Dell’s Distribution Channels

Dell was established in 1980 by Michael Dell at the age of 19 when he decided to cut out the middle man and directly connect himself with the customer supplying computers without the expense of a distribution channel.  Initially Dell was distributed directly to customers as they were able to order a computer made to their individual selections, with a gross turnover of $73 Million in the first year of trading it seemed that Dell was going to be tough competitor in the Personal Computer Market.

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Manufacturers selling direct to the consumer as Dell did eliminates costs associated with marketing and distribution as there is a reduction in the number of links between the product being sold to the consumer and the consumer buying the product.  Dell has used many different channels to sell their PC’s over time such as computer stores, department stores, over the phone, Ebay and of course their website.  A computer is relatively easy to transport and can be easily distributed from the manufacturer to the consumer.  Whilst it may be a difficult purchase for some consumers Dell has partnered customer service with their product and offered consumers the ability to order a computer which is made to their specific selections known as “Configuration To Order “.  This removes the need for consumers to go into a retail outlet to make a purchase.  Consumers can call Dell during the purchase process or request sales assistance online and receive a cal back within approximately 48 hours.  As can be seen below in the diagram the intermediary such as a retail outlet is removed in Direct Channel Marketing, which occurs when purchasing directly from Dell’s website.

 

direct-and-indirect-channels

 

By removing the Intermediary in the channel process this enables Dell to have greater control over their product and control the price as there is no retail outlet attempting to price cut their product (Iacobucci, 2014).  This is a an essential marketing strategy for Dell as they target consumers looking for the convenience of purchasing a PC which is tailored to their needs at an affordable price with comparable quality to the store brought product.  A Direct Chanel is easy for the consumer and fits with Dells’ consumer behaviour.

In 2001 Dell became the world’s number 1 computer systems provider.  With years of experience configuring PC’s to order Dell knows what their consumers want and have recently developed a growth plan for the future which meant a change in their ability to distribute their products sooner.  Dell has developed “Smart Selection” which involves pre-building what they think their consumers want to enable mass production of PC’s and enable them to ship within 24 hours.  This enables Dell to compete with their competitors and reduce the wait time for commercial consumers which was previously seven to ten days.  With Dell now offering their commercial companies the option to have their approved custom software image added by allowing 48 hours for shipping.  They have continued with their brand segmentation by allowing commercial companies to also make purchases that are quick, convenient and have the ability to be configured in a small way to their needs, building upon their position in the market and continuing to collaborate with customers.

customer engagement

 

Dell now has a variety of products such as laptops, desktops, Cloud software and servers all available online and ready to suit the growing market of online shoppers and improve profit by targeting their current consumers.  E-Commerce generates an enormous amount of revenue globally and with young people more likely to make purchases online Dell’s website promotes secure online buying to ensure that customers are not discouraged by making an expensive purchase online.

The ease of Dell’s distribution channel for large and small consumers alone makes it a very powerful marketing strategy as it sets itself apart from their competitors but also allows Dell to minimise costs to the consumers as a number of  costs are reduced, such as logistical costs, advertising, and other mark up costs which would be passed onto the consumer if there was an intermediary in the distribution channel.

 

 

 

 

References:

Iacobacci, D 2014, Marketing Management, 4 South – Western, Ohio.

Kirkpatrick, D 1997, ‘Now everyone in PCs wants to be like Mike’, Fortune vol. 136, no.5, p.91

https://en.wikipedia.org/wiki/History_of_Dell

Moorhead, P (2013) forbes.com/…trategy-in-it-to-win-it/print

dell.com.au

Robinson, B (2002) forbes.com/2002/08/01/0801marketers

 

 

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Ow, T.T, Wood, C.A 2011, ‘Which Online Channel Is Right? Online Auction Chanel choice for personal computers in the presence of demand decay’, Electronic Commerce Research and Applications, vol. 10, pp. 203-213.

 

 

 

 

 

 

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