'Dell has a local approach to the Indian market'

Bhupesh Bhandari / New Delhi September 13, 2010, 0:59 IST

Dell has displaced Hewlett-Packard from the top slot in the Indian personal
computer market after six years. In the second quarter (April-June) of 2010, Dell
grabbed a market share of 15.2 per cent, against Hewlett-Packard’s 14.3. Dell
Consumer Vice-president/General Manager (global sales & marketing) Michael
Tatelman discusses with Bhupesh Bhandari how Dell reached the top in India,
and how its business model has changed over the years with the emergence of
new sales and distribution channels. The interview was conducted before IDC
came out with its numbers for the April-June quarter.

What do you attribute Dell’s success in India to?

We entered this market many years ago from a commercial perspective and
have been here with our direct model for quite some time. A little over two years
ago, we also opened our indirect channels. We approached the market in a
relatively novel way. We spoke to our customers. Some loved to configure the
products online and customise and personalise the products. Others liked to
shop in a retail environment where they can touch and feel. And still another set
of people wanted to go to a retail environment and have the ability to configure
the product. So, our channel model is quite novel in that we have all three:
Online, in-store and online in-store.

Which of the three gives you maximum numbers?

We don’t break the numbers down by channels, but we are experiencing growth
in all our channels right now. I can’t really say if one is growing faster than the
others. That won’t be true. When we first opened our new channels, I guess they
were growing faster than our direct model, but not today. The second thing is
that we have had quite a revolution in our product line. Three years ago, when
we revitalised our consumer business, we invested pretty heavily in industrial
design and I think we became the “design meters” in this industry. Indian
consumers have an eye for value and design, and we have done very well from a
product perspective. The third factor, and possibly the most important, is that we
have taken a very local approach to the market. We have a huge presence here
— 24,000 people. So I would like to think we are pretty much a local company. I
am not sitting next to an American, or a European; we have an all-Indian team
here, just as we have tried to build local management teams in all our markets.
Co-incident with that, we also have a very local channel presence. All our
channel partners are small distributors who have very intimate knowledge of
their markets. And it’s not just the metros, we are in 300 cities plus and continue
to expand. All of these have converged to build a successful business around a
very strong brand.

How much of this growth is led by notebooks?

It is a pretty significant amount. Our notebook business is growing faster than

the overall market. We have been number one in the notebook business for a
while.

You have locked the enterprise market very well too by aligning with Microsoft
and not Linux. This way, analysts say, buyers feel more confident.

It’s a matter of choice. We try and build experiences; particularly in the

commercial business, we try to build services that go around as experiences. So,
we bought Perot Systems to really bolster our services business. Certain
applications have done well in a Linux environment, and others have done better
in a Microsoft environment. Certainly, Microsoft Windows 7 has been a fantastic
improvement over previous operating systems. On the client side, I think we see
a lot more Windows-based products across all our lines of business. On the
service side, it is mixed.

How have offline sales affected the famous Dell supply chain?

It has affected quite a lot. You have to build a lot more lead time into the model
when you do more than one (channel) at a time. We have had to build up from
the ground systems, corporate planning, forecasting, and replenishment
systems. We have had to learn to do demand planning that enables us to ship
our products in a cost-effective manner. And we have had to learn how to build a
replenishment model vis-à-vis a fill model that enables us to have very fast
response. The direct model, combined with the channel model, does offer our
channel partners a pretty interesting alternative in that we have partners with no
inventory. They use Dell.com as their supply engine. The consumer will come
and configure a system and order it; we will ship the product directly to the
consumer, bypassing the need for inventory at all. Not only have we had to
create more traditional multi-tier distribution models, we also have taken the
lead using the tools we have for creating gen-next distribution models as well.

How accurate are your demand forecasts? Has the index of your supply chain
efficiency remained the same or has it come down now?

We are learning. There are so many variables in supply and demand. I would say
there is plenty of room for improvement, but we are more than on track in our
internal targets on where we want to be. It is also very dependent on where you
are in the world. The length of the supply chain does matter. So, India is better
than places that are further away from the factories. China is probably the best
in the world. India, from a demand-planning perspective, has done a great job.
It’s not as consistent everywhere in the world.
What’s your take on Asian personal computer brands? Where do you see them in
the days to come?

Brand matters to consumers. In India, it matters a lot. People look at the Dell
brand for a lot of different things like value, reliability, for the support that we
give, for the experiences we bring. So there is a heritage of consistent
experience with our brand. There are always new entrants into the market place.
This is a big market that is growing dramatically. Connectivity to the internet is
growing dramatically. There is a plenty of room for competitors, but I think we
have a very trusted brand and we cherish and nurture it, and we try to live up to
the expectations of the people.

Is Dell ready to gain market share at the cost of profits?

We are really looking at profitable growth in all the territories where we do

business. The investments we make are some time long-term but they are
balanced with our (profit) margin and profit targets. Strategically, we want to
continue to grow our profits as fast, or even faster, than now.

Are your products priced the same across markets, or have you done strategic
pricing in emerging markets?

Taxes aren’t the only variable. Warranty and service, logistics and shipping, are
all parts of the transportation cost from different factories around the world. Still,
they are close. But there are a lot more variables than just taxes.

What per cent of turnover does Dell keep aside for promotion?

We are probably pretty efficient in our expenditure. It helps to have a great

brand. Certainly, the mix today is different than what it has been in the past. The
demand model is strictly to bring people to the online store; it is very different
when you have a multi-channel model. In fact, the stores themselves act as a
fairly significant marketing engine. So, we spend more on merchandising and
demo equipment. Two years ago, I didn’t have demo. Today, we have thousands
and thousands of computers in retail stores for people to see. There is a little
difference in the mix, but we are a little bit more efficient than our competitors in
our marketing spend.

What’s the scope of your partnership with Google?

We have a long-term multifaceted partnership with Google, certainly around

search. We are a big customer of it in the advertising world. Obviously, we have
come to the market with Android-based products in the smart phone space. The
Streak, which we launched in Europe more than a month ago, is built on Android.
On the operating system side, we have a strong and growing partnership with
Google.

What’s been the most important learning for Dell from India?

This very local channel model is really unique. Over the years — I lived in China
for some years — I have learnt how important it is to have local knowledge; and
the lesser layers you can get between people who take the decisions at
corporations, the better off you are. This experience in India with local partners
and local management has cemented my belief that that’s an imperative when
you are building a global business.
Relationship among Affect and Cognition, Behaviour, and the
Environment

In the above case effect of a change in element starts from the

consumer’s Affect and Cognition which led to the change in the
environment which in turn influenced the consumer behaviour.

Affect and Cognition

Consumers want to touch and feel the product before purchasing,

they want to know how it works and they want to ask questions regarding
the doubts to the salesperson located in the shop.

Environment

This made dell to come up with the retail store where customer can
touch and feel the product and listen to demo and ask question.

Consumer behaviour

The change in the environment thus made consumers to go to the

store and buy a product which they like.
Consumer buyer sequence for a retail store

Information contact
Prepurchase

Newspapers

Television

Internet

Funds Access

Credit facilities

Payment through online.

Purchase Store contact

Easy purchase through on

line from Dell’s website

Product contact

Catalogue of products

Obtaining trough free home

delivery

A
 A

Transaction

Pay through online

Postpurchase
Consumption and
Disposition

Free after sales service

Exchange for newer models

Communications

Existing customers can

recommend their products
through Dell’s website
Prepurchase
Information contact:

Dell advertises in newspapers (regional & national), television and

through internet. So almost all its target customers will come into contact
through atleast one of the modes.

Funds Access:

Dell is offering credit facilities to customers such as deferred

payment and the customers can through online.

Purchase
Store contact:

Dell sells through both online and Brick and Mortar store. Those who
want to save time can browse through Dell’s website and those who want
to touch and feel the product before purchasing can go to their retail shop
for purchasing.

Product contact:

It offers a catalogue of products. All types of models, specifications

at different price levels can be seen through the website by just entering
your model, specification, and price in the search box given in the
website. If customers want a customized product they can order their
specification etc…

Transaction:

The customer can pay through the website using debit, credit card
and PayPal. After the order is placed and the payment is made the
company will deliver the products to the respected address free of cost

Postpurchase
Consumption:

Dell is providing free after sales service and offers technical

assistance through online. The customers in case of any complaints can
call a Dell’s toll free number and voice your complaints. Within one day
your complaints will be resolved. In case of any technical assistance you
can e-mail your doubt to the company’s customer care who will respond in
one day.

Communication:

Customers are encouraged to give feedback to the company

through the website and they can recommend your friends also.
MEANS END CHAIN
The means end chain links consumer ‘s knowledge about consequences and
values. The means end perspective suggests that the consumer think about the
product attributes subjectively in terms of personal consequences.

Attributes: Functional
consequence

1. Price 1. Ease of use.

2. Quality 2. Used for work ranging from
3. User friendly Business level to home level.
4. Colour 3. Timely completion of work
5. Sections of laptops 4. Non complicated usage
6. Creating our own 5. Customization
configuration 6. Durable
7. servicing

Values Psychosocial
consequence

1. Self esteem 1.Feel smarter

2. Attractive 2.Feel comfortable
3. Comfort 3.Attractive
4. Relaxed 4.Feel confident
5. Social
recognition

The above diagram represents the four levels in the means end chain and gives
examples of each level. The product attributes sometimes doesn’t mean much to
most of the consumers until they use the product and directly experience it or
else learn about them from advertisement or from other consumers. In case of
attributes the price and the quality plays a important role. In India most of the
consumers rely on the price as per the recent survey. The other attribute that
directly have an effect on the consumer are the colour and the ease of the use
by the consumer. Consumer select from a large variety of laptops , but in DELL
the most important factor that gives the consumer the competitive advantage is
the creation of their own configuration , that is the consumer can create their
own configuration as per their requirements. This ranges from business laptops
to the laptops used by the college students and from Home use, it also includes
the desktops.
As per the functional consequence is concerned, the ease of use impacts the
buying behaviour of the consumers. DELL laptops help in the timely completion
of the work for all levels. It is durable and can be used for all complicated works
which resembles high performance . Customization is an important factor for
DELL because no other company has

this type of facilities, which gives DELL a competitive edge over other laptops.
This also makes the consumers to buy the laptop and give DELL the highest
priority than other laptops.

The functional consequences gives rise to the psychosocial consequences .

Buying DELL laptops makes the consumer feel confident that they have bought
the best laptop from a wide variety of laptops. It also makes the consumer feel
smarter while using the laptops. Consumer feel comfortable using the DELL
laptops as it is very easy to use the laptop. DELL laptops are also attractive and
comes in different colour , and most of the female consumer gets attracted to
the laptops. Consumers may have positive and negative consequences
(Perceived risks and benefits) , they might have difficulty in purchase decision
that may involve conflicting decisions.
Steps in developing Consumer Behaviour Influence Strategies:

1. Measure current levels of consumer affect, cognition, and behaviour:

To design successful strategies, marketer should first know what consumers think, feel, and
do about a company’s products, store, or other offerings. Marketer should know something
about competitive offerings. In other words, consumers affect, cognitions, and behaviour
should be measured to form the basis for successful strategies.

When DELL entered India they have the strategy of direct selling which is followed by
DELL around the globe. They know that DELL is known for the service. Generally public’s
cognition about the DELL is that they provide better service than others with reasonably good
quality in the products offered. DELL knows this better to serve the market in better way and
in India people never mind paying more for an electronic item to avail better service basically
culture in India is that people don’t want to take risk while purchasing valuable items.

2. Analyze consumers and markets:

After collecting baseline data, the next step is to analyze the information in evaluating
consumer’s response from various current and potential markets. Consumers may not
purchase a product for many reasons, and consumer research is designed to uncover the
reason. Perhaps they do not know about the product, do not like it, or do not know where to
buy it. Perhaps they purchase a competitive product with which they are highly satisfied. The
strategies that are appropriate depend on level of consumer’s affect, cognition, and
behavioural response to the company’s products relative to competitor’s product.

DELL analyzed Indian market and consumers properly they know that level of knowledge of
consumers will be less when compared to other developed nation but DELL felt that their
direct selling strategy would work in India to certain extend. They found that awareness
about the product is more among the public and people may not know where to buy the
product because not all the consumers in Indian have good knowledge in computers so DELL
has adopted other strategies in selling like they came up with new concept called “IN-STORE
ONLINE” which new concept DELL developed this strategy to not give any attrition in
customer base. With this adaptation of strategies according to culture of India helped DELL
to become market leader in India.

3. Select and implement influence strategy:

Based on the consumer market analyse, a strategy to influence consumer response is selected
and implemented. The strategy may involve any are all of the marketing mix elements and
may be designed to accomplish both short-term and long-term objectives.

After analysing Indian market properly DELL decided to implement different strategy to
influence customers and DELL has successfully implemented the strategy and become
market leader in Indian computer market with market share of 15.3%. DELL aggressively
came up with advertisement in newspapers and social networking sites to promote its
product. Which in turn showed increase in number of units sold?

4. Measure of strategic effects:

After implementing the strategy, its effects must be measured to see whether and how much
influenced consumer’s affect, cognition, and behaviour and whether it did so enough to
achieve objectives. If not, considerable analysis and evolution needed to be done to determine
why the strategy failed. This is a complicated problem because influence strategies fail for a
number of reasons

5. Evaluate for performance improvement:

DELL computers have mastered this aspect of business they are the one organization who is
consistently looking for opportunity. They constantly measure consumer’s overt behaviour
and they are always innovative. DELL changed their globally accepted direct selling model to
in-store online model and then they appointed dealers to sell their product. It shows that they
constantly adopted different business models to make customers buying habit easier and they
are closely in touch with customer’s behaviour.

A Model of the cultural process of DELL computers:

Understanding the content of culture is useful for designing effective marketing strategies,
but we also think culture as a process. The cultural process describes how this cultural
meaning is moved about or transferred between these locations by the action of organizations
and by individuals in the society.

Cultural meanings in social and physical environment:

In India the cultural meaning for electronic goods is that the customer will be willing to touch
and feel the product before the product and Indian customers expect the product to perform
for a longer period of time. Indian customers are not conscious about the brand that they are
purchasing but they are more particular about the useful life of the product, the product
should have good re-sale value and the product should be easy to use. For this purpose Indian
customer never mind to pay more but the product should not have any problem. Indian
customers are more particular about after sale service they expect that their product should
have warranty and guarantee. These are the general cultural meaning in social and physical
environment.

Moving Cultural meaning into products:

Advertising has been the most closely studied method of transferring cultural meaning from
the physical and social environments into products. Advertisements communicate the cultural
meaning in product to customers.

DELL has successfully communicated the cultural meanings in social and physical
environments to the customers. DELL communicated that it is the best computer company in
offering better service which Indian customers values the most. And DELL has advertised
about the proven quality of the product which is also one of the most important cultural
meanings for Indian customers.

Cultural Meanings in DELL’s products:

Products, stores, and brands express cultural meanings. When we say DELL people will say
about the service that they provide it is the cultural meaning that DELL carries with them.
People will also tell about the quality and easy use as the cultural meaning of DELL in
Indian.

The cultural meanings of products are likely to vary across different societies. but DELL was
able to carry the same cultural meaning in most of the societies it entered. Not all social
group perceive same cultural meaning for a product for some segment of people DELL is a
prestigious brand but most of the people does not look at DELL in same manner. Students
feel DELL is not attractive model for them but end up in buying DELL because the similar
cultural meaning “Better Service” attracts them.

Moving cultural meaning from DELL’s products into Customer’s:

Cultural process model identifies rituals as ways of moving cultural meanings of products
into customers. Rituals are symbolic actions performed by customers to create, affirm, evoke
or revise certain cultural meaning. People will buy DELL because that their friends and
others said that the product is good in quality but it cannot be proved before using the product
after using DELL they will tell that the product is of good quality this is called as Acquisition
rituals. After some time they used to tell their friends and neighbours about the quality and
service of DELL this is called possession ritual. This has contributed to the growth of DELL
in India. Certain rituals are perishable after certain time people brought DELL products for
the assured quality will spread negative information about the product if they did not get the
assured quality this is called as grooming rituals.
Fishbein’s model for DELL and HP COMPAQ:
A small survey was done to find the attitude of the two products Dell and HP using Fishbein
model. The survey was done among the user of Dell and HP.

The attribute asked for Dell is

How likely is dell offering its product at low cost = 8

How likely dell product has high quality = 8

How likely is dell has excellent service = 9

The belief of the attribute is strong because the respondent is using the product

Evaluation of the attribute

Dell is priced low = +2

Dell has high quality = -1

Dell offers excellent after sales service = +3

So from this study it is proved that the customer have a strong attitude towards the product.
And they believe that dell has low price, low in quality and they offer excellent service.
The attribute asked for HP is

How likely is HP offering its product at compact design = 9

How likely HP offers excellent service = 8

How likely is HP has good quality = 8

The belief of the attribute is strong because the respondent is using the product

Evaluation of the attribute

HP has a compact design = +2

HP has high quality = +2

HP offers excellent after sales service = -1

It reveals that consumer has an attitude that is HP’s design and quality is good but the service
it offers is very poor.

From the survey it is proved that the customers have strong belief about the attributes of the
products and the attitude towards the object is high for dell and low for HP.
Types of promotion for Dell

The following types of promotion strategies are followed by Dell:

Advertising

Advertisements for Dell are conveyed via a variety of media like Internet,
TV, Radio and print magazines. The marketers of Dell focus separately on
intentional exposure as well as accidental exposure. Incidental exposure is
done through the official website of Dell and other related sources.
Accidental exposure is done by linking the Dell ads to other websites, by
placing billboards and other relevant sources.

Sales promotions

Since sales promotions are direct inducements to the consumer to make a

purchase, Dell focuses on TV advertising though it is costly. Other types of
sales promotions like temporary price reductions, rebates, trade shows
and exhibitions are followed by Dell in order to boost their sales.

Publicity

Publicity for Dell is achieved through listing its products in various

journals, magazines and newspapers. Since this involves no cost to the
company, it is considered to be most beneficial. So marketers are
concentrating in publicity to a great extent.

The promotion mix

Dell has been successful in developing an overall promotion strategy that

integrates the various types of promotions into an effective promotion
mix.
Promotion Affect & Cognition

The Elaboration Likelihood Model (ELM)

The following ELM identifies the cognitive process by which promotion

communication such as advertising can persuade consumers. The central
route to persuasion is explained below:

Exposure to
persuasive
communication (ad)

Higher involvement
with product or
message

Attention

Focus on “central”
product-related
information

Comprehension

• Deeper
thoughts about
product
attributes and
consequences

• More

Persuasion

Product beliefs

Brand attitude

Purchase intention
Since Dell is a high involvement product, consumers are motivated to pay
greater attention to the central, product-related information and
comprehend it at deeper and more elaborate levels. Marketers should
consider the support arguments which are the positive thoughts about
product attributes and the self relevant consequences of the product use.
Markets should try to reduce the counterarguments, which are the
unfavourable thoughts about the product.

Measuring customer satisfaction

An Expectancy Disconfirmation Approach to Satisfaction

Pre-purchase Post-purchase
performance performance
expectations perceptions

Disconfirmation

Satisfaction

/Dissatisfaction

Pre-purchase expectations of the customers will be high because of the

high brand equity for Dell. So, marketers should ensure that the post-
purchase perceptions should match or exceed the pre-purchase
expectations in order to maintain the customer satisfaction. Marketers
should try to increase the positive disconfirmation by trying to increase
the performance of the product.

Store-related Affect & Cognition

The various cognitive process that should be considered by Dell after

setting up its online in-store are given below:

Store image

Store image can be determined by studying dimensions like merchandise,

service, clientele, physical facilities, promotion and convenience. Since
the brand equity of Dell is high, it is obvious for it to have a good store
image. The store image can be assessed by asking customers how good
or how important various aspects of the store are. Marketers should aim
at developing a consistent store image.

Store atmosphere

Store atmosphere involves primarily affect in the form of in-store

emotional states that consumers may not be fully conscious of when
shopping. Four types of approach or avoidance behaviours can be related
to the in-store:

Physical approach and avoidance

It can be related to store patronage intentions at a basic level

Exploratory approach and avoidance

It can be related to in-store search and exposure to a broad or narrow

range of offerings.

Communication approach and avoidance

It can be related to interactions with sales personnel and floor staff.

Performance and satisfaction approach and avoidance

It can be related to frequency of repeat shopping as well as reinforcement
of time and money expenditures in the in-store

A model of store atmosphere effects

Approach or
Environment avoidance
Emotional states
responses
Stimuli
Pleasure

Arousal

domincance

Marketers of Dell should ensure that the pleasure and arousal are more so
that it will influence the customers. The following things can be ensured:

• Enjoyment of shopping in the in-store

• Time spent browsing and exploring the various categories of

computers in the store

• Willingness to talk to the sales personnel

• Tendency to spend more money than originally planned.

• Likelihood of returning to the store

Store related behavior

Store contact

Store contacts involves the consumers locating, travelling to, and entering
a store. The store contact can be increased by putting carnivals in parking
lots, rebates and local advertising. Store contact is also influenced by
other factors such as heavy traffic, pedestrian patterns, the visibility of
the store and its distance from the consumers. So, marketers should keep
this in mind while choosing the store location for the online in-store.

Store loyalty

Store loyalty represents the repeat patronage intentions and behaviours.

It can be influenced by the arrangement of the environment. Marketers
should try to increase the store loyalty to increase their sales.

Store environment

Store location

Since store location is a critical aspect of channel strategy, marketer

should choose an appropriate location for the online in-store. Good
locations allow ready access, can attract large number of consumers, and
can significantly alter consumer shopping and purchasing patterns.

Approaches to store location

The four general approached to store location are as follows:

Checklist method

Through this method, marketers can evaluate the relative value of a site
when compared to other potential sites in the area. It includes information
about the socio-economic and demographic composition of consumers in
the area, level of product usage and consumer expenditure patterns. Site
specific factors such as traffic count, parking facilities, ease of entry and
exit and visibility are often considered.

Analog approach

Through this analog approach, an existing store or stores similar to the

online in-store should be located. Surveys can be used to observe the
power of these analog stores to draw consumers from different distance
zones. The ability of the analog stores to attract consumers can be then
used to estimate the trading area and expected sales at alternative sites.
The site with the best expected performance is chosen for the Dell online
in-store.

Regression models

Regression models can be used to investigate the factors that affect the
profitability of stores at particular sites. Store performance can be studied
in regression models as a function of store location, store attributes,
market attributes, price and competition.

Location allocation models

Location allocation models can be used to assess an entire market or

trading area. It involves the simultaneous selection of several locations
and the estimation of demand at those locations to optimise some
specified criteria. These models allows the investigation of the effects on
profitability of one store in a chain is another store is added in the same
trading area, and they can be used to systematically consider the impacts
of possible changes in the future marketing environment, such as
competitive reactions.

Store layout

Marketers should give due importance to store layout since it has an

important effect on consumers. The layout influences factors such as how
long the consumer stays in the store, how many products the consumer
comes into visual contact with, and what routes the consumer travels
within the store. Marketers can ensure that they place the computers in
such a way that the consumers get a view of a wide variety of the
available models.

Approaches to Influencing overt consumer behaviour:

When DELL entered India they have the strategy of direct selling which is followed by
DELL around the globe. They know that DELL is known for the service. Generally public’s
cognition about the DELL is that they provide better service than others with reasonably good
quality in the products offered. DELL knows this better to serve the market in better way and
in India people never mind paying more for an electronic item to avail better service basically
culture in India is that people don’t want to take risk while purchasing valuable items.

After analysing Indian market properly DELL decided to implement different strategy to
influence customers and DELL has successfully implemented the strategy and become
market leader in Indian computer market with market share of 15.3%. DELL aggressively
came up with advertisement in newspapers and social networking sites to promote its
product. Which in turn showed increase in number of units sold?

DELL analyzed Indian market and consumers properly they know that level of knowledge of
consumers will be less when compared to other developed nation but DELL felt that their
direct selling strategy would work in India to certain extend. They found that awareness
about the product is more among the public and people may not know where to buy the
product because not all the consumers in Indian have good knowledge in computers so DELL
has adopted other strategies in selling like they came up with new concept called “IN-STORE
ONLINE” which new concept DELL developed this strategy to not give any attrition in
customer base. With this adaptation of strategies according to culture of India helped DELL
to become market leader in India.

After analysing Indian market properly DELL decided to implement different strategy to
influence customers and DELL has successfully implemented the strategy and become
market leader in Indian computer market with market share of 15.3%. DELL aggressively
came up with advertisement in newspapers and social networking sites to promote its
product. Which in turn showed increase in number of units sold?