts” (Dilworth, 2013, p. 27). Thus, social networks are considered to be one of the most effective tools for new generation customer support.
However, a shift to IT solutions and services “has changed the nature of Dell’s sales process, and its sales team’s relationship to its marketing team” (Dilworth, 2013, p. 27). Communication on Facebook, Twitter, and other social networks does not satisfy another target segment, namely B2B.
Hence, demographic, psychographic, geographical, and behavioral characteristics of the segment require a different approach for customer support because of complex software and IT solutions services. Geographically, Dell’s global presence in IT market is presented by the following figures: “9M Dell’s global PC shipments in Q2 2013 (Gartner)”, “11.8% Dell’s global market share in Q2 2013 (Gartner)”, “>2B Worldwide shipments of connected devices by end of 2015 (IDC)”, and “$735.1B Value of global connected device shipments by end of 2015 (IDC)” (Dilworth, 2013, p. 28). In addition, challenging behavioral characteristics of B2B customers require customer service to be always at hand.
Nonetheless, new technology gives an opportunity for Dell, Inc. to be always on line. Hence, Dell had to change its customer service strategy by connecting “employees through social media training seminars… to engage with customers on their own social pages, based on their role” (Dilworth, 2013, p. 28). This new strategy ensures customer’s satisfaction to be ultimate and global.
In addition, deep analysis of enterprises’ needs and expectations revealed a new target market for Dell, Inc. The growing impact of “Big Data and public/private cloud services… on virtually every vertical industry” was detected (Hughess, 2013, p. 1). The new target market is connected with Dell’s core philosophy of developing strong customer relationships to help customers to cope with constant data volume increase. Therefore, Dell can now use “its services capabilities to help companies manage the complexity inherent in cloud migration, security/risk/compliance, and other transformational processes” (Hughess, 2013, p. 3).
To satisfy emerged needs, Dell can “play at a high level around cloud, virtualization, and datacenter” and also “provide specific assistance on how these technologies should evolve in the context of the larger IT themes” using its Dell Social Media Command Center (Hughess, 2013, p. 3). Bearing in mind its customer-focused marketing strategy, although Dell’s “storage-related services may take a backseat to the sale of hardware and software”, it is crucial for Dell that customers “demand high-quality support, storage transformation guidance, and implementation and design services” (Hughess, 2013, p. 3). Therefore, behavioral characteristic of the new target market reveal that customers need a vendor for both “short-term tactical and long-term strategic” (Hughess, 2013, p. 3). Although the new target market of storage services demands large investments, it will pay off by customers’ loyalty.
During its history since 1984, Dell Incorporation experienced significant changes in products scope, marketing and sales strategies. Nonetheless, customer focus has always been the core of Dell’s business strategy. The new target markets and the new customer service models still place satisfaction of customers’ needs and expectations first. This way Dell Incorporation wins customers loyalty to the brand. However, the new target markets should be clearly stated in the company’s mission and brand’s positioning to enhance relationship between Dell Incorporation and customers.
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Davis, M. (2010). Case study for supply chain leaders: Dell’s transformative journey through supply chain segmentation. Gartner Research, ID Number G208603, 1-11. Web.
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Dissanayake, D. (2012). Integrated communication, integrated marketing communications and corporate reputation: Evidences from Dell Computer Corporations. International Refereed Research Journal, 3(3), 26-33. Web.
Hughess, P. (2013). Storage and data management services: Vendor profile. IDC, 1(243115), 1-7. Web.