DM computes for Dell

When Michael Dell opted to sell the personal computers bearing his name directly to end-users, perhaps he was just being a contrarian.After all, an efficient network of distributors and resellers already existed to serve the growing pc market.Not a religionIn addition,...

When Michael Dell opted to sell the personal computers bearing his name directly to end-users, perhaps he was just being a contrarian.

After all, an efficient network of distributors and resellers already existed to serve the growing pc market.

Not a religion

In addition, Dell once remarked that direct marketing was just a strategy and not a religion, meaning, presumably, that if a more efficient sales system became evident, Dell Computer would switch to it in a minute.

Well, direct-to-user selling has become Dell’s winning strategy – in fact, the company now describes itself as ‘a leading direct marketer of high performance personal computer systems.’

Furthermore, Michael Dell’s strategy may have changed the computer products industry, forever.

Compaq now sells direct, as does ibm, as do countless computer hardware ‘clones.’

Identical trend

The identical trend is seen in the computer software industry, in which Borland, Lotus, Microsoft and Software Publishing (and others, likely) are using the mail to reach, influence and ultimately sell their products.

For computers and laser printers, and for many business application software products, direct-to-user marketing is the clear and rational approach in this highly competitive business.

Dell Canada ‘comfortably achieved’ its target of doubling sales, to $100 million, for the year ended Jan. 31, 1993, according to Paul Rubin, vice-president of marketing.

Double sales

(Worldwide, Dell’s sales were slightly more than $2 billion for the year ending Jan. 31, 1993, double the previous year.) In 1993, Rubin predicts Dell Canada will double its sales again.

The sales force at Dell Canada is divided into three, roughly equally sized units: government, major accounts, and Dell Direct, which serves small- and medium-sized businesses (including home business, a fast-growing group) over the phone.

Government and major accounts have dedicated sales representatives who, among other things, negotiate discounts and take orders. (Believe it or not, there are actually some ‘sales’ people in the computer industry who can do everything except take an order.)

Most profitable

According to Rubin, while government and major accounts are more likely to make a second, or subsequent, purchase from Dell than its Dell Direct customers, Dell Direct is the most profitable of the three sales units.

And, there is evidence that Dell Direct is poised for growth.

Consider Dellware, the company’s aggressive new marketing initiative.

Designed to take full advantage of Dell’s customer list, and to build sales and profits of non-Dell products, the Dellware program competes directly with ComputerLand Direct, Crowntek Express (both of which produce catalogues), and other resellers who use media advertising or mailings as their principal media.

‘Add-ons’

Rubin says that in the past, software and peripheral sales were thought of as ‘add-ons’ by Dell.

‘If you wanted the latest release of Lotus 1-2-3 on your new Dell computer, we would sell it to you and install it,’ he says.

By comparison, Dellware offers Dell customers a broad selection of non-Dell products, more than 1,000 compared with about 100 in the pre-Dellware days.

More competitive

In my view, the Dellware strategy is designed to make Dell more competitive with other direct resellers, which sell a complete range of computer products.

The Dellware program recognizes that since computers do not work in isolation, some sales (for software, printers, peripherals, etc.) were going somewhere other than Dell.

This might present an opening for a competitor, and negatively impact Dell’s future hardware business.

Consider Dell products in Business Depot and Price Club stores.

While the first sale goes to the store, the second, and subsequent, sales (if any) can go directly to Dell. In this instance, Dell is using retail to build its own direct customer list.

Categories

If you are a new caller to Dell Direct, the sales representative categorizes you into one of three broad categories: ‘tire kickers’ will receive the information requested plus a call back within a week; ‘price shoppers’ will receive a fax quote, but no follow-up; if you’re a ‘hot-lead’ you will be pursued.

The individual Dell Direct reps determine the hot leads, based on their individual assessment of immediacy, company size and number of pcs being considered for purchase.

Rubin claims that a sophisticated inquiry management system, which will automate the hot list ranking, and provide potential Dell customers with specific ‘Dell vs. X’ comparisons, among other things, will be in use by the end of 1993.

Enhanced database

A new, enhanced database will allow more complex sorts, for better targetted mailings. (If you have previously dealt with Dell Direct, your inquiry will go to the sales representative who served you last time.)

Dell religiously codes its advertisements, and Dell Direct’s sales force are supposed to request the ad-code from each caller, which they do not always do.

Similarly, they like to track media source, from the company’s regular, full-page advertisements in The Financial Post, The Globe and Mail’s Report on Business section, Les Affaires and The Computer Paper.

The computer products industry has always been a competitive business, and now it is becoming a competitive, direct marketing business.