Market segmentation is dividing the market into groups of consumers who have a common need. It is based on the factors such as demography. This includes gender, age, the level of education and the level of income. Other factors that are considered include geography, which includes the location, distribution of people and the population growth rate. In addition, Psychography, which is the lifestyle that people lead, their opinion and attitude and behavioural segmentation that includes issues to do with price and the consumer’s loyalty to the brand are considered. Based on these factors Dell can segment its market in more than one way.
One of the ways that Dell can segment its market is by considering the customers’ loyalty. The company was founded in 1984 and from that time, it has become a force to reckon with in the business and computer industry. Over time, it has built up a loyal clientele all over the world. The motto that Dell has worked on has been improving the people’s business and personal lives. This has attracted it to consumers who feel that their interests are catered for. With the new mode of distribution, customers are able to test the product before buying. This assures them that the product is of high quality.
Another factor that makes the company have loyal consumers is the fact that they are able to specify the exact model that they want. This also means that the company can use the level of income and price to segment its market. By considering a client’s specification, it has been able to reduce costs. The company intends to distribute its products through a low cost retailer. This will attract many customers who would otherwise have feared to buy the computer elsewhere. A customer who wants to buy a personal computer but does not have enough to buy what is in the market can choose what he or she can afford.
Another way that it can segment is by considering the people’s lifestyle. The company produces different products such as desktops and notebooks. Some people prefer notebooks to desktops. The company has not ignored this area. It has specialized in making the best desktops and notebooks. Dell can use location to segment its market. The company has a global presence. Its products are sold in America, South America, Europe, Africa and Asia. The initial experiments will be in Puerto Rico, USA and Canada. After this, they can later take the idea to the other consumers in other stores round the world. The retail chain that they have chosen is found in many locations around the world and this can help in its expansion efforts.
Dell has an advantage of having a website. One of the marketing tools that the company can use is advertising. Advertising can take up different media such as billboards, magazines, radio, newspapers and televisions. However, it can choose to use its website for this purpose. This will reach a large audience all around the world. Advertising through the website is better than using the print media, radio, television and other digital displays. The website is an interactive tool and it has more information about the product. Customers and consumers who have any questions regarding any of the products offered can ask online. If there is a consumer who encounters any problem when using the product, it can also be solved.
Another advantage is that consumers will get a chance to see other products that the company has and any other offers it may be giving. Besides that, it only makes sense that a company dealing with computers should consider the internet as its first priority in advertising. Another communication tool is sales promotion. Sales promotion can be used in different ways. Dell can use either gifts or free packs. For instance, it can offer a free piece of hardware such as a keyboard with every purchase of two computers. It could also offer free service for a set period.
Since the company is now choosing to sell in retail stores, it can offer trade sales promotions such as training programs to those who will be selling its products. This is a form of sales promotion and it is very useful especially to those who have never dealt with the product before. A training program will ensure that the seller has full knowledge of what he or she is selling. He or she will know the benefits that the products have over other brands. The seller will then be able to convince the consumer to purchase the product. Dell is not free from competition and its worst rival is Hewlett-Packard. Hewlett-Packard overtook Dell’s sales and this obviously came with a cost.
Another marketing communication tool that Dell can use is Public Relations. This is a useful tool especially when the company has faced some challenges in the past and it wants to rectify some issues. It is usually done through press releases or event sponsorships and the main aim is for the business or company to be portrayed in a positive light to the public. Dell can use the opportunity to create good relations with the customers and the distributors. Since press releases are usually free, they might be hard to come by. It would be good to embrace technology and use other forms such as blogs.
Another marketing communication tool is direct marketing. Dell is already giving consumers the chance to test its products before purchase. This is in turn attracting more consumers to its exhibition stands. This method of trying and testing before purchase is very profitable and both the company and the consumer gain. The company gains since it gets a chance to improve the products based on the customer’s feedback. It also creates a stronger customer base and more customers that are loyal.
The fifth marketing tool that can be employed is personal selling. This involves making presentations. This is a good idea especially for people who may not be too conversant with using computers. It is usually a face-to-face presentation and the customer has a chance to ask any questions that he or she might have. Personal selling creates knowledge of the product and the consumer builds a relationship with the seller since there is a high chance that the sales person will meet often with the consumer. In this case, the consumer builds a relationship with the retailer who in turn builds a relationship with the producer. There is an increased opportunity to increase the customers’ value because of the feedback.
The decision by Dell to enter into a relationship with the retailers has both advantages and disadvantages. First, it is important to realize that they did not do this strictly, but it was a measure of increasing sales and consequently profits. There are several advantages of retailing. First more people are aware of the product. The stores that Dell chose were appropriate. Wal- Mart is visited by many people because of its low costs. There are people who probably learnt about Dell when they saw the personal computers in wall mart.
Secondly, there are more people selling the products. This means a larger market. The retailers are trained about the products that they are selling through sales promotion and this means that there are more people solving computer related problems. Third advantage is that higher sales volume is realized because the products are offered at a lower price. Being a strong chain in the market, Wal-Mart knows the prices of the rival companies and it is able to tell at which price the products will be most profitable. This is another advantage.
The fifth advantage is that it saves time. For a person who might not have the time to wait for an order, it will be easier to go to the store and select the computer that he or she wants. The disadvantages are that there is less consumer relationship with the producer and the producer will need to employ a sales force. Many people will flock to the retail chains and sometimes it may be hard to communicate directly with the consumer. This can lead in a gap being created and customer loyalty lost. The second disadvantage is the loss of innovativeness. Many consumers will get their personal computers from the retail stores and they will no longer be calling the company to have their computers personalized with their specifications.
There will be a shortage of ideas because people want what they can quickly get. There is therefore a high likelihood that the same products will always be produced. Another disadvantage is that the retailer may not represent the company in the best way possible. Because of many clients, he or she may be so busy and may not have the time to examine the product with the consumer. There is the fear that the retailers will only be interested in what they can make. Fourth disadvantage is that the producer does not have control over their product. This includes determining the price of the product and deciding on some of the discounts given.
In addition, there is the issue of poor management and the uncertainty that the stores may close down. While this is not a real concern presently, it is something worth considering. Whether Dell chooses to sell their products in retail stores, it should not neglect the things that have brought it this far. Though Hewlett-Packard had more sales, it could have been caused by other factors such as the excitement of having something new in the market. It is wise to weigh all the benefits against the costs and decide which the better option is.