Michael Dell's Per Diem Web

Many transactional customers can't bring themselves to pull the trigger on web sales, however. They may use Dell Online's pull-down menus to customize and price systems but, for a variety of reasons, make the final deal over the phone. Dell counts such a customer's purchase as web sales if the customer calls the toll-free number on the web site, but not if the customer calls from a print ad.

The big money-online or not-is with big customers. And "the key to getting to 50 percent is converting our biggest customers to electronic orders," Dell says. "There's a longer lead time than with consumers or small business. Happily, we're seeing the move. But we're certainly not there yet." Perhaps that's because, as Eckert admits, Dell was slow to address enterprise-level customers on its site. "It took a lot of effort to address consumers and small businesses," he says. "Corporate customers are more complicated. They have a special set of needs."

Among the biggest is topnotch support. It's obvious enough how Dell benefits from moving support to the web-saving money in phone calls and personnel costs, for example. Putting order-tracking information online has been a huge cost savings for Dell, too. But Eckert says customers also save money.

 

Dell has set up more than 8,000 "Premier Pages" on the Dell site. Premier Pages are, in effect, mini-sites holding a variety of information specific to a customer, including detailed technical information that gives a customer access to information in Dell's own support database. Dell sees this support as key in persuading customers to buy online. For customers who order online (and even for those who don't), the Premier Pages are where they'll find the specific configurations and prices they've negotiated with Dell.


Some customers found it a natural move to web purchasing. Database company Informix has been buying online from Dell for 18 months, says Greg Mustard, a buyer for Informix, which has standardized on Dell for PCs and notebooks. "All of our standard configurations are [on the Premier Pages], and so is the pricing," he says. "So I just go.

 

I just put in the quantity. I don't have to fool around getting quotes all the time." Early on, Informix was uncertain about whether it would order this way, both for the novelty and concerns that it would take longer. Those concerns quickly dissipated. "Once we started playing with [the online system], it became obvious we could save a lot of time. We're now talking to other vendors to see if we can do the same with them."


Of course, Dell is well known to tech companies. But it also has a substantial customer base in government and the Fortune 500. Selling to big customers highlights some squishy accounting in Dell's 50-percent online-sales goal. Winning business, online or not, from the likes of Ford and other large customers, is a huge effort.

 

It takes platoons of sales people, technical briefings and intervention from top executives who help close deals. The idea of buying online may not figure into a customer's decision to go with Dell. But if the customer chooses to buy online after Dell wins the account, all orders count toward online sales figures.

Getting the attention of big customers, then, is one of Dell's biggest jobs. The company is sure it can win accounts when it's in the running, but getting into the running isn't all that easy when competitors like IBM, Hewlett-Packard and Compaq tout their soup-to-nuts abilities. While Dell has increasingly moved into the server market-and recently began selling higher-end storage systems-it ultimately is a Wintel company.

Market perception therefore still relegates Dell to the old "mail order" niche, says Scott Helbing, Dell's vp of corporate brand strategy. "We're trying to make clear we're a multi-billion-dollar, global company, with significant bricks and mortar here that we can bring to bear on the equation-full service, anything you'd want from a computer company."

Helbing says Dell is clearly identified as a "first-tier" manufacturer in its target segments. But the company is "considered"-that is, it makes the final cut of vendors invited to submit detailed bids-far less often than it would like. "We have about a 22 percent consideration rate," Helbing says. But "the good news is the highest number in any research we've seen is Compaq, at 44 percent."

Therein lies an opportunity-particularly because even a 44 percent consideration rate is low compared to top-tier companies in other businesses. Dell's immediate goal in a major branding campaign, then, is to move the consideration figure from the low 20s to 35 percent. "We know we have strong conversion rates when we're considered," he says.

That branding effort has hit some serious speed bumps, however. Early this year, Dell selected J. Walter Thompson to create a brand campaign-Dell won't confirm reports of expected billings of $100 million but then fired the agency in favor of BBDO. "We didn't get ads we felt explained Dell and our personality," Helbing says.

When the campaign does finally re-launch, it'll expand on traditional Dell themes: "Dell offers unprecedented accountability in its ability to uniquely respond to every customer," Helbing says. There's an emotional component, because customers are "looking for a net to grab when something goes wrong." The rational part of the pitch goes back to the company's understanding of a notion perfected by the web: mass customization.

In offering this, Dell will promote flexibility and efficiency, plus the value in the build-to-order system where, in theory, the company can provide every customer with the same kind of service and support, Helbing says. What role will the Net itself play in communications? "It won't be the focus," Helbing says, "but it'll play a key role in everything."

The pitch differs by the audience, but the web is a constant-all part of a company policy to drive customers online, says Mike Massaro, COO at Goldberg Moser O'Neill in San Francisco, which handles Dell's product and segment advertising. Over the last two or three years, Massaro says, advertising has evolved from pointing to toll-free numbers to a point where "the primary call to action is becoming dell.com."

Indeed, most PC consumers know Dell's ads for their configurations, requisite fine print, 800 number and web address. But it's different in the relationship-segment campaigns. "In certain segments you want to be very vertical," Massaro says, discussing things that specific purchasers might find compelling.


 

 

 

 

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The media mix remains strongly tilted toward print, with some broadcast and a small but increasing amount online. "I'm not sure if people have figured out advertising online," Massaro says. "It's still in its infancy." The bigger the potential customer, the more you'll find the ads focus on things like servers, where some of Dell's best margins exist. But even when Dell gets a large account, converting it to online purchasing isn't simple. Dell does plenty of business with the government, but doesn't sell much online to the government or schools. Chris Gehring, director of online business development for the public segment, says this is the most immature segment in online sales due to the public sector's typically rigid purchasing systems.

But government buyers increasingly are heading to dell.com, and Gehring expects it'll be a matter of time before the company can persuade the public sector to buy there, too. Looking ahead, moving sales online may come easier than maintaining the growth that has made Dell stock one of Wall Street's rocket ships in recent years. Yet company execs exude confidence, pointing out the room left to grow. In the face of the Asian economic mess, Dell has continued to grow even there-and at very fast rates. In the end, Michael Dell himself wants most of all to grow faster than the rest of the industry, something he's had no trouble doing lately. So what worries Dell? Not much, except failing to drive efficiency, executives say. One worry may be that some on Wall Street are convinced that Dell's stock is a bubble. As of late October, the company was leading the list of short interest-shares sold short by those expecting the price to drop-on Nasdaq.

Dell may also have a weakness in another part of the company's business model. No company is more beholden to Microsoft and Intel than Dell-Microsoft in particular. Intel's recently revived competition is actually good for Dell's semiconductor buying power. But Microsoft's constant delays in the next generation of Windows NT, now Windows 2000, have left Dell vulnerable on the highly profitable server side if Linux or other Unix variants make a strong move. Michael Dell's embarrassing performance before a U.S. Senate committee earlier this year, when he obsequiously defended Bill Gates and flubbed an explanation of why he wouldn't load Netscape Navigator on his computers despite the demand, was more a demonstration of his weakness than he may have realized.

Does Dell fear its competition? Not to hear the company's execs, who keep pointing out that a company can't be half-channel/half- direct if it wants to be as efficient as Dell Computer. In the consumer market, Dell has made a clever move in partnering with phone and cable companies to offer soup-to-nuts high-speed Internet access via DSL and cable modems. Michael Dell says he doesn't care whether the cable or phone companies win; he just likes that an enormous percentage of people who get high-speed Net access buy new computers soon after. But it's hard to see how Dell will overtake Gateway here, which seems to have a much clearer understanding of what people do with computers at home.

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