Relationship Management in Dell Computers
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Published: Tue, 16 Jan 2018
The Dell Computers Company was founded by Michael Dell. The business started by selling various computer products by use of the direct business model when most companies at the time employed the services of dealers and distributors. At its inception, the company concentrated on the relationship management with customer focused marketing. At the time, according to Joan (2000, p.73) most companies for instance Compaq and IBM concentrated on being ‘engineering centric’. On the contrary, the Dell Company was selective in the production, focusing on the products that enhanced the relationship between the company and its customers, with Michael Dell adopting a direct business model in marketing. The model harnesses virtual integration which permits the business to specialize in products which satisfy on customers, present and future needs. In our case study of Dell Computers we shall look into the various aspects of relationship management that the company has applied in ensuring its successful growth.
2.0 Key Account Management and Global Account Management
Key account management (KAM) can be defined as the management of customer accounts which bring most profitability and are of strategic importance to the Company. In essence, this concept in relationship management seeks to analyze those key accounts of importance to the company, forecast on their needs, and give them premium services and value added products thus increasing on satisfaction and more customer retention. The key accounts management can also be referred to as strategic account management. This concept gets global with the company having key accounts all over the world. As such, the global account management (GAM) can be defined as a strategy in which a company selects on some customers globally with the capability to deliver on their needs.
There are key reasons why the companies practice global accounts management but the main one is to get competitive advantage and gain more revenue while enjoying the difference in economies of scale. Key account management can also be defined as offering customers with large accounts products and services tailored to their needs to attract loyalty. In the first step the key accounts management entails identifying those accounts of strategic importance. Key accounts according to Jukka (2001, 202) are selected according to the volume of sale or the profitability the company intends to get from the customer relationship. In addition, the selection is based on the volume of the purchases from the customer and the period the relationship has been in existence. According to Michael dell, the Dell computers continue identifying on key accounts and this has helped the company in increasing the company by the fast cycle segmentation (Joan 2000, p.77). The company is able to grow on revenues while keeping down on the expenditure by focusing on profitable segments only.
The next element in key account management is analyzing on the key accounts. The account is studied on the basis of the history of any relationship and more so the economic status of that account. In an interview Michael Dell agrees that dealings with big institutions and corporate companies which are profitable, easier to manage and are unlikely to default in making their payments is the core of the business at Dell Computers (Joan 2000, p.76). In addition, at this stage determining the switching cost which entails the cost of replacing the outgoing partner with a new one, is important incase the relationship ends (Jukka 2001, p.203).
The Dell Company maintains a strategy on selection of key accounts and avoids taking on very powerful accounts which could bring huge switching costs and this keeps the demand of its products on level. As a matter of fact, the company does not serve customers with more than one percent to two percent of its revenue (Joan 2000, p.77). More over, the ability for the company to organize and respond to various needs of the customers holding the large accounts is very important. The organizational capabilities have been greatly improved in Dell computers with dedicated teams designated to run on the key accounts.
Large accounts make up most of the business at Dell computers. It sells to them standardized products besides predicting on their demand and future needs through virtual integration. The company also monitors on the global accounts in different parts of the world. With very huge accounts the company deploys a team onsite to effectively manage on the customer’s needs.
To ensure success in management of key accounts a company needs to have competent key account managers and other team members. In making the selection of the staff members of these teams it is imperative that members with wide experience and qualifications are chosen for the task. The evaluation of the account relationship could also be considered where the key manager is overburdened with his role and adapt a network of organizational relationships. In addition, for KAM to be effective there should be an efficient information exchange between the key account team and the partner.
3.0 Big customers, customer segmentation and marketing orientation
3.1 Big customers
Customer value is an important aspect in relationship marketing at Dell Computers and we should thus study it. In value strategic models there are three types of value elements. The first one is esteem value and influences the customer to buy a product for the sake of just owning it. On the other hand, the utility value influences the need to have the product due to its characteristics in meeting the want of the consumer. Finally we also have the exchange value which influences on the worth of the customer with the product creating interest with time.
Satisfaction among the customers is what makes them to make repurchases. As matter of fact, this feeling of satisfaction becomes extreme when the product performance exceeds the expectation. The loyalty among the customer is cultivated by giving value added products as compared to the other sellers. Indeed satisfaction is of great influence in maintaining customer loyalty, enhancing marketing by word of mouth and making the buyer come back to purchase more (Wolfgang &Andreas 2006, p.313). According to a report by Azaddin Salem Khalifa (2004, p.646) customers who are extremely satisfied due to their value added products were 45% more likely to be loyal and were six times more likely to come back for more purchases than dissatisfied customers.
At Dell they realized that in adding this value to the products and ensuring on customer satisfaction then more focus was to be made on the needs of the customers. As a result, the company has seventy percent of its customers comprising of large educational, governmental institutions and corporate companies. The company reduces the risk by handling accounts of these big customers. The company continues to target these big consumers to enhance profitability with its scalable business. Indeed, in maintaining these key accounts nationally and globally the company is able to increase on revenue while suppressing on expenditures.
3.2 Customer segmentation
With the direct model and a very fine customer segmentation of big consumers the company is able to predict the needs of its few customers and order goods tailored towards this information. As such, a fast inventory velocity the Dell Computers maintains with the suppliers is important in providing more flexibility and speedy ordering of goods. According to the founder of the Dell Computers, a fast cycle segmentation involving big customers offers lesser managerial problems with the company being able to tailor programs to the needs of the customers (Joan 2000, p.78). This can be attested to by the variety of products the company produces with inventory being reviewed by more than thirty times in a year.
Where value is an important component in forecasting demand, the Kano’s model dictates that in order for a company to not only satisfy but make the customers delighted in using the products, it becomes imperative for such a company to pay less attention to the normal customer activity cycle but focus on the customer’s needs (Azaddin 2004, p.649). Indeed, innovative features which are unexpected by the customers do not cause any form of dissatisfaction but if included they lead to satisfaction and delight of the customers.
On the other hand, the benefits and the costs ratio model defines value not only on the benefits the customer is able to get but on the sacrifices the customer incurs. Such sacrifices are categorized as time and effort required in obtaining the product. In same argument it then follows that the right values include a low price for the product delivered in time, a premium service and impeccable quality. We can also conclude that intangible costs decrease this value. The Dell Company ensures on timely delivery of its products to big consumers effortlessly. The big customers are not only able to order their products online but they are also able to access technological support information easily and a dedicated team of third party maintainers.
Other than to respond and predict its customers’ needs in time, segmentation of its customer into big but fewer accounts greatly help the Dell Company to greatly reduce on costs. Indeed information on the needs of the customers at present and in future should be available for a more coordinated approach in designing the products,
3.3 Marketing Orientation.
Marketing orientation can be defined as an implementation of a marketing concept with focus to customers. The term in detail entails coordination in marketing and focus in profit and customer orientation. Ajay and Bernard (1990, p.3) argues that a customer focused orientation entails implementing on market intelligence obtained and any other information obtained from the customers. This concern to the needs of the customer helps in customer delight at the end. We have already seen that Dell Company values on the satisfaction of its customers by virtual integration and segmentation to tailor products relevant to their needs.
In marketing orientation, proper coordination between various departments is very imperative. The information on market intelligence should be utilized by all the departments in coming up with customized and need specific products. This concerted effort in dissemination of intelligences leads to a coordinated response.
When applying customer focused marketing model a company also needs to focus on profitability. The Dell Company effectively increases on profitability by market segmentation and having a more coordinated and a fast products delivery system with its suppliers.
The dell company only partners with only a few suppliers to ensure speedy implementation of the information relayed from the company in a virtual supply chain. Orders are made in a networked computing system. This further enhances in the improvement of speed and more so the quality of the products. Indeed in relationship marketing a level of trust with the supplier is important. For instance, the Dell Company does not require checking on the goods ordered from credible companies it works with and this further helps in increasing the inventory velocity and eliminating on warehousing expenses.
The company integrates its suppliers to seem like they are the part of the company. In addition, the company cooperates with the suppliers in ensuring timely delivery of products and services to its customers which is attributed to this integration. The company, with advancement of technology has seen it forge more integration with the suppliers and other partners by sharing on databases. One of the intangible costs a customer incurs is time. As such for the company to gain on the customers’ loyalty products need to be delivered in time with less effort. This makes dell company partner with some few suppliers who share on same values of quality and are flexible in their ordering system. With its suppliers the Dell Company has been successful in reducing the risk associated with inventory by sourcing goods from credible suppliers who then supply them to the Dell customers thus helping the company to save on time and resources.
The direct model the company utilizes helps in eliminating the problems that emanate from involving distributors and dealers. The company believes in speedy transactions with its suppliers and maintains very low levels of inventory with them. In essence the company maintains a very slim gap between the point of demand and point of supply. Indeed, with such concept the Dell Company has continued to ensure efficiency and is easily able to determine the units it needs. Indeed, we can conclude that by applying virtual supply chains, by sharing information and eliminating inter-company links with its suppliers Dell has been able to achieve speed-to-market for its products.
In customer focused marketing model, it becomes important to study on the competitor orientation as well. The exercise details on gaining more understanding on the potential of the main competitor and the current competitors. With direct selling method of its products and virtually integrating its customers the Dell Company is easily able to trample on its competitors.
Virtual integration implies removal of boundaries where products are ordered in an informal way such as through the internet. Most of the Dell competitors still continue to use vertical integration system with focus on producing in volumes with products being experimental in nature. This virtual supply chain at Dell, with information being relayed through a network, compounded by a light inventory helps the company in beating of competition from its rivals. This value added relationship with its suppliers helps the Dell Company to work towards one cause.
6.0 Dell’s CRM (customer relationship management
It can simply be defined as a strategy with focus in increasing the customer satisfaction and loyalty by offering innovative and customized products and services (Elaine & Margret 2004, p.24). The company system that strives to observe CRM consolidates information which is available by all the members of the company, the customers and the suppliers being also virtually integrated inside Dell’s business. .
The Dell computers forecast on the demand of its customers and then develop need specific products by involving the services of sales-account managers in virtually integrating with the customers. The needs and other products improvements which are contingent are then communicated to the company for implementation. The Dell’s CRM system also involves monitoring the purchases of its customers globally and this provides more insight on the operations of the company. In addition, the company employs the use of software in monitoring the assets of its buyers.
Companies have various ways of gathering information. As such, some companies employ the use of loyalty schemes where customers are awarded points which can then be redeemed. In the process, the buying habits of the customers are studied using the information obtained and kept in the database. According to a research done on Tesco, the scheme was found to be beneficial in sustaining customer relationship and was effective in attracting loyalty due to the value that was being given to the Tesco’s customers (Jennifer 2005, p.195)
In another research done by (Wolfgang &Andreas 2006, p.313) the relationship value was found to influence on the commitment, satisfaction and more so the trust from the customers which can be defined as the relationship quality. The Dell Computer enhances on more consumer contact not only by direct sales model but also in other ways. For instance, information databases are shared between the customers and the management at the company. This helps the customer find technological solution and integrates him or her into Dell’s business. For instance, a customer at Dell is able to get to the various internal technical tools which saves on the customer’s time and helps the Dell Company in saving on costs.
The customers’ segmentation of the company comprises of big customers hence their needs are easier to forecast and tailor the right products in time. The Dell Company continues to incorporate technology in the systems of the customers with some teams working onsite for better delivery of support services and maintenance of the products.
In addition, Dell Computers organizes forums and meetings like platinum councils for these big consumers where information on the needs is gathered. Information on the planned products is also relayed to these customers (Joan 2000, p.81). CRM enables the company to maintain one on one relationship with the customers. It is worth noting that, in such meetings the ratio of the representation between the company and the customers is usually one to one. In essence, besides these meetings being informative they also help the company forecast on the demand of the customers.
The company contracts with maintainers from other companies who make service calls on the behalf of the company which further enhances on the value to the customers.
More over, the Dell computers have established intranet sites for mega customers which offer them convenience in buying and more so offer them useful technical information about various products. Indeed, such customized services integrate these customers into the Company’s system.
The Dell Company continues to employ technology in giving customer focused products and services. The company continues to offer premier services and even helps the customers to develop their own version of the dell website (Joan 2000, p.80). We can look CRM as a tool that in particular aids a company in identifying on the premium customers due to its interactive nature with them. In addition, a more coordinated marketing strategy is able to be formulated with sharing of information between the various departments and hence streamlining on the designing of the value added products.
When developing the CRM, a company as we have already seen, needs to gather necessary information pertaining to its customers. This is done at various touch points and a general idea about the needs of that customer can then be determined. The benefits that come up with such a strategy are many. Besides helping in forecasting the demands of the customers such systems help improve on process management and customers’ information (Elaine & Margret 2004, p.26). In addition, the CRM helps in increasing the sales volume and due to the accuracy of the information obtained the complaints by the customers are greatly reduced (Elaine & Margret 2004, p.26).
Indeed, the Dell Company can be said to practice relationship marketing. In this aspect the Company has abandoned on the traditional ways of vertical integration and distributorship and continues to relate with its customers in delivering specific need products. In addition, the Company has virtually integrated its suppliers and the customers in its business in its speed to market system. Employing technology in relationship management and ensuring information is available to all, the Company continues to make strides in new ways of marketing and customer focused delivery of products and services.
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