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July 2009

Comments

Dan D

Sorry, I disagree with some of the diagnosis.

I used a cost-effective, capable Dell at work. I bought my first home PC in 1995 from Dell, based on cost, quality, and the ability to get some basic configuration changes from "off the shelf". The direct model worked for numerous consumers as long as Dell focused on quality, value, customization, and good service.

Service demands for the direct model soared with a combination of bad Microsoft OS products and relentless cost cutting on world-sourced components. A reliable machine required little service support, but the task became gigantic for Dell when hardware refused to work with software.

Sales growth times exponentially greater quality glitches overwhelmed their ability to service direct consumers. Their foray into retail marketing, Wal-Mart, etc. distracted Dell from executing a consumer built-to-order direct business.

My second and third Dells were good machines, by the fourth there were many problems, mostly aggravated by Microsoft failings. By that time featuritis had set in, making configure-your-own a much harder process.

I am convinced Dell for the consumer, sold direct, was a viable business model that failed because of poor execution and lack of understanding that Wintel machines were becoming too complex from a reliability standpoint.

Apple succeeds by keeping control of hardware and software, charging more for a predictable and reliable ownership experience. Dell could have built a similar experience for Wintel machines had they kept focused, instead of pushing into other channels of distribution.

Sunil S Chiplunkar

Marketing is a tricky and tough assignment. Ultimately it is the 'market gap' that helps companies win. Dell found a 'market gap' - direct selling of customized PCs at very competitive rates. Business expansion should take place through proper branding approaches and identification of 'market gaps'. A 'market gap' can also be created through branding and product differentiation. Brand differentiation techniques help create 'market gaps' in the minds of customers or prospects. A 'market gap' based method of marketing helps ensure success of marketing ventures.

For instance, MJ (Michael Jackson) had a particular style of singing and dancing. This created a 'market gap' for his style of music and dance (like moonwalk). If MJ had deviated from his style to aping some other style of music & dance, his market would certainly have collapsed.

Heather Torres

Great example of a clear violation of the Law of Expansion. What were they thinking? Dell was known for having a direct sales/distribution model. They sold their souls, thinking that they would be able to capture more customers if they found new ways to distribute their product. This change, turned their tried and true business model on its head. It confused consumers and made people wonder what their brand really stood for.

Kamil

ust tell me one thing why don't Micheal Dell and many others don't read your articles??? or do they?...do reply!!!!

Kmail

ust tell me one thing why don't Micheal Dell and many others don't read your articles??? or do they?...do reply!!!!

Laura Ries

Good Comments!

The way to grow and stay focused is to launch second brands.

Second brands would have greatly helped IBM, Dell, Sony, Motorola and others.

But second brands are something big companies rarely launch.

Big companies launch brands like IBM-PC jr not new brands like Lexus.

Erik

Great post. I wonder what Dell's market share in "business desktops" was before they started expanding. If their market share was over 35% why not expand into other markets. But only with new brands.

If you have the resources and the patience to enter the new markets I would go for it. Or simply buy other start-up brands that are starting to gain momentum.

Will public companies ever be able to fight off the pressure of Wall Street? Sooner or later sales will slow (Starbucks) and the intense pressure will follow.

But still, congrats to the college dropout Michael Dell for beating the other big brands before he was met with the Law of Success.

Charles Jolley

Totally agree with you on the diagnosis of Dell's problems.

I think the question a Dell exec would ask then is: OK, so once we own the "direct sales to business" market segment, where do we turn next for growth if we can't expand our brand?

To me the big conflict is between the marketing mantra of focus and the drive from Wall Street to continue rapid growth, even once you dominate your target segment.

If you could go back to meet with the Dell execs before they pushed into consumers but could foresee slowing growth in their main business (assume due to market saturation), what would you suggest that they do?

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