Marketing Mix at Dell Inc
Marketing can be viewed as a set of functions that include product development, packaging, pricing, advertising, selling, distribution and customer service. Marketing tactics are referred to as the “4Ps”: product, place, promotion, and price. (Kotler, 2003). The marketing mix is probably the most famous phrase in marketing. It was James Culliton, who coined the expression Marketing Mix and it was Jerome McCarthy, who described the variables of marketing mix in terms of the four Ps.
The product variables include: 1. Product line and range, 2. Design, quality, features, models, style, size and warranty, 3. Packaging, type, materials, label, 4. Branding and trade mark, 5. Service, pre-sale and after-sale, 6. New Products.
The place variables are: 1. Channels of distributions, types of intermediaries, channel policy and design, location of outlets, channel remuneration, and dealer-principal relations, 2. Physical distribution, transportation, warehousing, inventory, order processing, etc.
The price variables are: 1. Pricing policies, levels of prices, levels of margins, discounts and rebates, 2. Terms of delivery, payment terms, credit terms and installment facilities, 3. Resale price maintenance.
Promotion variables are: 1. Personal selling, objectives, quality of sales force, cost level, level of motivation, and level of effort, 2. Advertising, media mix, budgets, allocations, and programs, 3. Sales promotional efforts, display, contests, trade promotions, 4. Publicity and public relations. The application of marketing mix in the case of Dell Inc. can be illustrated as follows:
Dell Inc. supplies PCs to business and domestic customers across the globe using direct marketing approach. In addition, Dell supplies a range of IT products and services to businesses, including powerful servers, storage, workstations, notebooks, and desktops. Dell employs approximately 47,800 people worldwide. Total sales currently exceed $43.5bn per annum.
Dell places product quality as one of the main criteria. Recently Dell voluntarily recalled certain Dell-branded batteries with cells manufactured by Sony and offered free replacements for these batteries. This is because it has been found that under rare conditions, it is possible for these batteries to overheat, which could pose a risk of fire. This measure shows how much importance Dell places on product quality. The main part of Dell’s success is its strategy of offering consumers ‘choice and control’ when it comes to product purchase.
Buyers can click through Dell and assemble computer system piece by piece, choosing components like hard drive size and processor speed based on their budgets and needs. This direct contact with consumers gives Dell a competitive advantage. Dell’s approach to innovation is customer driven. Moreover, Dell has returned to one year standard warranties on all its products. Dell builds computers on a just-in-time (JIT), build-to-order (BTO) basis. Therefore, if a new technology emerges it can be included immediately.
By catering to customers across nations from the internet and through regional centers, Dell has acquired the location strategy advantage. From 1999, Dell has engaged in extensive marketing campaigns. The “Be Direct” promotion campaign has changed the way consumer view Dell. The campaign focus on consumer benefits of new technology rather than comparing its products with other rival products or company.
Dell advertises in the national newspapers, computer magazines, on the Internet and TV and by placing inserts in newspapers and magazines. Dell’s advertising campaigns are designed with one central objective – to get a potential customer to ring up or go online and order a computer. Dell measures the impact of each individual marketing campaign by assessing the volume of calls to sales representatives and the number of clicks to the Dell website.
The company also uses direct mail. Dell publishes various 24-page monthly catalogues, describing available product ranges. Different catalogues are geared to separate Dell markets – one for the small businesses and the other for domestic customers. This is sent to a selected group of customers who are on Dell’s mailing lists. The Internet offers many advantages to a direct marketing company. Products can be shown and described in detail on a website. Customers can browse at their leisure without leaving their home or office (Business2000, 2005).
Dell has long been using rebates and discounts as part of its promotion campaign. This helped it to survive competition in the industry. Dell often used to offer brief promotions such as extra memory or a free flat-panel display that might not have remained available if a consumer took a day or two to make a purchasing decision.
Rebates have long been popular with electronics retailers, because they allow for higher list prices and because many customers never bother filling out the forms.
Dell is able to offer competitive pricing mainly because it uses the JIT – Just in time inventory model. The JIT/BTO approach means that Dell does not have to keep stocks of components or readymade computers. At Dell Inc. usually no component is in the factory for more than three days (Business2000, 2005). Stock, which is also called inventory, costs money. Dell does not have these costs and, therefore, can sell to the customer at a lower price.
Further, by having regionalized production centers, Dell has diversified the risk of concentration of labor, production costs, and transportation costs. When production and transportation costs are cut down, the pricing can be competitive. For example basing plants in Xiamen, China Dell has been able to provide products and services at the local prices. By following a business model that allows a consumer to design his own computer cost of carrying inventory is minimized. This allows the company to offer its products at competitive rates.
The company manufactures its computer systems in six locations: Austin, Texas; Nashville, Tenn.; Winston-Salem, North Carolina; Eldorado do Sul, Brazil (Americas); Limerick, Ireland (Europe, Middle East and Africa); Penang, Malaysia (Asia Pacific and Japan) and Xiamen, China (China). Dell sells its products and services worldwide… By catering to customers across nations from the internet and through regional centers, Dell has acquired the location strategy advantage.
The company’s strategy of selling over the Internet — with no retail outlets and no middleman — has been as discussed, admired and imitated as any e-commerce model. Dell’s e-commerce website, www.dell.com, is one of the busiest in the world. The site is distributed across 86 countries, using 28 languages or dialects and 29 different currencies (Business2000, 2005). On the website, customers can review, configure, and price computer systems for themselves. They can place an order online and then track the order from the manufacturing stage to actual delivery. This gives greater market reach to the company.
Dell is one of the most successful companies in the world. Though we may study the marketing mix in order to understand the success of Dell Inc., it must be mentioned that the Dell combination of direct marketing and just-in-time, build-to-order manufacturing brings the benefits of low cost and high quality to each and every customer. It is this focus on customer value that is truly responsible for Dell’s market leadership position.
Annual Report, Dell Inc., 2005
Official Website, Dell Inc., 2006, http://www1.us.dell.com/content/topics/global.aspx/corp/background/en/facts?c=us&l=en&s=corp&~section=000
Philip Kotler, Marketing Management, 2003.
Business2000 (2005). Dell- Directly from Dell to the Customer. http://www.business2000.ie/cases/cases_8th/case1.htm