Introduction:

Dell is one of the world's largest computer systems companies, which is highly distinguished by its direct
channel marketing policy. Furthermore it is globally known for building personal computers, enterprise
products like servers as well as storages and IT solutions which are customized per order to match the
customer's needs. These services are mainly low cost with good quality and are ones that can be
considered good value for money. It is also remarkable to see how Dell that was founded on the basis of
direct marketing operations beginning with telephone sales could swiftly embrace the internet as its main
direct sales channel.

In recent years, Dell was hit by slower growth and increased competition in its core market segments. In
addition, Dell lost its leadership position after HP merged with Compaq to assume the market leader's
position.

This report looks at the success story of Dell in its marketing approach, highlighting the key components
of its marketing mix as well as its segmentation, targeting and positioning process. Moreover the report
will analyze and discuss the company's pricing strategies and objectives in response to the slow market
growth and increased competition while exploring and suggesting further options that can increase Dell's
revenue and market share.

II. Dell's Segmentation, Targeting and Positioning

(STP):
The formula of segmentation, targeting and positioning is the base for strategic marketing. Companies
realize that they cannot appeal to all customers but have to identify the customers they are able to serve
best and profitably. According to Kotler, "A company must identify the parts of the market that it can serve
best and most profitably".

The computer market has various products which can basically be classified into software and hardware
categories where each are sub-divided into various product segments. It is clear that Dell is focused on
the computer hardware market where it started with the desktop personal computer as its initial product
segment. Further product segments such as notebooks, servers and computer peripherals have been
added to its marketing mix as revenue increased. In addition, Dell has partnered with major corporations
such as Microsoft to ensure their products are equipped with the latest software as per customers'
needs.

Dell mainly uses customer segmentation in its market strategy along with the product segmentation
where it is targeting several market segments and designing separate products or offers for them. On one
hand, geographically, Dell has segmented the market into the US/Americas, EMEA and Asia Pacific-
Japan where each area has different pricing and marketing strategies. On the other hand,
demographically, there is no age, gender or race bias but income, occupation and education play a role in
deciding the customer needs and hence the product offer.

It is also worth noting that from a behavioral view, Dell focuses on the benefits sought by consumers such
as low price and good quality and service. It also carefully selects customers with relatively predictable
purchasing patterns and low service costs, allowing itself an opportunity to develop a core competence in
targeting and keeping a specific database for target customers.

IV. Dell targets two classes of customers

a) Relationship Customer:
The first is the relationship customer such as large corporations, government and education sectors.
These customers provide the largest portion of profit and are therefore supported by dedicated sales
representatives or account managers. A large share of Dell's business stems from long-term corporate
relationship accounts for which Dell has developed tailored customer-specific web sites such as "Premier
Pages" with predetermined custom specifications and budgets, giving them access to product design,
order status and product support and service information.

b) Transactional Customer:
The second is the transactional customer who is price-sensitive looking for low cost, more reliable, quality
service and added value products. These are mainly individual customers who are more likely to access,
choose and buy online as a mean to fulfill their product requirements and customer needs. To obtain
stable demand in this segment, Dell used the latest technology products to target buyers who had regular
upgrade purchase patterns, required little technical support, and paid by credit card.

This report suggests that Dell's customer segmentation is the main factor in their market strategy as it is
able to use these segments to understand the market needs and demands, this can consequently
influence its product segmentation strategy and the customized product offers that Dell can introduce.
Clearly it makes sense that Dell does not target a product segment until demand and development
standards have been established so it does not affect its brand image and value proposition.

Dell's value proposition is offering equivalent quality computers at a lower 'price for performance'. As
many large corporations, Dell had to alter its positioning to maintain its competitive advantage as well as
its main value proposition. Therefore in the early days, Dell positioned itself as a premium computer
company through an easy and convenient internet-based sales medium and outstanding service.
Gradually this further growth and increased advertising managed to establish Dell's position in
consumers' minds and presented it as an aggressive, value-oriented computer manufacturer.

Even when later this initial advantage has disappeared as more competitors caught up with online
marketing and price strategies. It is clear that Dell's flexibility in extending its product segments while
maintaining its brand image and positioning towards its targeted customer segments have enabled the
company to maintain revenue and market share growth.

V. Dell's Marketing Mix:

a) Product:
Dell offers its customers a wide range of computer systems workstations, servers, desktop computers and
notebook computers as well as storage products and solutions.

Dell also extended their selection by adding computer hardware peripherals, computer software as well
as support services. Never the less, Dell does not manufacture the components of its final products, but
instead it relies on a number of trusted suppliers who have convenient warehouse facilities within 15
minutes of Dell's production centers. Analysts at Data monitor and Valanium associates have been critical
about this approach and considered Dell's dependence on third party suppliers as a major threat to its
long term success, however Kraemer and Tuckwell have praised this cost effective approach and its
positive impact on Dell's pricing strategies.

b) Place:
The place or distribution channel is one of Dell's distinct advantages in their marketing mix. This is
because Dell uses a direct channel model where it sells its products directly to the customer without need
for a distributor or a middle man. Though it initially started with selling products over the phone using a toll
free number that customers can call free of charge, they were the first to adopt advanced technology and
use the internet as a direct channel to sell its products.

The direct channel model enabled Dell to reduce costs and minimize inventories and so it has been able
to pass these savings to customers in the form of lower prices.

c) Price:
Price is the amount of money charged for a product or service, or the sum of the values consumers
exchange for the benefits of having or using the product or service.

In this case Dell provides high quality computer systems at the lowest price to match the customer's
expectation of value for money. It is also able to supply products at low price by cutting out all costs of
manufacturing parts as well as costs associated with retailers and distributors.

As pricing remains a major factor in the customer's buying decision, Dell uses the internet to get a
reasonably accurate idea of the market's supply and demand, hence reflecting on its price changes and
promotions.

d) Promotion:
Promotion is the most important component of the four P's so it is crucial to understand and be able to
promote a product. Here it can be seen how Dell uses many different promotional methods to market their
products, such as advertising on television, on the internet, in magazines and newspapers as well as
direct mail ad campaigns. It even uses sponsorships in professional sports as well as product placements
in films and television in the marketing techniques. Perreault et al suggest that direct sales channels and
direct customer relationship approach has enabled Dell to fully understand its customer's requirements
and preferences as well as to maintain its competitive edge.

It is clear from the above details that Dell's current marketing mix is one of the main factors that contribute
to its competitive advantage. The way the company is able to use its marketing strategy should allow the
company to leverage its competitive advantage in its core market segments. However, Dell should take
advantage of the market opportunities that could potentially increase the business revenue and
strengthen its market position. These opportunities will require changes in the market strategy in order to
fulfill the market demands, hence increasing profits and market share.