Dude, Dell’s got a problem.

When a company gets into trouble, all management wants to do is to use PR to fix the PR problem. Instead they should be doing something to fix the underlying problem that is causing the PR problem.

Dell is getting bad PR all over the place about its poor customer service and falling stock price. Should they not have so many of the call centers in India? Probably. Should Michael Dell be running around doing interviews, personifying, humanizing and defending the brand? Absolutely.

But these short term fixes are not going to solve the real problem. It’s like trying to put a band aid on a cancer and hoping for the best. Dell needs to cure its underling cancer to reestablish its brand dominance.

What is Dell’s underlying cancer? They got successful by focusing totally on the business market. Then they broadened their target market to include consumers.

Today, consumers account for only 15 percent of sales, but a disproportionate percentage of the service calls. As a result, Dell’s service representatives are overwhelmed with consumers who have bought cheap computers calling for help.

Not true with their competition. Consumers that buy Hewlett-Packard computers usually go back to the store that sold them the product (like CompUSA) before calling a service representative. The retailer takes on a lot of the return, exchange and technical support burden.

Dell sells direct. No store to visit. The only option for consumers is to call the manufacturer. Big companies that buy Dell computers in bulk have their own in-house IT experts to handle problems and don’t pose such a burden for Dell.

So how can Dell cure its brand cancer?

Surgery. Cut out the cancer. Dell should get out of the consumer market and refocus the brand on the business community.

What is Dell doing instead? Throwing more money at the consumer market by opening retail stores. Exactly the wrong prescription. Doesn’t Dell remember Gateway’s disastrous attempt at opening stores?

Dell’s dalliances with the fickle consumer market have taken management’s eye off the ball. And it’s not the first time such an affair has caused trouble for the company.

In the early 1990’s Dell had similar issues with expansion leading to sinking profits, falling stock prices and shrinking brand value. So what did they do? They refocused the brand.

In 1994, Dell got out of retail and focused on its roots, the mail-order business market. One result: In the decade of the 1990s, Dell was the best-performing stock of the Standard and Poor’s 500 Index.

Look how IBM has improved its position by getting out of the personal computer business. Sometimes it’s best to remove the cancer, cut your losses and focus your company so you can maintain the position of your brand in the mind.

General Motors has made a mess of all of its auto brands. None of them stand for anything anymore. What’s a Chevrolet? A Chevrolet is a cheap, expensive, large, small, car or truck today. When you appeal to everybody, you appeal to nobody. Better press releases will not solve GM’s problem, only radical cancer treatment and radiation has a chance of helping.

GM should do the same thing that Dell should do. Focus each of its brands on a single market.

As a general rule, companies should fix the real problem first and then fix the PR second. When you reverse this process, you are asking for trouble.

Do something to cure your cancer, then tell everyone about it in a press release.

Comments

[Leo Bottary]

I wouldn't presume to tell Dell ohw to run its business, but I would like to address the "crisis issue" here. I can't tell you how many times a client has made a mistake that affected its customers, and asked, "What do I tell the press?" It's hard to imagine that today, people still don't realize you have to address the victims of your mistake, and tell the press how you're handling the problem. The news media are not a target audience in a time of crisis. They're a communications tool - period.

[Scott Miller]

"But many people still can't understand the power of focusing."

I think people understand focus for the most part, but the one positioning principle that very few people can truly grasp is the power of sacrifice. It's the most counter-intuitive positioning principle. Sacrifice is like focus, but from the perspective of getting out of a market that you're already in.

Your advice to Dell is that they sacrifice the consumer market, but that's just not something they can come to terms with. It's against human nature to sacrifice what you already have. It's crazy talk! (Or so the not-so-bright business experts will tell you.)

McDonald's would be better offer sacrificing the market for chicken sandwiches. Microsoft would be better off sacrificing the console market, leaving it to Sony and Nintendo. Coke would be better off sacrificing coffee drinks to Starbucks. The list is endless.

Rarely do companies sacrifice what they already have, even if they have it at a steep cost.

[Laura]

I am so glad to hear there are people who agree with me. I was interviewed on CNBC's Squawk Box on Monday morning and they went ballistic when I mentioned Dell should get out of the consumer business. I didn't think I was going out on such a limb saying it. But many people still can't understand the power of focusing.

[Patrix]

Right on the dot. Dell is certainly abandoning its core competency and pandering to consumers who buy Dell just because its cheap. Cheap computers will have problems. So why is Dell taking on that burden and subsequently damaging its rep. is beyond me.

Good post.

[Ray Roman]

Laura,

You observations regarding Dell are right on the money. I worked for Dell in Round Rock, TX for about a year in the Consumer TeleSales department. It seemed 1 out of every 3 calls was for service, even though we were in sales. Most people did not want to speak to Techs who were abroad. Service was becoming quite a strain.

I agree they need to get out of the consumer market and refocus entirely on business, government, and education.

Regards