Dell and its strategy of selling the products and services online


1.0 Introduction

The founder of Dell Incorporated was Michael Dell. He used the strategy of selling the products and services online directly to customers and also through catalogs. This is to eliminates unnecessary time and cost. Besides, it delivers the superior customer service too. Dell is the best understand of customers needs and wants by putting great effort to understand what drove customer satisfaction. It produces consistent high quality, custom-made computer systems that provide high performance and also latest relevant technology to the customers. Consequently, Dell is successful.

Michael Dell was running a mail-order-trading business at his aged 13 with grossing $2,000 per month. When he turned to aged 16, he was selling subscriptions to the Houston Post and at he bought his first BMW at aged 17 with the money he had earned.

In the year 1983, he registered at the University of Texas. His parent wanted him to become a doctor but end up, he became deep in computers and started selling PC components out of his college dormitory room. He bought random-access memory (RAM) chip and disk drives at cost from IBM dealers in large quotas monthly for IBM PCs. He advertises through newspaper and also national computer magazine by giving a toll-free number to resell the components with 10-15% below regular retail price.

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In 1984, Michael Dell dropped out of the college and formed a company named PCs Ltd. The company had become the first in the industry to sell custom-built computers directly to end users. He bought PCs through retailers' surplus stocks at cost. Then, he powering the PCs with graphics cards, hard disks and memory before resell it. This strategy is to get rid of retailers' markups. In addition, his company able to sell IBM clones by using the same or similar components to copied the function of IBM. The price was about 40% below of an IBM PC. This had attracted price-sensitivity customers and growth rapidly. By 1985, the company came to its own PC design.

The company became the industry's fastest-performing computer and first in the industry offers thirty-day money back guarantee and first onsite service program in 1986.

By 1987, the PCs Ltd renamed to Dell Incorporated and opened the first international offices in the United Kingdom.

In between of 1990-1993, Dell Inc. began distributing its products through Soft Warehouse Superstores (now Comp USA), Staples, Wal-Mart, Sam's Club, Price Club (now Price/Costco) and Best Buy stores because he think that his direct sales business would not grow fast enough. Conversely, he realized that he made a mistake and withdrew the selling from retailers or intermediaries when the company learnt about the margins in selling through distribution channels.

In 1994, Michael Dell vision was to become one of the top three PC companies. At the same time, Dell Inc. launched a record-breaking battery line known as Latitude notebook. At the same time, the corporation successfully opened its first operations in Asia-Pacific region.

Dell Inc. becomes Number 1 computer in the United States by 1999. In 2004, Dell Inc. revenue exceeds of $41 billion and ranks Number 6 on the Fortune magazines among the global "most admired" list (Reference for Business, 2010; The McGraw-Hill, 1999 and Strategies that Revolutionized and Industry, 2010).

2.0 Content

2.1 Customer service policy

Nowadays, customers most concern for the services provided by a company. Based on this, Dell Inc. had offers customer the option for the return of most of the products that purchase directly from the firm in order to build a long term rapport with the customers. As a result, the firm constructs customer service policy. Customers can return the products that bought directly from firm within the timeframe set. If the order has an error or if want to return the order due to another reason, don't be refuse of the delivery as it takes more time to credit. One of the policies is the Total Satisfaction Return Policy. Customers may return entitled products for a credit or a refund of the purchase price paid, less shipping and handling and any applicable restocking fees. Meanwhile, customers must follow the policy that set by the firm.

There were couples number of policies but we will only focus two major policies in a followings:

30-Day Return Period for Certain Hardware, Software Products and Accessories

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All the hardware, accessories, peripherals, parts and media-based software that are unopened and still in their original sealed package may be returned to the firm up to 30 days after customer receive them for a refund for a credit or a refund of the purchase price paid, less shipping and handling and any applicable restocking and taxes if already paid.

Besides, the electronically which has not been downloaded may be returned too unless the customer have a separate agreement with the firm.

However, any product that returned to the firm without prior authorization will be considered as an unauthorized return. So, the customer will not receive credit for the product and Dell will not ship the product back to you. While those refunds or exchanges for imperfect products can be made within 30 days of receipt of the products.

14-Day Return Period for Reconditioned or Refurbished Dell-branded products from Dell

For those customers who are the original purchaser, who bought reconditioned or refurbished products from the firm, they may return the products to the firm within 14 days after the date of packing slip or invoice for a refund or credit of the product purchase price. While for the fees, the refund or credit does not include any shipping and handling charges shown on customer packing slip or invoice if the product is imperfect or results of the Dell error. But, customer do responsible for any damages incurred during the return shipment. The refund or credit will be subject to a fifteen percent (15%) return administration fee of the purchase price paid plus any applicable sales tax unless otherwise prohibited by law.

On the other hand, if you are an organization that bought the products under a written agreement with the firm, then the agreement may contain different terms for the return of products than specified by this policy.

2.2 Process

There is the procedure or process before returning a product in order for the management to be managed effectively and efficiency. Firstly, customer needs to contact Dell Customer Service and get a Credit Return Authorization (CRA) number before the end of the valid return period. Thus, Dell will not accept returns that without a CRA number.

Customer must ship the product to Dell within five (5) days of the date that Dell Customer Service issues the CRA. It must be in strict fulfillment with the following:-

Customer need to ship back all the products that are to return to Dell which received a CRA number. While for partial returns, the credit may be less than the invoice or individual component price due to bundled or promotional pricing or any unadvertised discounts or acknowledgment.

The products must be return in their original packaging as in new condition along with any media, documentation and any items that were included in the original shipment (eg. Manuals, floppy disk(s), CD(s), power cables).

Dell Customer Service will provide waybill to ship the product back. Customer need to have multiple and uniquely numbered waybills if returning multiple items. One box per each individual item.

Do not photocopy and use the same waybill multiple times on separately boxed items or this will hold back and delay customer credit.

However, customer needs to make sure that the data on the drive(s) and on any other storage devices are back-up before return the product to the firm. This is for customer's safety and privacy. Do remove any confidential, proprietary and personal information too. While this is because Dell Inc. is not responsible for any confidential, proprietary or personal information lost or corrupted data or damaged or lost removable media that may be included with the return. Any product that returned to the firm without prior authorization will be considered as an unauthorized return and the customer will not receive credit for the product. Consequently, the firm will not ship the product back to the customer. Then, upon receipt of your authorized and proper return, the firm will issues a credit or a refund of the purchase price paid, less shipping and handling and any applicable restocking fees and taxes subject to this policy.

Conversely, Dell Inc. has exceptions for the Total Satisfaction Return Policy which does not apply to the following products which may not be returned at any time:

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Dell Equal Logic and Equal Logic - branded products

Dell EMC and EMC - branded storage products

Power Vault ML6000 tape libraries

Dell ISG product that is custom configured to customer specifications and any non Dell-branded enterprise products, enterprise software and customized hardware or software products

Gaming consoles and peripherals

Personal use items (eg. Earphones and headsets unless the package is unopened)

Application software and operating systems that have been installed by the firm may be returned only if installed on a returnable system but it must within the applicable return period.

Whereas for non Dell-branded Software and licenses may be returned only with the express approval of the publisher which in many conditions will not be granted.

Those with proper authorization (software with sealed package that containing the floppy disk(s) or CD(s)) which is unopened may be returns for a refund or credit.

The application or operating system software that has been installed by Dell Inc. but want to return for refund or credit, the whole system must be returned along with any media and documentation that may have been included in the original shipment.

Anyway, all these policy is not valid for those who were not purchased directly from the firm. The products return and exchange policies are governed by the retailer or reseller where you purchased the products. (Dell's Policies + Processes, 2010)

2.3 Major issues / challenges and difficulties with customer service

There are many challenges face by Dell Inc. today with the rapid global of computer industry in the market. The firm faces challenging from customers and outsider (competitors) site in order to satisfy the Dell's entire customer. Customers are more concern how they were treating during the progression of purchasing and follow up after purchase.

Case study: Dell Latitude E6400 and E6500

The major issue that Dell Inc. had suffering is about the latest products Dell Latitude E6400 and E6500. These products had arisen about hundreds of owners report the problem. It may be a serious problem with the notebooks. Owners of user complained of huge performance issues that the laptop is overheating and under clocking.

However, the firm needs to remain their competitive advantages in the computer industry. For example, customization and provided better services to their customers. Besides, it must be reliability that the firm should perform their promised service consistently and precisely to the customer; responsiveness which the customer service should lend a hand to solve customers' problem; assurance by being polite and showing respect to the customer; empathy by the customer service to listen what customer needs and wants (Fitzsimmons & Fitzsimmons, 2008). Hence, the firm have to find out what the problems that customers had facing and provide best solution and handle well in order to reduce dissatisfy customers. (TechSpot News, 2010)

Example of the customer complaint can refer in Appendix 1.

2.4 Resolved

These problems drag on for many years. Dell Inc. didn't handled the situation gracefully and took quite a long time to admit that it had a problem that needed fixing. However, John Paczkowski (American journalist and blogger) noted this problem. Even though $150 million has spent to improve customer service, the latest customer satisfaction rankings from the American Customer Satisfaction Index show Dell Inc. falling 5%. This is not what Dell Inc. hoped to see. Consequently, Dell Inc. will probably need to go ahead of just fixing its current customer service problems that due to the earlier bad experience effect. (TechDirt, 2010)

Moreover, Michael Dell uses a variety of inventive approaches to continually bring information from the outside world into Dell. This is to stay as competitive as they can. He says, "I also enjoy roaming around outside the company to see what people think of us." Meanwhile, Dell Inc. was creating in chat rooms where actual users commonly chat about Dell and our competitors. From this method, information can be obtained through conversations when they discuss their purchases and their likes and dislikes. It's a tremendous learning opportunity. (Strategies that Revolutionized an Industry, 2001)

Example of the customer complaint resolved by customer service can refer in Appendix 2.

3.0 Analysis & recommendation

3.1 What are your thoughts on this organization's customer service policy and process?

There are several thought after we analyze and had discussion of the Dell's customer service policy. There are different view from the perspective of Dell Inc. and the view from the perspective of customer.

From the perspective of Dell Inc.

From the perspective of the Dell Inc., the corporate have offers comprehensive policies which provide standard service and deliver value in order to satisfy customer needs and wants. Customer can handiness gets a solution for their PC or laptop by just making a toll free call. For instances, Dell phone support designed for customer to schedule a service visit.

The two major policies are important devices because it enable customer to communicate and connected with the firm. The policies allow the customer service to handle the customer requirement and complaints with proficient. In other words, the firm organizes in a systematical way. The procedure require enable the corporate to handle the process more accurate, effective and efficiently. This can also increase the positive perception from the customer towards Dell Inc. and maybe repeat purchase.

In addition, Dell Inc. does deliver the service to customer timely. For instances, the repair or replacement will be three (3) to six (6) of working days after the product have been received. Otherwise, the customer service staff will contact the customers. For sure, this will be subjected to terms and conditions.

As a result, the customers will feel more guarantees with the service provided. They will also feel comfortable and tangible.

From the perspective of customer

Based on our opinion on this organization's customer service policy and process, Dell Inc. focus on build and maintain long term relationship with customers by providing guarantee to customer. Hence, the corporate introduce the return policies which make the customers believe that Dell Inc. product and service is the place that they looking for it. First of all, let's make the clear statement. Since Dell Inc. set the return policies was to make customers feel safe, secure, and satisfied with the products and services. For long term orientation, these customers will stick to Dell brand name by repeat purchase.

Obviously, these policies had gained the numbers of loyalty with the comprehensive policies but there were as well the numbers of customers who had been disappointed and dissatisfied when the major issues that the firm had suffering (Dell Latitude E6400 and E6500). It took long time to solve.

Moreover, the policies procedures look complex for certain customer to follow in order to send back their product to the firm. For example, the 30-Day Return Period Policy, customers are required to return in unopened and still in their original sealed package. Customer wouldn't know whether the purchase is in good condition or not.

Additionally, customer also required getting the CRA number before returning the product. Some customer will just ship back without CRA number because they do not know about this procedure and will not get any refund. Consequently, they may feel they have been cheated and may spread negative word of mouth.

As a conclusion, the policy is good from the perspective of Dell Inc. However, this should revise from the perspective of customer as its important consideration for win-win situation between corporation and customer.

3.2 Do you agree with the decision/steps taken by the organization in handling their customer service issues?

Agree - Term of Policies

Dell Inc. is doing well with the decision/ steps taken in handling their customer service issues. The corporate is operating its business through internet. The connection and communication between the corporation and the customer is built in an intangible way. The firm is actually using the five (5) distinctive characteristics of services to provide to their customers, which the service is simultaneity, perishability, intangibility, heterogeneity and customer participation in the service process. Therefore, by offering the policies, customer can be guarantee if any problem occurs. Besides, Dell Inc. used via forum, customer chat room, blog and discussion; and Dell technician support in order to be more understand of the customer perspective. (Fitzsimmons & Fitzsimmons, 2008).

Disagree - Term of solving problem of Dell Latitude E6400 and E6500

We are disagreed with the decision or steps that taken by DELL in handling their customer service major issues. Firstly, as we can see, there are a lot of dissatisfaction customers that post their complaints on the internet to let other consumers know that the problem they are facing with DELL. This is serious that may occur negative word-of-mouth.

Based on those complaints and further information that we get from the internet, customers contacted Dell several times via phone but were disconnected each time. Besides, customer also sent email to customer support saying that would like to return the laptop. Disappointedly, customers were informed that nothing they could do after the 21 day return period (from invoice date). The same thing was repeated even by the supervisor, which the answer given were not favor by customers at all. This is indeed a very serious problem that DELL should take a serious consideration on it so that they will be able to sustain their customer in the future repeat purchase. The firm did not take action immediately.

3.3 How would you have handled the problem/situation differently?

Recommendation 1 - Allocation of technician

We can solve the customers problem in more cost saving and effectively by allocate technician to operate in different state. For instance, Dell Inc. appointed different technicians and allocate them in different state (Spoke and Hub) which use by most of the delivery industry such as Fed Ex. Whenever the customer service get a call, they can appoint the technician nearby to solve the customer problem. This can reduce the time of the technician to reach the customer in shorter time.

Recommendation 2 - Customer Representative

We will set a standard qualification requirement for the customer representative as customer support staffs. It will used as our guideline to hired the staffs. This enables the customer representative to answer any query from the customer with professionally.

After select, training will be provided to the customer service staffs as well equipped with the knowledge and ability to handle various type of problematic customer. For example, the staffs are brief to be in polite way, how to use the right manner when facing customer, use effective and efficient way to communicate with customers. This is important because customer service representatives who are not well equipped with Dell products knowledge may lead to misleading of information. Worst come to worst, it may cause lack of confident by the customer. In addition, there may also be inconsistent of ways provided by different customer representative in solving customer problem and consequently it will cause ambiguity in customer.

Moreover, all the staffs in the corporation other than the customer service also need to know regarding the Dell Inc. policy.

Recommendation 3 - Extension of policy

The policy of return shall be extending due to the period of return start counting when the customer orders the purchase. This include the time of customize the product and delivery time. So, it actually left less than 30 and 14 days return period policy.

Recommendation 4 - Retail Store

The social trend now is following of Information Technology (IT). The demand of IT device is increase rapidly and become larger target market. As based on Malaysia cultural, customer are more preferred with the sensation product. So, Dell Inc. has to expand their operating system by set up more retain outlet in the Malaysia market in order to reach more target market. For example, Penang has set up Dell Inc. outlet in the market whereby customers can travel and reach their service with effective and efficient. Besides, it will be more convenience and tangible for customers.

Besides, the corporation enables customer service staffs to dealing with returns, exchanges and complaints more proficient that solve the problem on the spot instead of waiting days after days.

4.0 Conclusion

By summarizing from what we have study in our project, there are few learning points that we have gained throughout the learning progress. Dell Inc. is successfully in offering online purchase experience to customer. They are pioneer in this computer industry which it is a critical success factor. Besides, service delivery play an important role as value added in contributing to the successful. It managed to send the product to customer by one (1) day.

First of all, we learned that in general, service management includes any customer service policy that involves parties from customer and company. Also, these policies have the process; and also term and conditions.

In the beginning part of the report, we have learned that two types of policies in the firm which have different view of point from the perspective of Dell Inc. and customers.

The next learning points for us is; we get to know what are the types of major issues/ challenges and difficulties encountered with customer service (Dell Latitude E6400 and E6500) that occur the dissatisfaction of customers and also affect the reputation of the firm. It has to resolve in order to protect themselves from dissatisfaction of customers.

Last but not least, by studying the analysis and recommendation, we get to know that there are numerous solutions that can improve in the future. As the computer industry is so competitive, maybe someday, competitor is doing online purchasing too. Therefore, the firm needs to keep on doing Research and Developments (R&D) and also be innovative in order to stay competitive in the industry. Then, it will be hardly for the competitors to enter the online purchase as Dell Inc. have pioneer in this.

5.0 Appendices

Appendix 1