Customer Relationship Management At Dell

Introduction

Customer Relationship Management (CRM), as defined by Anderson and Narus, “is the bundling of customer strategy and processes, supported by relevant software, for the purpose of improving customer loyalty and, eventually, corporate profitability.” Consultants Rigby, Reichheld and Schefter have mentioned the imperatives of CRM as “acquiring the right customer, crafting the right value proposition, instituting the best processes, motivating employees, and learning to retain customers.” This can be substantiated by studying the particular case of Dell, which has used internet and other direct media to develop an efficient model of CRM. This report will bring out the details of CRM process followed by Dell, and how it has helped in sustaining loyal customers and build customer satisfaction.

About Dell

Dell is a leading technology company which offers a broad range of product categories, including mobility products, desktop PCs, software and peripherals, servers and networking, services, and storage. As per a Gartner research report based on second quarter PC shipments in 2009, it is the number one supplier (26.0% market share in US) of computer systems in the United States and the number two supplier worldwide (13.6% global market share).

The mission statement for Dell is “to be the most successful computer company in the world at delivering the best customer experience”. Since Dell is a global wide company, its “direct approach is relevant across product lines, regions and customer segments”. [1] 

Dell is organized geographically into the Americas, Asia-Pacific and Japan, and Europe. The corporate headquarters is located in Round Rock, Texas, near Austin. In the mid-1990s, the company decided that in order to manage a company that was growing at 50% a year, it needed to decentralize decision making rather than try to control everything from the U.S. Therefore, each of the regions has its own regional headquarters (Japan has a separate headquarters), its own manufacturing facilities, and its own IT infrastructure.

Ongoing Customer Relationship Management at DELL

Monitoring, Evaluating and Reassigning Accounts

Dell’s business activities are organized in each region around different customer segments. These generally include (1) relationship (large corporate) customers, (2) home and small business (sometimes called transaction customers), and (3) public sector (government and educational) customers.

This segmentation is evident in Dell’s product mix, which has different product lines for each segment, in its marketing strategies, which vary by business segments, and in its e-commerce and Internet strategies. For instance, services such as Premier.Dell.com extranets are geared toward large relationship customers, while a more limited set of online services is offered to home and small business customers on Dell.com.

For large enterprise customers, Dell maintains a field sales force all over the world. There are dedicated account teams, including field-based system engineers and consultants, which form long-term relationships to create a single source of assistance for their largest customers, develop custom solutions for them and get important customer feedback. There are several programs to provide single points of contact and accountability with global account specialists, special global pricing and consistent global service and support programs. There are separate sales and marketing programs aimed at federal, state and local government agencies, and specific healthcare and educational customers.

For small and medium businesses and consumers, marketing is done primarily by advertising on television and the Internet, print media and mailing a wide range of direct marketing publications such as promotional materials, catalogs and customer newsletters.

Relationship and public sector customers account for about 54% of Dell’s revenues overall. All these accounts are initially serviced by field-based sales representatives along with a support team of telephone service reps dedicated to these accounts. Small businesses and consumers are served by several thousand phone reps who can look up historical sales records to help the customers in ordering systems that match their prior purchase pattern.

Figure 1: Dell’s four customer aligned business units [2] 

Dell’s CRM Applications

The Internet and e-commerce are fundamental to Dell’s business, as expected from a company that defines itself as an Internet infrastructure company. The e-commerce has been adopted into the core of the business in three ways: 1) in its relationships with end customers, (2) in coordinating its value web, and (3) in communicating its market message to emphasize its ability to provide e-commerce solutions to its customers. As per Anderson and Narus, some of the emerging applications of CRM, (that we can also observe in Dell) are in:

Customer acquisition, retention and growth

Synchronizing marketing efforts

Updating delivered value

Customer Acquisition, Retention and Growth

Dell has involved the Internet in all aspects of customer relationships, ranging from customer acquisition, retention and growth to marketing. The internet is used in supporting existing channels such as the direct sales force and call centers by providing them with real time information and automating their routine tasks. It has also developed self-service tools for customers, using which they can order online, track order status or solve a technical problem through the Internet or an extranet.

Acquisition

Dell sells its own products at the dell.com website. On the homepage, customers in the U.S. are segmented into home and home office, medium and large organizations, Internet providers, health care businesses, federal government, state and local government, and education. Each customer segment has a different mix of products and services available. Customers can choose and price different configurations with Dell’s online configurator. Once they are ready to buy, their order is sent to a shopping cart. They can also choose various addons such as software, peripherals, digital cameras, PDAs, etc. on the Gigabuys or DellWare sites and add those to the same shopping cart. Once an order is entered, the customer receives an order number that can be used to track order status until it is delivered.

Premier Pages are customized for every customer and they include capabilities for procurement, asset management, software upgrading, and even technical support. Large relationship customers can have Premier Pages customized even further to link to their own internal procurement systems, allowing their orders to be sent directly from the customer’s office information systems to Dell’s order management system.

Dell’s account teams work with such customers to set up Premier Pages, setting access levels and registering user names and passwords for employees, and customizing the information and the kind of services that will be available. Dell also provides a few tools for customers to create their own pages. The various services available through Premier Pages include:

_ Purchase history reports: The complete history of a customer’s purchases from Dell, including PO number, order number, date, SKUs, quantity, shipment dates.

_ Standard configurations: To make a customer’s PC administration processes simpler (installation, upgrades, help desk, technical support), the customer can specify a definite set of configurations for different employees. These are made available for ordering on the customer’s Premier Pages at the price negotiated between Dell and the customer.

_ Paperless online purchase orders: Dell and the customers sign a legal agreement that allows the customer to place orders without mailing or faxing a signed purchase order. This lets the entire ordering process, from configuration to payment, to be done online, saving time for the customer.

_ ImageWatch: A roadmap of future product release plans made available to large enterprise customers to help them plan their own IT strategies. Dell relaunched its Premier Pages as “DellPremier.com” in September 2000 in the U.S with a new look and better navigation tools.

Retention and Growth

Service and support are normally quite an expensive and labor-intensive activity for PC companies, which need to provide technical support for complicated systems with a wide range of hardware and software configurations. Dell has an advantage here because most of its business is with large organizations that have their own MIS departments and technical help desks to support users. Home and small business support is usually provided directly to the end user, and costs more per PC to provide. Online support was originally developed by the Support Technology Online (STO) team, which grew up in the HSB (home and small business) segment as support.dell.com. In late 1999, Dell created separate STO groups for relationship and transaction customers, each part of those groups’ service organizations.

Dell offers several service tools online. These are available online to home and small business customers at support.dell.com, and to relationship customers on the DellPremier.com extranet:

_ Order status tracking — Once an order is placed by the customers, they can track it until it is delivered.

_ Resolution Assistant – A software which is pre-loaded on a Dell PC that gathers information and sends it to a Dell technician when the customer faces a problem. The information is matched against an automated knowledge base. Whenever possible, a MAP, an executable module that automates resolution, is sent to the PC and the fix is done automatically. Resolution Assistant reduces the length of service calls and improves accuracy in diagnosis.

_ Dell Knowledge Base — A Dell database including product information, frequently asked questions, third party knowledge and other relevant documents specific to a particular Dell product.

_ Ask Dudley — A natural language searchable database of technical information which uses a customized version of the Ask-Jeeves search engine.

_ File Library – Downloadable drivers, utilities and other updates for Dell PC systems.

_ Dell Software Tips -A library of hints and tips for operating systems and office applications.

_ Pro-active services – Pro-active notification services on warranty status, system age related information, file drivers, and the order status.

_ Dell Talk-a monitored community forum for Dell customers to share information. Dell has built a community where its customers and loyalists can help each other with technical problems and questions. Dell doesn’t censor the discussion on the forum, but monitors it regularly to ensure accuracy. If any user gives out incorrect information, Dell intervenes with the correct information. The users of this service are almost equally divided between relationship and transaction customers.

With the launch of Dell Premier Support.dell.com in September 2000, Dell renamed its Help Tech service as “Premier Support” for relationship customers. Technical Support for corporate and public sector clients is handled by the Relationship Support Technology Online (STO) group. The primary customers for the Relationship STO are those individuals that support the end users belonging to corporate and public sector. This includes the personnel from help desks, MIS departments, IT professionals and technicians. Dell’s relationship customers have access to all of the online tools available to HSB customers, and also have customized applications relevant to their account for multiple systems and platforms. Unlike individual users, help desks and MIS organizations must deal with many systems, and with specific problems that arise from networking and client-server environments. For some large accounts, Dell itself may act as the help desk function for Dell equipment, as Dell’s technicians and online offerings have rich experience in troubleshooting and diagnosing system issues.

Recently in February 2008, Dell launched its ProSupport portfolio of services. In this new framework, customers are able to self-identify the type of customer they are – end users of IT professionals. Once the customers have self-identified, they are able to choose the features they need in the support package, thus customizing the support experience to their specific needs.

The customer profile and history is very important in providing service and support. If the user enters a customer number or system identification number, he or she can get a personal support site that has the machine configuration and the history of what has happened with that machine since it was bought. The support strategy is based on what Dell calls virtual integration- getting customers closer to the knowledge, and inside out/outside in-giving the internal technicians the same set of tools and knowledge content as the outside customer. Dell gives customers a choice of venues for support, including phone and online support. They like people to use the web, but don’t force them to. The breakdown of help incidents for HSB customers as of mid-2000 was as follows:

_ 37% of incidents use the web alone for support

_ 13% use both web and phone

_ About 50% use the phone alone

Dell finds that people who buy a PC online are more likely to get service and support there, while people who buy by phone will use phone service.

Synchronizing Marketing Efforts

The sales and marketing efforts of Dell are organized around the evolving needs of its customers. Its direct business model provides direct communication with its customers allowing it to refine its products and marketing programs for specific customer groups. Customers may offer suggestions for current and future Dell products, services, and operations on an interactive portion of its website called Dell IdeaStorm. This constant flow of communication allows Dell to rapidly gauge customer satisfaction and target new or existing products.

For instance, Dell used a concept called “free-range marketing” [3] : allowing the community to drive the excitement and story about the new product, to create a buzz in social media using blogs, forums, communities etc. for the launch of their Inspiron 910 in September 2008.

Updating Customer Value

Dell interacts with more than 3 million customers every day, so it made sense for it to create a community to capture feedback from both customers and its 80,000 employees. Dell launched IdeaStorm, an interactive portal, to let customers share ideas that influence product development, services, and operations. Within the first week, IdeaStorm had collected more than 500 ideas; within the first month, it had 2,500 ideas. [4] Customer feedback on IdeaStorm led the company to build select consumer notebooks and desktops preinstalled with the Linux platform. Dell also decided to continue offering Windows XP as a preinstalled operating system option in response to customer requests.

Dell also launched EmployeeStorm, a secure community employees can use to post ideas regardless of their position within the company. In the first 2 weeks, the company gathered more than 700 ideas. EmployeeStorm breaks down the silos typical in corporate life and increases collaboration

Sustaining Customers through Connected Relationships

Value Chain

Dell’s core value chain for its PC business is different from that of a traditional value chain. Like others, it concentrated on building and selling PC systems, relying on others to supply components, software and services. However, it sold directly to the end user, cutting out the distributor and reseller. (Figures 2 and 3)

Suppliers

PC Maker

Distributors

Retailers, Resellers, Integrators

Final Customer

Figure 2: Indirect PC Value Chain

Suppliers

Dell

Final Customer

Figure 3: Dell’s Direct PC Value Chain

However, with the expansion of Dell beyond selling simple PCs, it’s simple value chain has evolved into a new model that we call the value web or the virtual corporation.

Value Web

Figure 4: Dell’s Value Web: A virtual company

There are three key aspects of the value web model of Dell:

Dell’s central role in coordination and control of the value network, which is a result of its direct relationship with its end user. Being in direct touch with the customer requirements, Dell controls the flow of information to its business partners who provide the actual service. As shown in Figure 4, all the information flows are channeled through Dell.

The close physical integration of Dell with its business partners and suppliers. The suppliers are normally located close to the plant and their personnel are located on the plant floor ordering material from their warehouse, based on information on Dell’s extranet. Such integration of material and information flow reduces inventory costs and creates an efficient supply chain, ultimately benefiting the end customer in the form of lower prices.

The importance of internet and other electronic communications in allowing Dell to coordinate the web of close relationships through a constant flow of information between Dell and its partners. For example, if a customer’s hard drive crashes, the information travels from Dell technical support into Dell’s internal service and support systems. A new hard drive is ordered and dispatched to a Dell service provider, which sends a service engineer to install the drive. The information about the drive that crashed enters Dell’s databases and is conveyed to the supplier and plant that provided it for corrective actions.

Customer Satisfaction

For well-designed e-commerce services, the cost savings are not necessarily thought to go along with customer satisfaction. However, Dell has demonstrated that not only does it save money by selling directly on Internet, but also satisfies its customers better than any other sales model. Many business customers of Dell see Premier.Dell.com as a valuable management tool, helping their purchasing and IT departments to control purchasing decisions and enforce technology standards.

Some customers (like Boeing) have integrated the Dell.Premier.com with their own ERP systems to allow online purchasing, making the ordering process much easier and more efficient for them. Not just purchasing, but also financial and IT departments of the customers benefit from Dell’s ability to provide a history of their purchases from Dell. All such benefits lead to better satisfaction among Del’s core customer group of large business enterprises.

While it is difficult to relate customer loyalty and repeat sales directly to the Internet and ecommerce, there is strong evidence that the Dell Premier.com services are a factor in helping Dell gain repeat business and achieve sole supplier status with some large customers. Some of this is from the convenience provided by Premier services and some from customer lock-in created by the electronic linkage of business processes between Dell and its customers.

In a 2007 survey, Forrester [5] asked 565 PC decision-makers at North American and European enterprises about their satisfaction with their primary PC supplier on various parameters. The performance of Dell and its main competitors on these parameters is shown below:

Dell

HP

Lenovo

Overall

Product features

44%

38%

46%

43%

Product quality

51%

49%

59%

52%

Price

43%

38%

33%

40%

Product support

46%

31%

46%

43%

Business relationship

37%

27%

45%

37%

Repeat purchase of desktops

86%

74%

71%

-NA-

Repeat purchase of laptops

89%

75%

75%

-NA-

From the table, it is quite evident that Dell leads the industry on Price and Product support. It is rated on par with Lenovo on Product features and Product quality, however, it lags behind Lenovo on the key parameter of business relationship. The survey found that the most likely reason for this is a lack of communication, combined with rotating account representatives. Another reason was the absence of a product roadmap which would help the customer managers to prepare their corporate IT environment for the next few years.

However, Dell scores very highly on a critical indicator of customer satisfaction i.e. a repeat purchase. The enterprise buyers gave big thumbs up to Dell on this front, with 86% ready to repeat purchase of desktops and 89% for laptops.

CONCLUSIONS

Dell has performed admirably on its efforts towards ongoing Customer Relationship Management. It has developed efficient systems and processes for customer acquisition, retention and growth, using online tools such as Premier.Dell.com, ProSupport and IdeaStorm. Therefore, many of the concepts discussed by Anderson and Narus in “Business Market Management” are substantially demonstrated in the case study of Dell’s CRM process.

There are many lessons learned from Dell’s experience. These lessons can be transferred to other companies in the industry.

Ensure better customer service is offered.

Dell has become an industry leader in service and reliability. Dell has used CRM to its advantage. This has instilled trust into their customers. By custom-building a computer that the customer desires, this has created a very strong relationship with the customers.

Implement technology in a phased fashion

Dell tested key tasks in each of its regions prior to deployment. It set-up mock environments to develop, test, and support the i2 systems in patches without disrupting the live version. Dell was able to bring on one piece of the i2 system at a time. As one part became more efficient, then Dell added other components in stages. Dell ensured that each stage of the process performed well and allowed for future growth before rolling out the entire system. This minimized the risk, while at the same time increasing efficiency.

Extend the connection from the customer to the supplier

Dell was able to extend its build-to-order model from suppliers to the customer while continuing to maximize operational efficiency and customer satisfaction. Customers were able to save money while being able to purchase a customized machine because Dell passed on the savings, which resulted from efficient inventory management, no excess inventory or inventory shortages. It was able to share, in real-time, information with suppliers about customer demands and buying patterns.