High Technology Marketing

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Concept Summary ofDirect From DELLStrategies
That Revolutionized an IndustryBy Michael Dell
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Timeline
1980 Purchased first computer and takes it
apart 1983 Wanted to beat IBM, Sells upgraded PCs
out of UT Dorm Room 1984 Registers Dell Computer
Corporation DBA PCs Limited Sells Direct to end
users 1986 12 mhz 285 based system. 30 day money
back guarantee 1987 International subsidiary in
UK 1988 Initial IPO 30 million 1989 Accumulates
excess inventory 1990 First to sell through
retail CompUSA, Best Buy, WalMart 1991 Converts
entire line to 486 high technology
priority 1993 2 Billion in sales
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Timeline
1994 Launches Latitude Notebook Setting new
records on battery life. 1996 Introduces
PowerEdge servers for small and medium server
markets 1998 Solidifies internet market. 12
million per day from customers. Sets up
supplier network.
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Dells Entrepreneurial Spirit

• Dells Stamps Eliminate the MiddlemanLook for
  a Commercial OpportunityThe power of catalog
  advertising
• Newspaper SubscriptionsIdentify Segments of High
  Demand and High Revenue People who just
  moved or just married Generate the Lists and
  Target them
• Turn Fascination to Hobby and to Business

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Dell Computer

• Goal Build a Better Computer than IBM
• Driving Passion How can we make the process of
  buying a computer better?
• Sell Direct
• Eliminate Reseller Markup
• Pass Savings to the CustomerFor Dell, the
  timing was right the beginning of a new consumer
  industry Continued high growth and limited supply

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Strategic Questions

• Where are we today?
• What do we think it will become?
• Where do we want it to go?
• What opportunities can take us there?
• How can we take advantage of them?Then make a
  wish list...

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Customer Lessons Learned

• Form a direct model that specializes on market
  segments or customer types.
• Know EXACTLY what the customer wants and then
  provide it.
• Price is not a sustainable competitive advantage.
• Sustain loyalty through customers and
  employeesResponse TimeQuality ProductsValuable
  FeaturesMake the Experiencing of Products EASY

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Key Actions

• 30 Day Guarantee (Industrys First)
• Performance Leader (Competitive Reviews)
• Award Winner for Quality, Support, Service
• Best Value Awards, Highest Performance Awards

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Market Lessons Learned

• Gradual improvements reduce risk and allow you
  to take advantage of technology
• It is hard to notice how fast or slow you are
  growing
• Read the market and then try to understand what
  it means
• Understand the economies of each segment
  Product, Use, Geography, Customer, etc.
• Measure everything to build improvement. Facts
  are your friend.

• You must target large companies to grow
• Provide the Best Support
• Engage in Global Expansion
• Features must compel the customer to buy
• Inventory flow speed is the key to survival
• Identify problems early and then fix them
• Involve your customers early in development

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Analysis is Key

• There is no system that does not produce enough
  data to diagnose its own inefficiencies.
• Define Your Goals Market Penetration, Growth
  Rate, Profitability, Sales Force Productivity,
  Service Level Performance
• Analyze Goal Progress by Product, Customer,
  Geographic Area
• Compare Sales with Total Market Sales, Examine
  Share, Growth and then understand what is driving
  us, how to do more, and where next?

• Eliminate Resellers
• Eliminate Channel Inefficiencies
• Speed the manufacturing process
• Add Velocity less time in channel steps
• Squeeze investment and inventory out of the
  channel 1993 2.9B sales, 220m
  Inventory1998 12.3B Sales, 230M Inventory

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Dell Market StructureChanges Over Time
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Managerial Lessons Learned

• Hire people for potential to grow and develop
  Self Reliant, Results Oriented, Driven to Lead.
• Recruit for succession (Train them to replace
  you)
• Stress Achieving Goals.
• Accountability for Results 360 degree reviews.
• Responsibility to one another
• Do Not Hoard Power
• Implement through Dual Reporting By Function,
  Market, Product
• Make successes a win for the entire company
  through communications

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Key Recruiting Issues

• Can they think in economic terms?
• What is their definition of success?
• How do they relate to people?
• Do they understand the strategy of the business
  they are involved in?
• Do they understand our business?

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Talking to Employees

• What are customers telling you?
• How do you think the companys products are
  doing?
• What are our biggest challenges?
• What are the biggest threats to our success?
• How can the company support you better?
• KeysMobilize people around a common goal, hire
  ahead of the game, cultivate a commitment to
  personal growth, get them involved.

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Train Employees to be Owners

• Look at goals, make them clear to everyone.
• Study the obvious for non-obvious solutionsAsk
  customers how they would have it solved.
• Make failures with learning acceptable
• Constantly question even good stuff. No cover up.
• Treat employees as owners.

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Dell Market Coups

• 12 Mhz 80286 Computer doubles IBMs 6 Mhz
  speed.Analysis Technology enthusiast market
  wanted speed most of all.
• LaptopsLithium Ion doubles battery
  lifeAnalysis Laptop owners want long life
  batteries. Dell Tied up whole channel by
  contracting SONY to manufacture. Dell
  Introduced, chartered plane for reporters and
  analysts, gave them a laptop and flew to Los
  Angles 4 1/2 yours later, they still had power.
  Great PR

• Low and Medium Size Server Market Analysis 1
  Servers have higher marginsAnalysis 2
  Competitors were treating servers as a cash cow
  for feeding the PC market. Dell entered market
  at about 20 lower price and told customers even
  if you dont buy from Dell, ask your vendor to
  match Dells price. Server Dropped 17 percent
  in one year and reduced the size of the cash cow
  for competitors.

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Enter the Web

• Increases Speed to Market
• Speeds Information Flow
• Enables Superior Customer Service.
• Provides a High Quality Product
• Gives Customers Direct Access to Custom Made
  Systems for High Performance
• Provides the Latest Technology relevant to that
  customer.

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Enter the Web

• Dell Premier PagesTechnical SupportDiagnostic
  databasesOn-Line OrderingSpecial Pricing
• Key Shrink time and required resources to meet
  customer needs.

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Market Strategy

• It is better to be first at the risk of being
  wrong than it is to be 100 perfect two years too
  late.
• If customer demand changes, ask WHY? Challenge
  them to understand why?(understand the
  underlying economics from the standpoint of
  capital, supply chain, technology, market
  trends).
• Dont perfume the pig Dont make something
  appear better than it is.
• If you accept status quo as good enough, you are
  managing in the rear view mirror.
• If we have a problem we have to fix it. We know
  if we dont, someone else will.
• Elevate a win to company wide accomplishment