Concept Summary of Direct From DELL Strategies That Revolutionized an Industry By Michael Dell

Scott Smith

High Technology Marketing

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. WalMart 1991 Converts entire line to 486… high technology priority 1993 $2 Billion in sales Scott Smith High Technology Marketing . 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.Timeline 1980 1983 Purchased first computer and takes it apart Wanted to beat IBM. Best Buy.

Sets up supplier network. Introduces PowerEdge servers for small and medium server markets Solidifies internet market.Timeline 1994 1996 1998 Launches Latitude Notebook Setting new records on battery life. Scott Smith High Technology Marketing . $12 million per day from customers.

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 Scott Smith High Technology Marketing .

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 Scott Smith High Technology Marketing .

. Scott Smith High Technology Marketing ..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.

 Price is not a sustainable competitive advantage.  Know EXACTLY what the customer wants and then provide it.Customer Lessons Learned  Form a direct model that specializes on market segments or customer types.  Sustain loyalty through customers and employees Response Time Quality Products Valuable Features Make the Experiencing of Products EASY Scott Smith High Technology Marketing .

Service  Best Value Awards.Key Actions  30 Day Guarantee (Industry’s First)  Performance Leader (Competitive Reviews)  Award Winner for Quality. Support. Highest Performance Awards Scott Smith High Technology Marketing .

etc. Scott Smith High Technology Marketing . Customer. Measure everything to build improvement. Facts are your friend. Geography. Use.Market Lessons Learned  You must target large        Gradual improvements 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     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.

Profitability.   Define Your Goals: Market  Penetration.3B Sales. Customer. Growth and then understand what is driving us. Geographic Area  Compare Sales with Total Market Sales.9B sales. Service Level Performance  Analyze Goal Progress by Product. 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.Analysis is Key  There is no system that does not  produce enough data to diagnose  its own inefficiencies. $220m Inventory 1998 $12. how to do more. $230M Inventory Scott Smith High Technology Marketing . Growth Rate. Examine Share. Sales Force Productivity.

Dell Market Structure Changes Over Time Scott Smith High Technology Marketing .

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

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? Scott Smith High Technology Marketing .

cultivate a commitment to personal growth.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. High Technology Marketing Scott Smith . hire ahead of the game. get them involved.

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

Dell Tied up whole channel by contracting SONY to manufacture. chartered plane for reporters and analysts. they still had power.Dell Market Coups  12 Mhz 80286 Computer doubles IBM’s 6 Mhz speed. gave them a laptop and flew to Los Angles… 4 1/2 yours later. Dell Introduced.” Server Dropped 17 percent in one year and reduced the size of the cash cow for competitors. Scott Smith High Technology Marketing .  Laptops:Lithium Ion doubles battery life Analysis: Laptop owners want long life batteries. Analysis: Technology enthusiast market wanted speed most of all. ask your vendor to match Dell’s price. Great PR  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.

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

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. Scott Smith High Technology Marketing .

someone else will. If you accept status quo as good enough. If we have a problem we have to fix it. supply chain. We know if we don’t. technology. ask WHY?… Challenge them to understand why? (understand the underlying economics from the standpoint of capital.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. you are managing in the rear view mirror. market trends). Don’t perfume the pig: Don’t make something appear better than it is. Elevate a win to company wide accomplishment Scott Smith High Technology Marketing .

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