Concept Summary of

Direct From DELL

Strategies That Revolutionized
an Industry

By
Michael Dell

High Technology Marketing Scott Smith

 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 PC’s 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
High Technology Marketing Scott Smith
 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.

High Technology Marketing Scott Smith

 Dell’s Entrepreneurial Spirit
• Dell’s Stamps: Eliminate the Middleman
Look for a Commercial Opportunity
The power of catalog advertising
• Newspaper Subscriptions
Identify 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

High Technology Marketing Scott Smith

 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 Customer

For Dell, the timing was right: the beginning of a new consumer
industry: Continued high growth and limited supply

High Technology Marketing Scott Smith

 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...

High Technology Marketing Scott Smith

 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 employees
Response Time
Quality Products
Valuable Features
Make the Experiencing of Products EASY

High Technology Marketing Scott Smith

 Key Actions
• 30 Day Guarantee (Industry’s First)
• Performance Leader (Competitive Reviews)
• Award Winner for Quality, Support, Service
• Best Value Awards, Highest Performance Awards

High Technology Marketing Scott Smith

 Market Lessons Learned
• 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
• 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.

High Technology Marketing Scott Smith

 Analysis is Key
• There is no system that does not • Eliminate Resellers
produce enough data to diagnose its • Eliminate Channel Inefficiencies
own inefficiencies.
• Speed the manufacturing process
• Define Your Goals: Market
Penetration, Growth Rate, Profitability, • Add Velocity less time in channel steps
Sales Force Productivity, Service Level • Squeeze investment and inventory out
Performance of the channel:
• Analyze Goal Progress by Product, 1993 $ 2.9B sales, $220m Inventory
Customer, Geographic Area 1998 $12.3B Sales, $230M Inventory
• Compare Sales with Total Market
Sales, Examine Share, Growth and
then understand what is driving us, how
to do more, and where next?

High Technology Marketing Scott Smith

 Dell Market Structure
Changes Over Time

High Technology Marketing Scott Smith

 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

High Technology Marketing Scott Smith

 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?

High Technology Marketing Scott Smith

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

High Technology Marketing Scott Smith

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

High Technology Marketing Scott Smith

 Dell Market Coups
• 12 Mhz 80286 Computer doubles
IBM’s 6 Mhz speed.
Analysis: Technology enthusiast
market wanted speed most of all.
• Laptops:Lithium Ion doubles battery life
Analysis: 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
High Technology Marketing Scott Smith
• Low and Medium Size Server Market
Analysis 1: Servers have higher
margins
Analysis 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 don’t buy from Dell, ask
your vendor to match Dell’s price.”
Server Dropped 17 percent in one year
and reduced the size of the cash cow for
competitors.
 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.

High Technology Marketing Scott Smith

 Enter the Web
• Dell Premier Pages:
Technical Support
Diagnostic databases
On-Line Ordering
Special Pricing
• Key: Shrink time and required resources to meet
customer needs.

High Technology Marketing Scott Smith

 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).
• Don’t perfume the pig: Don’t 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 don’t, someone
else will.
• Elevate a win to company wide accomplishment

High Technology Marketing Scott Smith