This paper is done as a part of the undergraduate program at BI Norwegian Business School. This does not entail that BI Norwegian Business School has cleared the methods applied, the results presented, or the
conclusions drawn
Applied Marketing Project (Capstone) – 24100
Bachelor of International Marketing
Student Name: Aurora B. Nilsen Tutor: Dr Nigel Bairstow University of Technology, Sydney
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Table of Contents:
1.0 Executive Summary ... iii
2.0 Internal Analysis ... 1
2.1 Description of company and product line ... 1
2.2 Business Model Canvas ... 1
2.3 Resource Audit ... 2
2.3.1 Human Resources ... 2
2.3.2 Physical Resources ... 2
2.3.3 Financial Resources ... 3
2.3.4 Intangible Resources ... 3
2.4 Value Chain Analysis ... 4
2.4.1 Inbound Logistics ... 4
2.4.2 Operations ... 4
2.4.3 Outbound Logistics ... 5
2.4.4 Marketing & Sales ... 5
2.4.5 Service ... 5
3.0 External Analysis ... 6
3.1 Market Analysis ... 6
3.2 Competitor Analysis ... 7
3.3 Customer Analysis ... 10
3.3.1 Segment 1: Business and Financial Operations ... 10
3.3.1 Segment 2: Management ... 11
3.3.3 Segment 3: Architecture and Engineering ... 11
3.3.4 Segment 4: Education, Training and Library ... 12
3.4 PEST Analysis ... 12
3.4.1 Political Forces ... 12
3.4.2 Economic Forces ... 13
3.4.3 Socio-cultural Forces ... 13
3.4.4 Technological Forces ... 14
3.5 SWOT Analysis ... 14
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4.0 Marketing Objectives ... 17
4.1 Overall Sales Objective ... 17
4.2 Promotion Strategy ... 17
4.3 Distribution Improvement / Low Penetration of Indirect Distribution ... 18
4.4 Customer Retention ... 19
5.0 Target Markets and Positioning ... 20
5.1 Target Markets: ... 20
5.1.1 Management segment ... 20
5.1.2 Education, Training and Library segment ... 21
5.2 Positioning ... 21
6.0 Key Strategies ... 23
6.1 Promotion Strategies ... 23
6.1.1 Promotional pull strategy ... 23
6.1.2 Hold a product launch process ... 23
6.2 Distribution Strategies ... 23
6.2.1 Direct distribution strategy ... 24
6.2.2 Indirect sales model ... 24
6.2.3 Implement training programs ... 24
6.3 Customer Retention Strategies ... 24
6.3.1 Customer service as a part of value proposition ... 25
6.3.2 Cross-selling ... 25
7.0 Key Recommendations ... 26
8.0 References ... 28
9.0 Appendix ... 34
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1.0 Executive Summary
After conducting an internal and external analysis based on primary and secondary research, the conclusion was that Dell is a strong brand in the commercial market. However, the research also concluded that Dell is facing three key issues:
The blurred lines between the private and enterprise market have become more blurred as Microsoft and their Surface Pro are targeting small businesses and entrepreneurs, which is a major threat to Dell who is aiming to become the market leader in the commercial 2:1 Notebook market. In addition, Dell’s weak indirect sales model is a major weakness which only accounts for 14% of Dell’s total product sales. As for the value proposition, end users do not understand the benefits of investing in a high-margin device as the Latitude 2:1 Notebook.
Furthermore, the three issues set the basis for identifying the overall sales objective and marketing objectives with underlying strategies to further ensure Dell’s profitability and success:
Sales objective: Achieve a market penetration rate of 20% for Dell’s Latitude 2:1 range.
Marketing objectives: 1. Promotion strategy, 2. Distribution improvement, and 3. Customer retention
Dell is suggested to implement three of the strategies to achieve the desired market
penetration rate by July 2018. The strategies should be implemented in a prioritized matter, based on the time sensitivity of each strategy option. Each strategy option is justified with thorough research and theory, and portrayed in a timetable for implementation. The three recommended strategies are:
§ Develop a promotional pull strategy
§ Improve the indirect sales model by implementing training programs
§ Implement customer service as a part of the value proposition
The value proposition is poorly communicated A blurred line between
private & enterprise market
Dell has a weak indirect sales model
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2.0 Internal Analysis
2.1 Description of company and product line
Dell is a computer and technology company founded in 1984 by Michael Dell. Dell technologies consist of seven brands, and they are the world's largest privately owned technology company (Dell 2017). Operating in 180 countries and bringing in revenue of $72 billion last year, Dell is a considerable force within the technology industry (Dell 2017).
However, the company has a low debt to revenue ratio (Business Insider 2015). The company has gained acknowledgment regarding their supply chain management, and for successfully building e-commerce with a direct business sales model (CNN 2013). Dell is considered one of the most secure, reliable and manageable technology brands on the market, which has led to a strong brand within the B2B segment. Dell was in the first quarter of 2017 the third largest PC vendor in the world, and as an entrepreneurial company, they have been able to follow market trends and stay relevant within rapid changes in the technology industry (IDC 2017). 2:1 Notebooks are the fastest growing part of Dell Australia. They have introduced three series of 2:1 Notebooks; the Inspiron series which is targeting the mainstream user, the XPS series is targeting power users and creative professionals, and the Latitude series specialized for business (Laptopmag 2017).
2.2 Business Model Canvas
A business model canvas has been constructed to assess how Dell creates, delivers and captures value. These factors are demonstrated through the analysis of the four core areas of the business: customers, offer, infrastructure and financial viability. The core information is covered in the “nine building blocks” as evident in the canvas.
One important aspect to notice is the value propositions; how Dell’s Latitude 2:1 Notebook meet customer needs better than their competitors. These value propositions are not being communicated in a desirable way.
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* The Latitude 2-in-1 Notebook will not be introduced to the retail market, but JB-Hifi and the retail channels are still mentioned as they play a major role in Dell’s business model.
2.3 Resource Audit
Using a resource audit analysis, Dell can examine their core strengths, assessing human, physical, financial and intangible resources. Each of Dell’s resources that distinguish them from their competitors is a competitive advantage, and this will guide Dell on the way to long- term success (small business 2017).
2.3.1 Human Resources
Through a connected workplace, Dell’s human resources sustain as highly mobile and flexible. Ongoing development through leadership training and skills development keep the workforce and leads them to achieve their goals (Dell n.a). Dell provides opportunities to develop their employees; therefore the need to hire new employees for new projects is small.
The company currently has 145,000 team members including a market leading direct sales force, and 30,000 full-time customer service team members delivering best of breed customer service and support (Dell 2017).
2.3.2 Physical Resources
Dell outdoes other 2:1 Notebooks on performance. Hardware reliability, consistency in performance and replacement parts availability has led to effective support and loyal Dell
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customers (‘Dell Notebooks are the most reliable according to Customer Satisfaction Research’ 2015). Dell is considered one of the most secure, reliable and manageable
technology brands on the market. Their successful direct online sales model sets the company apart from their competition, and 2:1 Notebooks are the fastest growing part of Dell on the Australian market (Dell 2017). The total cost of ownership (TCO) is an important factor for the customer satisfaction of 2:1 Notebooks (‘Dell Notebooks are the most reliable according to Customer Satisfaction Research’ 2015).
2.3.3 Financial Resources
DELL reported $72 billion in revenue in the year 2016 (DELL 2017). The balance of profitability and growth is driven by strategic investments in areas that deliver long-term results (Dell 2016). Despite Dell’s revenue, their debt is considerably high mainly due to the
$67 billion acquisition of EMC (Nytimes 2016). The benefits of the made to order business model creates low risk of inventory damage and maintenance cost, and contributes
significantly to DELL’s financial performance. However, the market maturity drives down margins for commoditized lines of business (DELL 2017). A $12.7 billion investment in R&D the last three years, and $4.5 billion R&D investment annually going forward is
indicating a commitment to delivering new and better solutions and continuing to be a leader in technology innovations (DELL 2017). Nevertheless, Dell does not have high R&D
investment regarding their revenue, compared to their competitors (Cnet n.a).
2.3.4 Intangible Resources
In over 25 years in local Australian operations, Dell has managed to maintain a position as a leader in technology and achieves a higher satisfaction score than the average notebook market in the quarterly customer satisfaction (CSAT) studies (‘Dell notebooks are the most reliable according to Customer Satisfaction Research’ 2015). Dell has a strong business model in place for the B2B market. Their corporate customers can “try and buy” Dell products, meaning they can lease the products for a certain amount of time with no commitment. The is one of the reasons they hold a strong brand name in the B2B segment, especially in the education and certain commercial segments. Dell’s company culture decides how the company builds their products, work with their suppliers and sustain operations.
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2.4 Value Chain Analysis
To find Dell’s competitive advantages, Porter’s Generic Value Chain is utilized to examine all of the company’s activities and how they are connected to each other (Porter and Millar, 1985). A value chain is a set of operations carried out by a firm to create value. By looking at how the supporting activities affect each of the primary activities we seek to understand where Dell is creating value, and where it can increase its investments to create more value to increase its competitiveness.
2.4.1 Inbound Logistics
Inbound logistics are the processes concerning storing, receiving and distributing inputs within the company, and Dell’s relationships with suppliers play an especially important role.
Dell has focused on supplier development to empower sustainable growth in the supply chain.
(Dell 2016). Materials for the production are shipped within 2 hours after receiving an order.
This procedure is possible due to dual order placements between both Dell and its suppliers simultaneously. Dell order every part they need from suppliers, and then assembles
everything themselves, which creates competitive advantages for them by withholding private information. In addition to this Dell utilize a Just-in-time philosophy. Proper management of these procedures creates value for Dell with cost leadership for most of its products and services, as well as low inventory costs and maintenance cost.
2.4.2 Operations
By assembling parts, Dell can offer their customers a high level of product customization, which is one of their major competitive advantages. For the 2:1 Notebooks, the operation process consists of three stages; assembly of standard parts, installation of custom parts, such as the different processors, and installation of software. All the steps are tested to check if configured correctly. It is essential with excellent expertise in the entire process, to make products of the highest quality, can see and fix product defects, be efficient and innovative.
This is an advantage for Dell, as their employees are highly educated, are up to date on technology and are specialized in their field. This will also cut down the technology costs of the assembling process.
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2.4.3 Outbound Logistics
Once the devices are assembled, they are sorted based on destinations. The devices are stored in a logistics hub and shipped either directly to the customer, or indirectly through
wholesalers like Dicker Data, Ingram Micro and their resellers (ARN 2017). Due to the efficient mass customization Dell can be punctual, and shorten the time between the order and delivery. The short lead time between ordering and receiving a 2:1 Notebook, adds value to the end users.
2.4.4 Marketing & Sales
Dell is focusing more on branding than marketing of their products. They are not investing heavily into the promotion of a single product category but emphasizes solution-based positioning. Due to the importance of creating and preserving customer relationships, Dell’s network and HRM activities help cut down marketing costs. Dell is spending 3% less than Microsoft on marketing communication (Dell 2017).
2.4.5 Service
Pre-and post-customer support is another of Dell’s competitive advantages. Dell is the market leader when it comes to supporting and after-sales service options for the business. They offer 24x7 support and 4 hours’ service level agreements. Dell’s employees take approximately 50,000 phone calls each day from their customers, logging everything in solid CRM systems.
These systems are sent to managers for further handling. Dell is one of the biggest providers of security and blocked 2.17 billion IP attacks in 2015 (Dell 2016). Significant amounts of resources are being allocated to pre-and post-support and are handled by Dell’s exceptionally well-trained employees.
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3.0 External Analysis
3.1 Market Analysis
The following section consists of a market analysis. This analysis includes an overview of the industry, Dell’s 2:1 Notebook target market, projections for the business, and necessary regulations for Dell to consider.
Industry description and outlook: “According to the research consultancy IDC, the global information technology (IT) industry market, encompassing hardware, software, services, and telecommunications, was expected to reach $3.8 trillion in 2016, up from $3.7 trillion in 2015.” (CompTIA 2016; Appendix 5). In the global IT market, IT hardware, software, and services account for 59%. In the computer industry, it is becoming increasingly more important to invest in areas such as IT support, software development, cybersecurity, data analytics, and related skills. “Many organizations view the further development of tech talent in-house as a strategic imperative.” (CompTIA 2016). One of the major technological trends is the emphasis on security, and companies tend to focus towards this emerging trend. This can be seen as a result of the adoption of new technology and reliance on digital data (CompTIA 2016). Considering the emergence of IT, attacks from hackers has now shifted from individuals to businesses of all sizes.
The computer industry involves several products, and looking at 2:1 Notebooks it is particularly necessary to note that desktops/laptops have a 36% potential to underperform, 59% potential to perform as expected and 5% potential to over perform (Appendix 6). For 2016, the IT industry growth rate is estimated at a rate of 4.9% in current dollars, with upside potential of 7.1% and a downside of 2.7% (CompTIA 2016). As mentioned previously focus lies in the cloud applications, cloud infrastructure, and security. However, the global industry is expected to add about $100 billion in revenue in 2016, which will involve a mix of
foundational product categories, such as PC’s or servers (CompTIA 2016).
Dell has less than 10% market share in the 2:1 Notebook market in Australia (Dell 2017).
However, it is hard to estimate an accurate market share, because of the 2:1 market is in the early phase of its product lifecycle. Microsoft is spending large amounts of capital in order to
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drive adaptation in the market and is looking to move beyond the chasm between early
adopters and the early majority (Rogers 2003). Convertible Notebooks are the fastest growing part of the Australian client market (Dell 2017). Sales are estimated to triple from more than 500,000 this year to nearly 1.5 million in 2017 (Telsyte 2017). Telsyte expects Windows- based tablets and 2:1 Notebook will grow to around a third of the market by 2017. “The latest findings show that Australians are moving significantly away from sub-premium (or low-cost) tablets. According to Telsyte’s Australian Digital Consumer Study 2017, around 40% of Australians are willing to pay more for ‘top quality electronics’ as digital devices become central to the consumer lifestyle” (Telsyte 2017).
The market for desktop computers and laptops has had another tough year. Overall shipments of PCs dropped 5.7% year-over-year (Fortune 2017). However, Dell was ranked third
regarding units shipped in 2016 (40.7 million) below Lenovo (55.5 million) and HP (54.2 million). Lenovo had a 3% decline, but Dell, however, had a 4.3% increase from the previous year (Fortune 2017). Lenovo operated with a market share of approximately 21% in 2016, HP with 21% and Dell with 16% (IDC 2016). Despite shipments declining in 2016, IDC said that overall fourth-quarter shipments results indicate a possible PC market rebound in the New Year (Fortune 2017). The PC market has declined over the last years, but recently it has been a positive trend, due to users wanting to update products and systems.
With two consecutive quarters of strong market growth, it is believed that the strong market performance is mostly driven by an increased appetite from the channel for inventory, not strengthened demand (IDC 2016). The convertible Notebook market can still be seen as unexplored. It is essential to understand that customers must feel the need for buying a 2:1 Notebook.
3.2 Competitor Analysis
In order to determine how competition can impact Dell, a competitor analysis, and industry analysis has to be conducted (Porter 2008). The threat of new entrants is low because of high barriers to entry, incumbents have created big brands, and there is a high level of brand loyalty. However, the line between the private and the enterprise markets have recently become blurred. This trend enhances competition between players in the industry,
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independent of whether they primarily sell to individual consumers or to the commercial market. The threat of substitute products is high because new products are constantly being developed and introduced to the market, similar to how 2:1 Notebooks were introduced as a combination of the laptop and tablet. The suppliers bargaining power is relatively low, as a result of Dell being able to negotiate on prices with different manufacturers. Unless strong relationships are established, the switching cost is low. Customers have high bargaining power because they have easy access to information about products in the market and their specific attributes. This challenge the companies to offer customers the best quality possible at a competitive price. There could be high switching costs due to brand loyalty, and operating systems can affect the way in which customers are willing to change. Purchasing a 2:1
Latitude from Dell and learning how to use Windows instead of MacOS creates a high switching cost, if the client has been using an Apple MacBook previously.
The IT industry is highly competitive, because of constant change and development in technology. This causes innovation, lower production costs, and better products because companies depend on high performance in these areas in order to stay competitive. Not all of Dell’s competitors focus on the 2:1 Notebooks to the same extent because one of the main drivers in the industry is currently cloud applications. However, market share in this segment is still important. Each of Dell’s products can be customized, and they are more powerful than their competitors’. This is particularly relevant for the identified segments because different occupations need different levels of power.
Competitive information from the primary research:
Based on a survey answered by end users, Microsoft is the “top of mind” brand when it comes to 2:1 Notebooks, along with DELL, Lenovo, and HP (Appendix 7). The analysis also shows that many consumers associate 2:1 Notebooks with
Apple even though they do not produce 2:1’s. Apple’s iPads can be seen as substitutes to the 2:1 Notebooks but does not possess the same power and software system as a 2:1 device.
Based the primary research and secondary data, Microsoft is proven to be the market leader in the 2:1 Notebook market, while companies like Dell, Lenovo, and HP maintain a rather small piece of the pie.
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Microsoft was the first company to launch a 2:1 Notebook. They have spent a high amount of money on developing, growing and adapting the market further, and has maintained a good reputation and strong brand loyalty. Their 2:1 Notebook Microsoft Surface Pro is easy to use with a powerful Intel chipset and Windows software. Furthermore, the Microsoft Surface Pro is their best-selling product. Microsoft is a global business with a strong consumer brand and user sentiment. They invest significant capital and attention to marketing and promotion in order to drive customer perception of the Surface Pro and to drive adaptation of the 2:1 Notebook market. Microsoft is globally known for its excellent software system, and this specialty gives them a major competitive advantage. However, they are not a great hardware company and spends significant resources on R&D and hardware manufacturing. Microsoft and their Surface Pro has long been positioned for retail and small business consumers being attractive for individual customers to purchase and use these products at work. Microsoft´s entry into the commercial market creates a major threat for Dell which is aiming to become the leader in this market.
Lenovo is usually ranked number 2 or 3 in the Australian market for client devices based on a quarterly cycle. They are aggressive in the channel business with eroding margins across the industry. Lenovo is very agile and is willing to pursue market share (Dell 2017). Design, support, and innovation are some of Lenovo’s main strengths. Seen as an enterprise, Lenovo is price aggressive because they pursue their market share goals. They follow disruptive strategies to generate stronger traction in channel markets. Like Dell, Lenovo has a consistent presence in government and education markets (Dell 2017). Weaknesses for Lenovo are that customers have mixed feelings about detachable 2:1 Notebooks and customers are not
impressed by the features offered. Lenovo covers almost all the major niches of laptops (Dell 2017). However, Lenovo’s 2:1 products do not provide the same range of performance ability as Dell (Lenovo 2017).
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HP is ranked number 1 in the Australia and New Zealand (ANZ) market for client devices.
They operate with a strong channel business and emphasizes marketing and promotion heavily. Marketing of individual products is a major advantage for HP compared to Dell – which primarily focuses on brand marketing. HP is number 1 in server sales in the ANZ market, operates with a strong storage and networking business, and has a strong channel presence and reseller networks (Dell 2017). However, HP has poor acquisition decisions.
They are heavily dependent on computer and printer sales, and the decline in computer sales internationally is expected to wallop HP.
3.3 Customer Analysis
Due to Dell’s strong brand in the B2B segment, they find customer relationships important.
To identify potential segments in this market, primary research consisting of interviews with wholesalers and resellers, and an end-user survey with 166 respondents have been conducted.
This resulted in the identification of four main customer segments for Dell’s 2:1 Notebook range in the Australian market. The segments are created based on respondents’ occupations, if they found a 2:1 Notebook beneficial, and if they would purchase a 2:1 Notebook in the future. The segmentation is based on the assumption that the needs and preferences are homogeneous within the occupations and heterogeneous between the professions.
3.3.1 Segment 1: Business and Financial Operations
The largest segment that has been identified is Business and Financial Operations, and the majority is students between the age of 18 and 24. It is necessary to focus on students within this segment because they can be more innovative, modern and can contribute to changing the attitudes towards digital devices. This segment acknowledges features such as a keyboard, data security and a long-lasting device as the most important when using their digital devices at work. Quality hardware is also highly valued, and they are willing to pay extra for quality (Appendix 11). The segment can be perceived as less price sensitive, and follow trends rather than sales offers (Appendix 10). The 2:1 Notebook market is still in the early stages, but
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trends indicate that the detachable devices have an immense potential for growth. 10 out of the total of 27 respondents (37.03%) in this segment perceived the 2:1 Notebook as beneficial.
In addition to this, 11 out of the total of 27 (40.74%) are neutral (Appendix 8). Seeing that the product and the market are still in the early stages gives Dell considerable potential. If Dell target this market, they can emphasize the need and the benefits, and make customers understand the usefulness of a 2:1 Notebook.
3.3.1 Segment 2: Management
The Management segment is second largest, with the majority being between the age of 45 and 54. The management occupation is growing correspondingly with the growth of new businesses and is, therefore, an important occupation for Dell to target with their 2:1 Latitude series. One key characteristic of this segment is that consumers travel more between locations such as meetings, business travels, etc. (Appendix 12). They also value good quality, data security, long lasting products, keyboard and touch screen, in which the Latitude series
possess. 9 out of 23 respondents (39.13%) would prefer a detachable screen, while 8 (34.78%) remains neutral (Appendix 11). Therefore, the segment has potential if Dell can convince neutral respondents of the benefits of using a 2:1 Notebook. 13 out of 23 respondents
(56.52%) find it beneficial to use a 2:1 Notebook in their work situation (Appendix 8) and the survey shows that the majority of this segment would consider buying one (Appendix 9).
Respondents in this segment value quality over price, and does not usually buy devices on sale. In addition, the respondents do not necessarily follow trends (Appendix 10). This segment can benefit from portability, flexibility, and high quality because of the majority travel on a daily or weekly basis.
3.3.3 Segment 3: Architecture and Engineering
This segment was identified due to a positive result from the survey, in addition to affirmative information from the interviews. Most respondents in the survey values features like the keyboard, high quality, long-lasting products, design, security, and software (Appendix 11).
Similarly, to the other segments, these respondents would pay more for quality and tends to ignore sales offers (Appendix 10). Out of 13 respondents, 8 (61.53%) acknowledge the 2:1 device as beneficial in their work situation (Appendix 8). Even though the numbers of respondents in this segment are low, the majority would consider buying a 2:1 Notebook and
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some already own a device. Several resellers identified Architecture and Engineering as an important segment, and one can, therefore, assume that a larger number of respondents in the survey would result in a similar outcome. This segment requires a device that can provide exceptional performance, such as the ability to perform heavy graphical tasks with optimal resolution.
3.3.4 Segment 4: Education, Training and Library
Based on the information gathered from resellers there is a high demand for 2:1 Notebooks in the Education, Training and Library segment (appendix 2). Our survey indicates a
considerable variation in age among the respondents. The software is one of the most
important features these respondents look for in a computer. In addition to this, data security, detachable screen, and high quality are essential features. This segment prefers the “best of both” worlds; they value both touchscreen and keyboard, and this would make a 2:1 Notebook the optimal device for them (Appendix 11). However, this is an interesting segment, because the majority of the respondents think the 2:1 Notebook is beneficial (Appendix 8), but there is an equal number of people who would not buy it (7 out of 14 respondents) and those who does consider buying (Appendix 9). Some of them already own a 2:1 device and it is believed that this segment has potential. Because the survey has a low number of respondents in this segment and with supporting information from resellers, it can be assumed that with a larger number of respondents, the results would have matched the current outcome. This segment can benefit from a flexible 2:1 Notebook and a good selection of ports and slots.
3.4 PEST Analysis
Several wider uncontrollable forces in the external environment could affect Dell. In order to scan and analyze the external macro environment, we have utilized a PEST analysis. This way Dell can recognize where there are potential opportunities and threats in the environment that Dell should be considering.
3.4.1 Political Forces
There are many political forces can impact Dell’s operations in Australia. There are several tax policies, trade restrictions and tariffs on import and export which the Australian
government has set to protect the national economy (Australian Trade and Investment
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Commission 2017). The Australian Government is, however, stable and is regarded as a liberal capitalist democracy. There is a low threat of terror (Trading Economies, 2017). One can, therefore, conclude that the political factor strongly impacts how Dell operates in Australia, but due to the stability, this can be categorized as a minor threat.
3.4.2 Economic Forces
Australia is one of the largest capitalist economies in the world. It is also as mentioned protected to a high degree. The economy has a stable inflation rate of 2-4%, a stable and increasing GDP and a low unemployment rate of 5.7%. The interest rate is held steady at a record low of 1.5% which impacts Dell positively because it encourages people to spend more money on purchases usually viewed as non-essential. This creates a major opportunity for Dell. People are generally prepared and willing to buy devices like 2:1 Notebooks (Trading Economies, 2017).
3.4.3 Socio-cultural Forces
The socio-cultural factors are highly relevant forces for Dell to consider regarding the 2:1 Notebooks. Australia has a current population of 24,588,774 people according to the estimates done by United Nations (Worldometers RTS algorithm 2017). Whereas 89,3% is considered as urban, and this high ratio of urbanization affects the socio-cultural factors and trends (Worldometers RTS algorithm 2017). People tend to move toward the big cities to work, and the increased social mobility and centralization creates opportunities for utilization. These factors are relevant because it affects the lifestyle of people, and demands a more flexible and on-the-go working situation. Australians tend to be well educated and up to date on trends.
There is an increased focus on corporate social responsibility (CSR), and Dell should respond to this force by emphasizing their devotion to CSR. The cultural, vibrant lifestyle and high standards of living increase the emphasis on design, brand and how the attributes of technological devices can improve the work routine. The trends of urbanization and the changes in work lifestyle is an opportunity Dell has taken advantage of when introducing the Latitude 2:1 Notebook. Seeing that branding is becoming increasingly important, this trend can be a threat for those not being the preferred brand in the market or are not responding well to people’s buying patterns.
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3.4.4 Technological Forces
Dell is operating in the IT industry, and hence the technological forces are highly important to acknowledge. The emerging technologies is an ongoing dynamic process of a digital
revolution, a complex mechanism and uncertain in a long-term perspective. This continuous movement has a high innovation potential, where competing technology development accelerates. This tendency has led to a decrease in the product lifecycle for many products in the IT industry. This drift puts a lot of pressure regarding R&D activity, and the need of having patents that keep up with the maturity of the technology is highly significant for companies like Dell. These major technological trends intensify the emphasis on security and protecting sensitive data of intellectual property for businesses. Another trend is the
importance of up-to-date devices in the workplace, especially among millennials. A ratio of 42% of millennials is likely to quit their job if their expectations are not met (Dell, 2017).
Keeping up with the technological trends in the environment is important for Dell to take into consideration, and the technological forces can, therefore, be seen as a major threat for Dell.
3.5 SWOT Analysis
Consumers are becoming less concerned with customization and standardized models sell cheaper and quicker. The hybrid business model combining direct and retail sales that has been developed, considers these emerging customer needs (Insight 2007).
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Strengths
Dell has over the years developed a strong brand in the commercial market. In this market, they have a loyal customer and partner base. This tendency might be leveraged to reach potential customers for the 2:1 Latitude Notebook. The offering of exceptionally secure devices is what distinguishes Dell's 2:1 Notebooks from their competitors. The secure access and data security make the Latitude 2:1 Notebook especially attractive for B2B consumers.
All potential segments identified in the primary research perceived security as one of the most important attributes of a computer device used in a work situation. Dell offers their customers excellent support and after-sales service for commercial clients. This reflects their overall corporate value in creating and preserving customer relationships.
Weaknesses
Dell has a market leading direct sales force. However, the indirect sales model is weak and only accounts for 14% of Dell product sales. This could be due to the lack of control over the product sold through resellers, for example, the reseller's sales technique and promotion activities. Despite a high revenue, Dell has more debt regarding the industry standard.
Compared to their competitors with high revenue and low debt, they spend less capital and attention to R&D. The Latitude 2:1 Notebook’s value proposition is not well communicated to the market. The Latitude is a long lasting premium device with corresponding price points, but the end users do not understand the benefits of investing in this device.
Opportunities
The 2:1 Notebook market is a new and rapidly growing market full of potential. Dell’s strong brand within the B2B segment creates an opportunity for further expansion within this
segment for 2:1 Notebooks, along with a low-interest rate in Australia of 1.5% that encourages consumption. When introducing the Latitude to the market, Dell has an
opportunity to consider a new marketing strategy to better communicate the value proposition of the Latitude 2:1 Notebook. They can for example tailor a marketing communication
approach and dig deeper into their reseller's sales techniques to monitor how the devices are being sold through the indirect channel. An opportunity for Dell is that most businesses need to have an up-to-date technology and keep track of the market trends and innovations to maintain efficiency within the firms. This tendency creates a demand for technology that can cover this need of well operating, practical and secure devices.
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Threats
The line between the private and the enterprise market have become more blurred, and Microsoft and their Surface Pro have started targeting small businesses. Since Dell is aiming to become the market leader in the commercial 2:1 Notebook market, this is a major threat.
Over the last few years, the computer market has experienced a decline. However, an evolving trend has recently emerged because of users wanting to update to the latest
technological advances. This threatens Dell regarding their limited investments in R&D, and their ability to deliver innovative products to an evolving market. The accelerated changes in customer demands lead to a shorter product life cycles. This can be a threat for Dell because they constantly have to develop new innovative products and invest heavily in R&D. Even though Dell produces long lasting products with high quality, customers might experience different needs more often, because of the rapid technological change.
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4.0 Marketing Objectives
The Business Dictionary defines marketing objectives as “the group of goals set by a business when promoting its products or services to potential consumers that should be achieved within a given time frame” (Business Dictionary 2017). The objectives should be SMART: Specific, Measurable, Attainable, Relevant and Time-based. Based on this, three marketing objectives are identified to solve the three key issues derived from the situation analysis. The three marketing objectives, how they are linked to the issue, initiatives/strategies, measures, and time-frames are all incorporated in the Strategic Plan (Appendix 13). The three marketing objectives are: Promotion strategy, distribution improvement, and customer retention
4.1 Overall Sales Objective
The overall sales objective determines what Dell wants to achieve in terms of units sold over a period of time. Therefore, Dell should emphasize increasing the market penetration rate.
Dell is targeting a large market consisting of the commercial management and education segments, whereas the total number of employees in the target markets in Australia is estimated to be around 2.6 million in 2017 (Department of Employment 2016). The market penetration rate measures the percentage of units sold to end users in the target markets.
Based on the estimated number of consumers in the target market, Dell’s overall sales objective is to:
§ Sell 520 000 units to achieve a market penetration rate of 20% for Dell 2:1 Latitude products for the Management and Education occupations market by July 2018.
However, the number of employees are estimated to increase in the next three years
(Department of Employment 2016), and Dell would benefit from increasing the penetration rate in the following years.
4.2 Promotion Strategy
Issue: Blurred lines between private and enterprise market
Objective: Increase product awareness and customer demand for the Latitude 2:1 range, by developing a promotion strategy.
Measure: Quarterly product sales revenue.
When: October/November 2017.
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Strategy:
1. Promotional Pull Strategy 2. Hold a product launch process
The first marketing objective is to increase product awareness and customer demand for the Latitude 2:1 range by developing a promotion strategy within the next three months. The objective is linked to the issue of blurred lines between the private and enterprise market. Dell requires a successful promotion strategy to avert Microsoft, for example, from attaining potential customers in the commercial market. This objective will be measured by assessing sales revenues every quarter to meet the SMART goals.
The 2:1 Notebook market is still in the early stages. It is therefore essential to introduce the Latitude 2:1 Notebooks to the market while it is an emerging product in the initial stages of the product lifecycle. The product life cycle of digital devices is decreasing rapidly; thus it is important to enter the market quickly to be as profitable as possible. This emphasizes the importance of developing a promotion strategy.
4.3 Distribution Improvement / Low Penetration of Indirect Distribution
Issue: Weak indirect sales model which only accounts for 14% of Dell’s total product sales.
Objective: Increase sales through different distribution channels to optimize profits.
Measure: Quarterly distributor sales revenue When: May 2018
Strategy:
1. Direct distribution channel 2. Indirect distribution channel 3. Implement training programs
Achieving the second marketing objective will strengthen Dell´s indirect sales model which only accounts for 14% of Dell’s total product sales. Hence the objective is to increase sales in the distribution channels to optimize profits.
However, selling products through an indirect sales model is risky because the distributors lack product loyalty and knowledge. As mentioned, Dell’s weak indirect sales model could be
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due to lack of control over the product sold through resellers, like the reseller’s sales technique and promotion activities. Therefore, it is highly important to develop strong partnerships with potential value-added distributors and resellers to control the product promotion.
4.4 Customer Retention
Issue: Poorly communicated value proposition
Objective: Achieve an increase in customer retention for Dell 2:1 notebook customers in the commercial market by communicating Dell’s value proposition.
When: July 2018
Measure: Customer retention rate.
Strategy:
1. Customer service as part of value proposition 2. Cross-selling
Dell can retain customers by providing accurate information about the 2:1 Latitude
Notebook´s value proposition. Achieving this objective contributes to strengthening Dell´s weakness of a poorly communicated value proposition. Customer relationships are one of Dell’s strengths; thus it is essential to focus on customer retention. “Customer retention is important because it is 5-7 times more expensive to acquire new customers than to keep an old one, it costs a company $234 every time they lose a customer, and loyal customers are worth up to 10 times as much as their first purchase” (Beard 2013).
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5.0 Target Markets and Positioning
5.1 Target Markets:
The commercial market is Dell’s target market for the Latitude 2:1 range, and based on the research conducted it is highly suggested that Dell emphasizes the segments of Management and Education. The Department of Employment 2016 and the customer analysis indicates growth in both management occupations and education occupations. Therefore, both
segments show great potential for sales of the Latitude 2:1. However, Dell needs to convince end users of the usefulness and the benefits of using a 2:1 Notebook. The target market of Dell’s Latitude 2:1 Notebook range in Australia should be primarily focused on the greater capital cities such as Brisbane, Sydney, and Melbourne. In these towns, the median age is approximately 35 years, and the median wage is around $50,000 AUD (Australian Bureau of Statistics 2017). Furthermore, there are more than 600 000 Education and Training employees in total in Queensland, Victoria, and New South Wales. (Department of Employment 2016).
5.1.1 Management segment
One of the segments Dell should target is the Management segment; the second largest
segment based on an end-user survey. The total number of Managers in Australia is 1,521,800 in 2015 (Figure 1), but the number is projected to increase by 9,2% over the next five years (Department of Employment 2016), which indicates a yearly average increase of 1,84%. The estimated number of management employees in 2017 is therefore 2 081 822.
* Figure 1: This figure shows the total number of Managers employed in Australia in November 2015, as well as the projected increase over the next years. (Department of Employment 2016)
An essential characteristic of this segment is that consumers travel more between locations such as meetings and business trips. Moreover, the segment value quality over price, data security, keyboard and touch screen. Managers would benefit from a portable, flexible and high-quality 2:1 Notebook.
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5.1.2 Education, Training and Library segment
The other segment Dell should target is the Education, Training and Library segment. The total number of employees within education professionals is 550 500 in 2015 (Department of Employment 2016). Even though the “professional” occupation is projected to increase 14,5%
from 2015 to 2020, no actual numbers are indicating a definite increase in the education occupation. However, from 2010 to 2015, “education professionals” increased with 12,2%, indicating a further growth in the forthcoming years. As mentioned in the customer analysis, this segment is interesting because respondents prefer the “best of both” worlds; they value both touchscreen and keyboard, which would make a 2:1 Notebook the optimal device for them. Furthermore, software is one of the most important features, alongside data security and high quality. This is a segment that can benefit from a flexible 2:1 notebook and a good selection of ports and slots.
5.2 Positioning
Dell is aiming to become the market leader in the commercial 2:1 Notebook market, hence they should position its Latitude 2:1 product as superior to the others as a premium high- margin client device. In other words, Dell should position itself by a high price and high quality. It is suggested that Dell emphasizes data security, high-quality device, and portability as the Latitude 2:1’s main features based on the segments’ preferences and values.
Furthermore, the positioning of the Latitude 2:1 notebook can help migrate traditional notebook users towards the latitude series, as well as retaining customers. “By investing in brand development that positions your brand as superior—you can potentially retain your customers, even if they become unhappy” (Claflin 2015).
According to Telsyte’s Australian Digital Consumer Study 2017, around 40% of Australians are willing to pay more for “top quality electronics’ as digital devices become central to the consumer lifestyle” (Telsyte 2017). Therefore, Dell can set a premium price for its Latitude 2:1 range that is above the competitor’s prices, which lies between $900-$2000.
Utilizing free marketing options like social media and word-of-mouth enables Dell to spend less money on marketing communications. However, Dell is required to invest more money in marketing communications to alter customers’ perception of the Latitude 2:1 range. The perceptual positioning map (Figure 2) enlightens Dell’s desired position relative to
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competitors. Altering consumers’ perception of the Latitude 2:1 range can be achieved by adequately informing consumers about the Latitude 2:1’s value proposition.
Figure 2: A perceptual positioning map based on Dell and competitors’ 2:1 Notebooks for the commercial market. (HP pavilion, Microsoft Surface Pro 4, Dell Latitude, Lenovo Yoga)
Dell ought to emphasize its direct sales model to maintain a close and intimate relationship with customers and increase customer retention. However, Dell must engage more in the indirect sales model through strong partnerships with value-added distributors and resellers to optimize profits. In addition, distributors should be provided with training programs and a Latitude 2:1 toolkit to assist Dell in promoting the desired position.
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6.0 Key Strategies
The Business Dictionary defines strategy as “a method or plan chosen to bring about a desired future, such as achievement of a goal or solution to a problem.” Therefore, each marketing objective consists of two to three strategies options that will assist Dell in achieving a market penetration rate of 20%.
6.1 Promotion Strategies
A promotion strategy will provide extra value or incentive to the sales force, distributors, or the ultimate consumer and can stimulate immediate sales (Belch & Belch 2015).
6.1.1 Promotional pull strategy
First of all, Dell should develop a promotional pull strategy to increase the flow of product information and encourage the customers to “come to you.” This requires Dell to invest money in pull tactics such as advertising, word of mouth referrals and customer relationship management. The promotional pull strategy will include advertising, mail order marketing, and inbound marketing.
6.1.2 Hold a product launch process
Secondly, Dell can increase product awareness and customer demand by holding an ongoing product launch process for the Latitude 2:1 Notebook range. This is beneficial because “new products can earn up to half of their profits in the early part of their life cycle” (Bos 2010).
This strategy includes utilizing public relations to develop a positive relationship between the organization and the media and the public (Learnmarketing n.d). However, all public relations are not always positive, and the Dell’s PR-team needs to both create favorable publicity through the media and minimize the impact of adverse situations. Articles, reviews, and blogs are examples of channels to gain publicity.
6.2 Distribution Strategies
Dell’s distribution strategy is about distributing their products to the end users at the right place and the right time (Learnmarketing n.d).
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6.2.1 Direct distribution strategy
The first distribution strategy is to sell directly to end users. The direct distribution channel has proven profitable for Dell, and they maintain complete control over their product. The direct strategy enables Dell to enhance the “build-to-order” approach as well as keep its “just- in-time” strategy to operate with the industry’s lowest inventory level (Bhasin 2016).
Furthermore, direct selling also enables Dell to uphold and retain individual relationships with customers as well as obtain direct feedback from consumers.
6.2.2 Indirect sales model
The second distribution strategy is to invest more in the indirect sales model, through selective distribution. Distributing the product through several channels can give Dell a competitive advantage and increase profitability. Dell could spread the financial risks through an indirect sales model and collaborate with value-added resellers is beneficial because they focus on customer service and adding value to the product. Furthermore, the resellers and wholesalers have more knowledge about customer demand, local markets, and selling
products to end users. However, they do not specialize in specific products, and Dell needs to educate resellers and wholesalers about their products and product features, which brings us to the third strategy.
6.2.3 Implement training programs
The third distribution strategy is to implement training programs for employees at the respective resellers and wholesalers to make sure they promote the product with the
appropriate information. Implementing training programs will not only benefit Dell’s indirect distribution channel but the direct channel too. The specialized sales teams for the Latitude 2:1 device should be educated similarly about the product and its features to coordinate the positioning and marketing of the product through both distribution channels.
6.3 Customer Retention Strategies
A customer retention strategy is important because, as mentioned earlier, “it is 5-7 times more expensive to acquire new customers than to keep an old one. It costs a company $234 every time they lose a customer, and loyal customers are worth up to 10 times as much as their first purchase” (Beard 2013).
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6.3.1 Customer service as a part of value proposition
The first strategy is to implement customer service as a part of Dell’s value proposition.
Emphasizing customer service will be beneficial, as it is one of Dell’s strengths and competitive advantages. While communicating the value proposition to consumers, Dell needs to make sure they do not over promise anything. Customers are more likely retained if they are positively surprised by the device rather than having high expectations that are not met (Claflin 2015).
6.3.2 Cross-selling
Secondly, Dell should cross-sell products to increase customer retention. Cross-selling “is to get the client to spend more money by adding more products from other categories than the product viewed or purchased” (Bustos 2009). Apple, for example, benefits from high brand loyalty because their devices possess the same infrastructure – MacOS. Dell is a technology leader and innovator and could utilize this to create the same brand loyalty by providing all necessary solutions for businesses with their devices and infrastructure. By cross-selling products, Dell can tie their customers to their products and increase brand loyalty through increased switching costs.
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7.0 Key Recommendations
Based on the research and analysis conducted, Dell should move forward with three key strategies to accomplish the marketing objectives and reach the overall sales objective. The three strategies should be gradually implemented in a prioritized matter, and are portrayed in an implementation timetable (Appendix 14).
It is highly recommended that Dell should prioritize developing a promotional pull strategy to increase product awareness and customer demand, resulting in retailers and resellers wanting to stock the product. Launching a product is both time-consuming and risky, hence
prioritizing the promotion strategy gives Dell the necessary time to research customer demand, product profitability, and to test the product. Utilizing Dell’s CRM-system to
develop a tailored approach to advertisements can ensure the visibility of Latitude 2:1’s in the target market. Inbound marketing involves utilizing social media to share interesting content and keep customers informed and engaged. Dell should use social media sites to maintain a close relationship with their customers alongside communicating the Latitude 2:1 range’s value proposition. It would be strategically smart to emphasize features like data security, portability, flexibility and high-quality as these are valued by end users in the segments.
Implementing the promotion strategy will therefore not only distinguish between the private and enterprise market but also communicate the value proposition.
The next recommendation is to improve the indirect sales model by implementing training programs and providing distributors with product toolkits. Resellers’ desire to stock the product grows correspondingly with customer demand, and therefore, it is necessary to begin implementing this strategy right after the product is launched (Appendix 14). Engaging more in the indirect sales model spreads the financial risk and aids Dell with local market
knowledge. The training programs should consist of audio, videos, learning interactions, quizzes, and certifications. Furthermore, the goal of the training programs is to control resellers’ promotion of Dell’s products. Whereas, the Latitude 2:1 toolkit will provide
Develop a promotional pull
strategy
Improve indirect sales model by
implementing training programs
Implement customer service as part of
Dell's value proposition
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resellers and wholesalers with different promotion suggestions. Investing in training programs is expensive, however profitable in the long-term should it succeed.
The final recommendation is to implement customer service as a part of Dell’s value
proposition. Customer service is a huge competitive advantage, and Dell would benefit from emphasizing this in their value proposition. Especially ProSupport and EndSupport are examples of successful activities that improve customer service and should be emphasized in Dell’s value proposition. As mentioned, the direct sales model enables Dell to enhance the
“build-to-order” approach and satisfy customers’ needs and requirements. Focusing on customer service increases customer retention and profitability. This strategy is not time sensitive, and Dell should, therefore, implement this in the 4th quarter. Introducing customer service as a value proposition can be done through developing headlines, sub-headlines, bullet points and visual content on Dell’s website.
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9.0 Appendix
Appendix 1: Questions to Wholesalers
• Are you a Dell distributor? Why/why not?
• What products do you stock?
• Will you stock the 2:1 Latitude Notebook?
• Which 2:1 Notebooks are the best sellers?
• Do you stock any other notebooks? Which brands?
• Can you give us some price points? What is the recommended retail price?
• Do you think the 2:1 notebook market has potential? (Do you see any potential for Dell’s 2:1 Latitude series?)
• What customers are buying 2:1 Notebooks?
• Who is the market leader for 2:1 Notebooks?
• Which resellers do you sell 2:1 Notebooks to?
Appendix 2; Questions to Resellers
• What brands do you stock in the 2:1 product range?
• Which brand is the most popular?
• Which 2:1 notebook is the best-seller?
• Do you sell your notebooks to specific businesses? If so, which ones?
• What are the primary target markets for 2:1 Notebooks? (What kind of customer segments (vertical markets)?)
• What is the general consumer feedback for the 2:1´s?
• Why do current consumers choose 2:1 Notebooks?
• Would you say that there is an increase in demand for 2:1 notebooks directed towards businesses?
• Are there any specific attributes/features that are perceived as important?
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Appendix 3: Questions to Microsoft
We are doing some market research for the 2:1 Notebook market here in Australia, and we were wondering if we could talk to someone about the market?
• Why do consumers choose 2:1 Notebook? What attributes and features are important?
• Do you sell 2:1 notebook mostly to individuals for private use or businesses for business services? Why do you think businesses are / are not interested in a 2:1?
• Is there any particular occupations that want/needs 2:1 notebooks/or that you recommend a Surface Pro to?
• Will you say that it is an increasing demand for 2:1 notebooks, directed towards business?
• How do you think 2:1 Notebooks can compete with tablets?
• Do you have any numbers on the size of the 2:1 market? How many % of that market is Surface Pro’s market share?
Appendix 4: Questionnaire
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If a person answered yes on the previous question:
If a person answered no on the previous question:
