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Running Case with Real Data

Dell Direct
Dell Inc. is the world's number one direct-sale computer
vendor and competes with Hewlett-Packard in that segment.
Dell offers network servers, workstations, storage systems,
and Ethernet switches for enterprise customers, in addition to
a full line of desktop and notebook PCs designed for
consumers. It also sells handheld computers and markets
third-party software and peripherals. Dell's growing services
unit provides systems integration, support, and training.
Michael Dell, the flamboyant founder and chairman
of Dell, started college at the University of Texas as a premed student but found time to establish a business selling
random-access memory (RAM) chips and disk drives for
IBM PCs. Dell bought products at cost from IBM dealers,
who were required at the time to order large monthly quotas
ofPCs from IBM. Dell then resold his stock through newspapers and computer magazines at 10 to 15 percent below
retail. By April 1984, Dell was grossing about $80,000 a
month--enough to persuade him to drop out of college. Soon
he started making and selling IBM clones under the brand
name PC's Limited. Dell sold his machines directly to consumers, rather than through retail outlets as most other manufacturers did. By eliminating the retail markup, Dell could
sell PCs at about 40 percent of the price of an IBM.

u.s. PC Shipment

Michael Dell renamed his company Dell Computer

and added international sales offices in 1987. In 1988, the
company started selling to larger customers, including
government agencies. That year Dell Computer went
public. In 1996, Dell started selling PCs and notebook
computers through its Web site. This channel of order
confirmation and shipping and handling is still the breadand-butter means of addressing Dell's consumer and
enterprise customers' requirements. In 1997, Dell entered
the market for workstations and strengthened its consumer
business by separating it from its small-business unit and
launching a leasing program for consumers. In order to
diversify its revenue sources, in 2001 Dell expanded its
storage offerings when it agreed to resell systems from
EMC. To grow its services unit, Dell a'cquired Microsoft
software support specialist Plural in 2002.
Despite its success at grabbing PC market share, Dell
continues to attack new markets. It bas put increasing
emphasis on server computers and storage devices for
enterprises. Furthering its push beyond PCs, Dell bas
introduced
a handheld computer, a line of Ethernet
switches, and consumer electronics such as digital music
players and LCD televisions. It originally partnered with

Estimates for Q3 2008

Dell
Hewlett-Packard
Apple
Acer
Toshiba
Others

774

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DeU-Financials-U.S.

CASE WITH

REAL DATA

775

Dollars (in millions)

70,000 -,--------------60,000+--------------50,000
40,000

Net revenue

30,000

Gross margin

20,000
10,000

o
Feb07

Feb06

Lexmark to develop a line of Dell-branded printers, and it

has formed additional partnerships to quickly grow its
printing line. On the services front, Dell has mirrored its
straightforward approach to hardware sales, embracing a
fixed-price model for offerings such as data migration
and storage systems implementation.
Dell is currently
looking to international revenue to supplant sales in the
PC-saturated U.S. market. Sales inside the United States
were about 53 percent of consolidated net revenue in
fisca12008.
Dell has thrived as downward-spiraling
prices and
commoditization washed over the PC industry, benefiting the
company's customers and bashing its competitors. Instead of
battling the tide by attempting to erect proprietary systems,
as HP and IBM often did, Dell used its low-cost, directsales model to ride the wave. In 2008, Dell announced
PartnerDirect, a global program that brought their existing
partner initiatives under one umbrella. Dell intends to expand
the program globally. Continuing their strategy and efforts of
better meeting customers' needs and demands, they began
offering select products in retail stores in several countries in
the Americas, Europe, and Asia during fiscal 2008. These
actions represent the first steps in their retail strategy, which
will allow them to extend their business model to reach
customers that they have not been able to reach directly.
Of late, with all the brand equity Dell has built up, Dell
Inc. is pushing into consumer products. Dell has recently
made a move into manufacturing flat-screen TVs. With
TVs that use the newest technology, Dell is now diversifying even further. The latest battle in the PC business isn't in
computers but in printers. Dell is now waging war on HP's
vaunted imaging and printing division, which produces

Jan 05

Jan 04

some 70 percent of HP's operating profit. In the case of

printers, the printer cartridges is where HP has the biggest
margins, and Dell seems to be focused on making inroads
into this market, over which HP has had a strong hold.
With such an intense competition for market share
and customer patronage, Dell is conducting a survey of
recent purchasers of Dell PCs and notebooks. Dell wants
to understand their consumers' primary usage of their
computers for Internet and other usage. Based on that,
Dell wants to understand
the satisfaction
that their
consumers are deriving from Dell products. Dell wants to
estimate their customers' probability of repeat buying of
Dell products and the extent to which their current
customers will recommend Dell to
., their friends and
family. Finally, Dell wants to understand if there is any
correlation on any of these identified usage factors and
the underlying demographic aspects of the classification
of their customers.

Questions
The questions are given in the Dell Running Case contained
in the chapters.

References
1. www.gartner.comlitlpage.jsp?id=777613.
accessedNovember IS,

200S.
2. www.deU.comJdownloads/globallcorporate/seclproxyOS.pdf,
accessed November IS, 200S.
Note: This case was prepared for class discussion purposes only and docs not represent the views ofDeU or their affiliates. The problem scenario is hypothetical and the
name of the actual company has been disguised. However, the questionnaire and the
data provided arc real. Some Questions have been deleted. while the data for other
Questions arc not provided because of proprietary reasons.

776

CASE 1 RUNNING

CASE WITH REAL DATA

DELL COMPUTERS
Internet Interview
Thank you for your interest in our study.
Burke is an independent marketing research firm that has been commissioned by DELL Computers to get the honest opinions of recent
purchasers of DELL personal computer systems. You will be asked to offer your views about DELL and describe your Internet usage.
This survey should only take a few minutes of your time. By completing this survey, you will be automatically entered into a drawing
for $100 gift certificates that can be used at a variety of major online retailers. If you don't complete the survey, you may qualify for the
drawing by writing to the address contained on the email inviting you to participate in this project.
Unless you give us your permission
responses will kept confidential.

at the end of the survey to release your name to DELL along with your responses,

your individual

INTERNET USAGE
Q1. Approximately

how many total hours per week do you spend online? This would be the total from all the locations you might use.
Less than 1hour
1 to 5 hours
6to 10 hours
11 to 20 hours
21to 40 hours
41 hours or more

0-1
0-2
0-3
0-4
0-5
0 -6

Q2A. Following is a list of things people can do online. Please indicate which of these you have ever done on the Internet. (Rotate responses.}
Don't Know

=0

Ask First
Communicated with others via newsgroups or
chat rooms - - - - - - - - - - - - - - - - - - - - - - - - - - Looked for a job - - - - - - - - - - - - - - - - - - - - - - Planned or booked trips - - - - - - - - - - - - - - - - - Downloaded a picture or graphic - - - - - - - - - - - Downloaded sounds or audio clips - - - - - - - - - - Looked up information about a TV show or movie
Downloaded a video clip - - - - - - - - - - - - - - - - -

Yes

No

0-1
0-1
0-1
0-1
0-1
0-1
0-1

0-2
0-2
0-2
0-2
0-2
0-2
0-2

Q3. What other type of things do you use the Internet for?

.,

DELL SATISFACTION AND LOYALTY

Q4. Overall, how satisfied are you with your DELL computer system?
Very satisfied
Somewhat satisfied
Somewhat dissatisfied
or Very dissatisfied
Q5. How likely would you be to recommend

0-1
0-2
0-3
0-4

DELL to a friend or relative?

Definitely would recommend
Probably would
Might or might not
Probably would not
or Definitely would not recommend

0-1
0-2
0 -3
0-4
0-5

....

1:'1

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777

Q6. If you could make your computer purchase decision again, how likely would you be to choose DELL?
Definitely would
Probably would
Might or might not
Probably would not
or Definitely would not
Q7. Deleted (Open ended)

0-1
0-2
0-3

0-4
0-5

COMPUTER MANUFACTURER IMPORTANCE/PERFORMANCE

Q8. The following set of statements refers to personal computer manufacturers.
you agree that DELL Computers
meets that requirement.

RATINGS

For each statement, please first indicate to what extent

To do this, please use a scale from 1 to 9, where a "1" means you do not agree at all with the statement, and a "9" means you
agree completely. Of course, you may use any number between I and 9 that best describes how much you agree or disagree
with the statement. Don't Know = 0
A. How much do you agree that DELL Computers

does (insert statement)?

(Rotate statements.)
Ask
First

Rating
Make ordering a computer system easy
Let customers order computer systems customized
to their specifications
Deliver its products quickly
Price its products competitively
Feature attractively designed computer system components
Have computers that run programs quickly
Have high-quality computers with no technical problems
Have high-quality peripherals (e.g., monitor, keyboard,
mouse, speakers, disk drives)
"Bundle" its computers with appropriate software
"Bundle" its computers with Internet access
Allow users to easily assemble components
Have computer systems that users can readily upgrade
Offer easily accessible technical support

.,

Q9A. If the price of the DELL computer system you purchased had been 5% higher, and all other personal computer prices had been
the same, how likely would you have been to have purchased your DELL computer system?
Definitely would
Probably would
Might or might not
Probably would not
or Definitely would not

have
have
have
have
have

purchased
purchased
purchased
purchased
purchased

0-1
0-2
0-3
0-4
0-5

Q9B. If the price of the DELL computer system you purchased had been 10% higher, and all other personal computer prices had been
the same, how likely would you have been to have purchased your DELL computer system?
Definitely would
Probably would
Might or might not
Probably would not
or Definitely would not

have
have
have
have
have

purchased
purchased
purchased
purchased
purchased

0-1
0-2
0-3
0-4
0-5

..

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EARLY ADOPTOR AITRIBUTES

QI0. Following is a series of statements that people may use to describe themselves. Please indicate how much you agree or disagree
that they describe you. To do this, please use a scale of 1 to 7 where a "1" means you disagree
agree completely. Of course, you may use any number between 1 and 7.
Don't Know

completely

and a "7" means you

=0

The first/next statement is (insert statement).

statement describes you?

What number from 1 to 7 best indicates how much you agree or disagree that this

Ask
First

Rating
Market Maven Items

r like

introducing

new brands and products to my friends

I like heJping people by providing

of products

them with information

about many kinds

PeopJe ask me for information about products, places to shop, or sales

My friends think of me as a good source of information when it comes to
new products or sales
Innovativeness
I like to take a chance
Buying a new product that has not yet been proven is usually a waste of time
and money
If people would quit wasting
more accomplished
J like to try new and different
I often try new brands before
J like to experiment with new

their time experimenting,

we would get a lot

things
my friends and neighbors do
ways of doing things

Opinion Leadership
When it comes to computer-related
ask my opinion

products, my friends are very likely to

I am often used as a source of advice about computer-related

friends and [leigh bars
I often tell my friends what I think about computer-related

.,

products by
products

DEMOGRAPHICS
Qll. These next questions are about you and your household and will just be used to divide our interviews into groups.
What was the last grade of school you completed?
Some High School or less
High School Graduate
Some Collegeffechnical
School
College Graduate or higher

0-1

0-2
0-3
0-4

"....
.

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CASE WITH

Q12. Which of the following best describes your age?

18 to 19
20 to 24
25 to 29
30 to 34
35 to 39
40 to 44
45 to 49
50 to 54
55 to 59
60 to 64
65 to 69
70 to 74
75 to 79
80 or older
Q13. Which of the following best describes your household's

0-4

0-5
0-6
0-7
0-8
0-9
0-10
0-11

0-12
0-13
0-14

total yearly income before taxes?

Under $20,000
$20,000-$29,999
$30,000-$49,999
$50,000-$74,999
$75,000-$99,999
$100,000 or over
NoAnswer-O

Q14.

0-1

0-2
0-3

0-1
0-2
0-3
0-4

0-5
O-ti

Are you ... ?

Male
Female

0-1

0-2

This completes all the questions.

Thank you very much for your assistance with this interview!

.,

REAL DATA

779