Case Study Analysis Owen Hendershot, UMFK, 2008

 Introduction  Company Overview  History  Strategy  Issues  Customer Decisions  Attempted Solutions  Recommendations  End Results  Questions Owen Hendershot, UMFK, 2008

 2004 Dell sets goal to sell $60 million per day by end of fiscal year  Dell sells $52 million per day, though it loses more than 99% of visitors to Dell.com ◦ A small decrease in the attrition rate would increase sales to the desired amount ◦ A large increase in online shoppers would also increase sales to the desired amount Owen Hendershot, UMFK, 2008

 Leading computer manufacturer with over 70% market share  Worldwide headquarters in Round Rock, Texas Owen Hendershot, UMFK, 2008

 Founded in 1984 by Michael Dell in his dorm room  Business based on Build-to-order PCs. ◦ Reduces Costs ◦ Parts don’t become obsolete ◦ Customers configure their own products  1996 Dell launched on-line sales through its website, Dell.com ◦ Targets tech-savvy consumers  1997 Sales reached $1 million per day through only 30 customers ◦ By the following year sales increased to $3 million per day  2000, on-line sales grow to $50 million per day Owen Hendershot, UMFK, 2008

 Segmenting ◦ Relationship and Transaction  Branding ◦ If people know what the want, Dell is where they can get it  Instead of Making products for customers, let customers make the products  Relationship Customers ◦ Already established long term relationships  Services such as DellPlus Owen Hendershot, UMFK, 2008

 Decrease attrition rate on Dell.com ◦ Over 99% of visitors leave Dell.com without making a purchase ◦ To reach the goal of $60 million, attrition would only have to decrease by 0.2%  Dell is not necessarily losing customers to other companies ◦ Some of the customers visit the site multiple times before making a purchase ◦ Only 5.7% of visitors to Dell actually buy PCs online  Increase the number of people that shop online Owen Hendershot, UMFK, 2008

 Good ◦ Branding already established ◦ Customers don’t have to search for what the best computer, because they can build it ◦ Services only offered through Dell attract relationship customers  Bad ◦ In comparison to other build-to-order companies, prices are high ◦ Lack of knowledge about specific computer components may scare away customers ◦ Inevitable long wait for customer service frustrates Dell customers. Owen Hendershot, UMFK, 2008

 Visually/Morally Appealing ◦ “new (PRODUCT) RED TM artist designs for Studio laptops. Designed to help eliminate AIDS in Africa”-Dell.com ◦ Let people design the appearance themselves  Dell offers new features such as preloaded movies  Increase number of people that purchase PCs online by targeting markets such as Gamers and Small and Medium Business owners.

 Many customers are willing to spend an extra $75 for a customized “designer” PC  Customers now have the ability to preload movies to their PC for $20 a piece  2007 Dell announces PCs designed specifically for gamers and SMB owners, in turn increasing the amount of customers that would be willing to buy from Dell.com

 Increase information on PC components available on or through the website  Make special offers more obvious on the website  Encourage customers to review specific components of PCs Owen Hendershot, UMFK, 2008

 Almost 50% of visitors to Dell.com leave during the configuration stage  Web site is designed for customers who understand technology ◦ Intel® Pentium® dual-core processor E2200 (1MB L2, 2.2GHz, 800 FS ◦ What does that mean? ◦ A faster processor increases the efficiency and performance of your applications and operations. ◦ How do I know which one is faster?  Customers buying a PC for the first time, or customers who don’t know the terminology may be overwhelmed  Adding links to information may help increase customer knowledge and decrease the attrition rate caused by fear of misunderstanding

 Consumers like it when they can buy a product for less  Shopping.hp.com tells their customer exactly how much they can save as soon as the customer selects a computer  If special offers are not displayed upfront, prices of Dell PCs may seem falsely high in comparison to other companies ◦ Display all special offers for PC components when, or even before, a customer selects a PC to customize ◦ Doing so may decrease attrition rates in either the browsing stage or the configuration stage Owen Hendershot, UMFK, 2008

 If a component in the constructed PC malfunctions or is for some reason unsatisfactory customers will most likely blame Dell for their ill experience  By encouraging customers to evaluate specific parts of their computers, it would relieve some of the consumer dissatisfaction from Dell ◦ If a customer has a bad experience with Dell they won’t buy another PC ◦ If a customer has a bad experience with a specific component, they may still buy from Dell  If customers read the reviews on components from other customers, they may just buy a different part and in turn be completely satisfied ◦ Dell could also gain from the reviews  The more information available, the better

 Catalogues – Concerning online purchases, Dell currently does not attract consumers who have never purchased a PC before. If Dell were to send out catalogues with product and component information, they may increase the number of customers that buy online;  Prebuilt computers – For customers who are uneasy with the amount of decisions that come with deciding their own configuration, offer prebuilt computers with set prices;  Recommendations – Keeping records of what customers view, as well as past purchases, Dell can make recommendations on new products available, or which components might best suit the individual customers interest, this would increase customer relationships and in turn may increase online sales;  Increase relationships and word-of-mouth – Give customers credit towards their next computer purchase for referring a friend to buy a PC from Dell.com Owen Hendershot, UMFK, 2008

 Since half of the customers leave during configuration stage, increasing customer knowledge of the product would most likely decrease the attrition rate by the desired 0.2%. Easing the customers’ access to information in combination with increased awareness of promotional offers, Dell would decrease the customers’ need to search elsewhere. Through relationship building programs, Dell has an opportunity to increase the amount the total number of people that buy PCs online as well as increasing the amount of relationship customers. The combination of the decreased attrition rate and the increased amount of customers making purchases online would increase Dell’s daily sales to at least the desired $60 million. Owen Hendershot, UMFK, 2008

 Dell currently remains in lead control of market share with roughly 30%, but competitors such as HP and Apple are rising significantly in market;  Dell continues to expand on computers that target gamers as well as the SMB market;  Ideas such as “designer PCs” and “Preloaded Movies” have the possibility of being successful, but the timing could have been better

Owen Hendershot, UMFK, 2008

The End Owen Hendershot, UMFK, 2008