Dell’s Direct Sales and Built-to-Order Process Strategies
Dell was founded by Michael Dell in the year 1984. Towards the end of the 1990s, the company had attained the position of the largest direct PC’s seller in the world. In the year 2005, Dell established its design centre in Singapore (Sg, n.d.). Dell is the world’s largest personal computer supplier and sells the computers directly by using mail-order catalogues and the internet. Dell offers a number of products to its consumers which include notebooks, workstations, monitors, high-end storage products, software, desktops, network servers, handheld computers, printers, and computer peripherals. The company also offers a lot of accessories and electronics that include digital cameras, gaming consoles, projectors, networking accessories, camcorders, LCD televisions, and surround sound speakers (Farfan, 2017).
Dell targets the life style groups and the age groups by offering a number of services and products to its consumers. Dell also takes the gender roles into consideration as over the years the numbers of women have attained greater economic independence than earlier and the PC designs reflect the change (R, 2012). Dell also designs its products as per the behavioural segmentation keeping in mind the requirements of students, business people, and individuals purchasing the computers for home use. Dell also designs its products keeping the income-segmentation in mind and while most of its products are designed for the middle-income target segment, the company has also started developing low-end products in the recent years especially in the developing economies (Farfan, 2017).
Dell has selected a unique business strategy to meet its customer requirements, that is based on the built-to-order and direct sales strategy. With this strategy, Dell has been able to obtain a clear understanding of the market demand and customer requirements and was able to aptly project the future demand (Sg, n.d.).
In its direct sales strategy, Dell is able to discern the customer’s individual requirements and also the market movement with the help of the information gathered from the order, purchasing, delivering, repairing, replacing, and the upgrading by the customers. By processing this information Dell is able to offer its consumers add-on services and products which will meet the consumer requirements and also provide technical assistance to the customers, which results in a loyal customer base for Dell (Dells Competitive Advantage & Strategy, 2015).
The other strategy employed by Dell is the built-to-order process. Dell has managed to minimise the human intervention in the process and has integrated a selected number of suppliers, who supply the high-quality components and product parts, into its physical production system. The whole process of order-fulfilment is managed by an external and internal information system (Dells Competitive Advantage & Strategy, 2015).
Before Dell introduced the concept of build-to-order computers, the consumers went to a retail store or an electronic store to purchase computers. There was no direct or indirect interaction with the computer manufacturers and the point of consumer interaction was limited to the salesperson of the particular outlet (Jayashree, Shojaee, & Pahlavanzadeh, 2011). The main problem that the customers faced was that they could not get production specific information about the computers that they were purchasing since the salespeople did not have knowledge about the manufacturing or related processes (Linoff, & Berry, 2011).
Dell employs a CRM strategy that focuses on making segmentations and identifying the potential customers, listening to the customers, learning from the customers, and each member of Dell’s team is responsible for the learning from the customers (Harsono, 2012). Dell uses three different kinds of software that automate and facilitate the CRM process. These are:
- Hotlink: This is the marketing automation software which helps in real-time monitoring of the trends in markets and consumer needs. This software also provides Dell with word of mouth advertising (R, 2012).
- Premier pages: This is the software that has the custom designed internet sites or web-pages for both the individual and the institutional customers. These web-pages allow all kinds of customers to accelerate and simplify the support and procurement processes (Jali, 2011).
- ProClarity: This software analyses all the data and highlights the negative and positive areas of the business and measure the successes and trends of the business. It helps the marketing department in tracking the consumer activity, sales, and developing marketing mixes. It also helps the sales management to track the accounts and act on the lapsed quotes (R, 2012).
By implementing the new CRM-SCM strategy Dell has built a strong relationship with not just the consumers but also its suppliers. This strategy ensures that the computer components or parts required by Dell’s customers are always available from the suppliers to meet the specific consumer demands. It also put an effective system in place which ensured that the final product was efficiently and effectively; shipped and delivered directly to the customer. This direct consumer focus of Dell’s CRM strategy has given the company a big competitive advantage over its rivals (Jayashree, Shojaee, & Pahlavanzadeh, 2011). By implementing the customer-focused CRM strategy Dell has developed a very loyal customer base and since it costs more to gain new customers than retaining the old customers, the strategy has proven to be very cost effective by generating a lot of repeat business for Dell (Greenberg, 2010).
Although Dell’s CRM strategy has proved to be very successful there are a few drawbacks or risks associated with the same. The three major risks or drawbacks with the Dell CRM model are:
- Dealers help in promoting the brand name of a company they are associated with. But in the direct CRM model of Dell, the company does not have the scope to forge any strong dealer relationships. The other big names in the computer business like HP, Intel have an advantage of their brand being pushed by the dealer networks. This could also have a negative impact on the brand name of Dell as they do not have the dealer support to promote the brand and its products to the customers (Jayashree, Shojaee, & Pahlavanzadeh, 2011).
- Since Dell does not manufacture any parts or components of the computer, therefore, it has no research and development facility. The company is dependent on its suppliers for a standard technology which it offers to its customers. But, there is a lack of visibility along the complete supply chain of Dell ((R, 2012)). Dell has a huge range of products, the components for which are sourced from different suppliers for customers that are spread across countries. The quality checks become difficult and this can result in product recall causing damage to the reputation of the company. Dell faced one such situation in 2004 when it had to recall almost 4.4 million laptop adapters from all over the world due to their overheating defect (Dudovskiy, 2015).
- Dell is dependent on its suppliers for all the product components since it does not manufacture any part of the computer. This limits Dell’s scope as it can only work with a few large suppliers and in case some suppliers withdraw, then Dell will suffer huge losses in income and revenue (R, 2012).
References:
Baran, R. J., & Galka, R. J. (2013). CRM: the foundation of contemporary marketing strategy. Routledge. Retrieved from: https://books.google.co.in/books?hl=en&lr=&id=d5SXsI7Tx5AC&oi=fnd&pg=PR3&dq=CRM:+The+Foundation+of+Contemporary+Marketing+Strategy&ots=rQw3tfy-Rq&sig=ZO9g_12MPPttLz_V7lwK7Aj0uzo#v=onepage&q=CRM%3A%20The%20Foundation%20of%20Contemporary%20Marketing%20Strategy&f=false
Dell’s Competitive Advantage & Strategy. (2015, November 25). Retrieved from: https://toughnickel.com/industries/Dell-Competitive-Advantage
Dudovskiy, J. (2015, September 03). Dell SWOT Analysis. Retrieved from: https://research-methodology.net/dell-swot-analysis/
Farfan, B. (2017, July 22). All About Dell Computer: Mission, Stats, History, Facts Research Profile. Retrieved from: https://www.thebalance.com/dell-computer-company-profile-2892813
Greenberg, P. (2010). The impact of CRM 2.0 on customer insight. Journal of Business & Industrial Marketing, Volume 25, Issue 6, pp. 410-419. Retrieved from: https://www.emeraldinsight.com/doi/abs/10.1108/08858621011066008
Harsono, A. (2012). HOW IT-ENABLED SCM AND E-COMMERCE HELP DELL IMPROVE COMPETITIVE ADVANTAGE. SISFOTENIKA, Volume 2, Issue 1. Retrieved from: https://www.jurnal.stmikpontianak.ac.id/file/ALEXANDER_-_SISFOTENIKA_VOL2_NO1_2012.pdf
Jali, S. (2011, March 31). CRM practices in Dell Inc. Retrieved August 18, 2017, from https://www.slideshare.net/shrayjali/crm-practices-in-dell-inc
Jayashree, S., Shojaee, S., & Pahlavanzadeh, S. (2011). A critical analysis of Customer Relationship Management from strategic perspective. In 2010 International Conference on E-business Management and Economics, IACSIT Press, Hong Kong, Volume. 3, pp. 340-345. Retrieved from: https://www.ipedr.com/vol3/69-M10082.pdf
Linoff, G. S., & Berry, M. J. (2011). Data mining techniques: for marketing, sales, and customer relationship management. John Wiley & Sons. Retrieved from: https://books.google.co.in/books?hl=en&lr=&id=AyQfVTDJypUC&oi=fnd&pg=PR37&dq=customer+relationship+management&ots=KXFsrpTYBM&sig=J1EpPuoyuBFHbtZ7fSleLtIv-2s#v=onepage&q=customer%20relationship%20management&f=false
(2012, December 04). Customer relationship management (CRM) is a combination of people, processes and technology that seeks to understand a company’s customers. Retrieved from: https://writepass.com/journal/2012/12/customer-relationship-management-crm-is-a-combination-of-people-processes-and-technology-that-seeks-to-understand-a-companys-customers/
Sg, D. (n.d.). Our history. Retrieved August 18, 2017, from https://www.dell.com/learn/sg/en/sgcorp1/our-history
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
