Efficiency gains through Digitization and Automation
Advertising Agency:
AdPeople
Advertiser:
Dell Computer Corporation EMEA
Media Agency:
Difinity, London
Prepared by:
Hans Rosenvold & Morten Munk
0.
Executive summary
Through a simple and effective online strategy, Dell and AdPeople have been able to achieve much
success in the UK PC market. By combining the creative platform with efficiency improvements in
the production of online elements, results have been achieved which exceed Dell‟s own high
expectations.
As in most other European PC markets, the UK PC market is characterised by intense competition.
This tough competition has led to pricing becoming an increasingly decisive factor in PC users‟ final
purchase decision. At the same time, the online market in the UK has grown significantly and is
expected to expand further in coming years.
Dell‟s business model – based on direct sales to customers – is built on always delivering the latest
technology at attractive prices and it is, therefore, essential that Dell‟s reaction time on matching
competitors‟ prices is minimal. Consequently the strategy must focus on fully maximizing online
media opportunities – both in terms of production and customer communication.
Dell‟s online strategy must fulfil 3 overall objectives:
1.
2.
3.
To offer superior value by reducing costs.
To be faster by optimising „time-to-market‟
To be better by always improving creativity
With the implementation of AdPeople‟s marketing portal DellShareTM and the integration of the new
creative platform, it has been possible to produce web banners for Dell‟s online activities up to 33
times faster than hitherto. At the same time production costs of online materials have been reduced
by 32%.
Moreover, the cooperation between Dell and AdPeople also contributed to the following results in
the UK market:




Dell sales in Q4 2005 increased by 32.4% over the same quarter in 2004
Dell‟s market share in the UK increased from 21.5% to 25% over the same period
34% sales increase generated from e-mails
43% sales increase via banners
This case demonstrates how an agency through great insight into a client‟s business model and
marketing strategy can optimize the value chain and make it more effective, thereby releasing
resources for further use in exploiting the potential of the online media.
AdPeople‟s efficiency achievements in production and handling of Dell‟s online activities have
released means which can be reinvested to improve the underlying processes and the creative
ideas. At the same time it would be possible for Dell to acquire a larger share-of-voice in the
strongly expanding online media.
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1.
Background
Dell was introduced in the UK in 1987 and this is now Dell‟s largest market in Europe, Middle East
and Africa (EMEA).
Since 2004, AdPeople have been responsible for all of Dell‟s online activities in EMEA.
This case will focus on Dell and AdPeople‟s online marketing challenges in the UK market in 2005.
Dell use both off- and online media for their direct response communication.
Note:
Dell‟s policy on business confidentiality is restrictive and hence any specific analysis data about Dell
cannot be shown and is confined to other references or main conclusions. In cases where market
data is shown in non-indexed format, such information comes either from generic or publicly
available sources.
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2.
The Challenge
The PC market in the UK is, as in the rest of Europe, characterised by intense competition. All PC
manufacturers offer the latest technology and with the ease and speed of the internet, customers
can easily compare products and therefore pricing is now a key factor in the market.
Dell is challenged on two fronts - partly due to a PC market where the competition for market share
is becoming increasingly tough and partly because of the enormous opportunities which the internet
offers advertisers to influence customers in terms of speed, direct communication and in large
volume.
In their desire for continued success, Dell focuses on improving effectiveness and, of course,
increasing sales of PCs. Dell require that investments in marketing projects must be covered within
the first quarter. Linked to this, it is a Dell objective that sales figures increase by a minimum of 30%
in each quarter.
To achieve this, new Dell marketing projects must always aim to fulfil the following overall
objectives:
1.
2.
3.
To offer superior value by reducing costs
To be faster by optimising „time-to-market‟
To be better by always improving creativity
In 2005, Dell‟s main objective on online strategy was to improve the quality perception of their
products by optimising processes as well as harmonizing the creative expression in all online
media.
The solution to Dell‟s challenges is to continually improve the underlying processes. The three
objectives above can be viewed as positively correlated:
By shortening „time-to-market‟ through efficiency improvements, marketing costs for production are
reduced giving the agency (AdPeople) greater scope in optimising creativity within the same
budget.
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3.
Dell
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Dell is the world‟s largest PC manufacturer and their mission is „to be the most successful
computer company in the world at delivering the best customer experience in the markets we
serve’. The company‟s strategy is „to deliver relevant technology at superior value’.
Dell was founded in 1984 by Michael Dell in Texas, USA. Since then, the success of the company
has forged ahead with their decision to solely use the „Dell Direct Business Model‟, which means
that Dell products can only be bought via the internet or telephone. The business model must
ensure that customers are offered high quality products using the latest technology at a competitive
price. As Dell‟s products cannot be seen and touched by customers in shops, their marketing
strategy is always to influence customers to the optimum effect at all contact points – both offline
and online.
Financially, Dell is doing extremely well. From 2004 to 2005 global net turnover increased by 18.7%
and the net profit by 15% 2. The root of this success is found in Dell‟s unique distribution model and
flexible price structure.
Dell‟s fundamental strength lies in the direct sale to private customers and the business segment,
whereby a costly dealer link is removed. This has enabled Dell to maintain high profit margins whilst
at the same time eliminating a vast and costly in-house stock inventory. All Dell products are „builtto-order‟ and this also means that Dell needs to be very flexible in their production e.g. in case of
technology changes or sudden changes in demand.
Figure 1 – Perception of Dell Direct Business Model – UK Q4, 2005
Source: Dell Quarterly Brand tracker, Q4 2005
_____________
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2
IDC, Q2 July 2006
Dell Annual Report 2005
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Direct sales are combined with a constant focus on the price structure. Dell mainly concentrates on
offering the best prices and therefore price promotions are often the main feature in the
communication strategy. With pricing being a key part of the communication, it is vital that Dell is
always in a position to match competitors‟ offers and products, and that the reaction time to
communicate this to the market is minimal.
The basis on which Dell is able to communicate pricing so aggressively in the UK is that they
maintain a very high „value for money‟ ratio and, as demonstrated in Figure 1, the perception of the
direct sales model is very strong among customers.
Through direct sales to customers, Dell has achieved real competitive advantages and in order to
maintain these, they must constantly ensure that the underlying processes contribute towards this.
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4.
PC market in the UK
Dell was introduced in the UK in 1987 and is now well established as the leading PC manufacturer
in this market. As can be seen from Figure 2, Dell‟s main competitors in the UK are HP,
NEC/Packard Bell and Acer. Dell is facing stiff competition – partly from computer producers and
partly from dealers such as PC World and Currys.
Whilst the competitors can use the online media and other media to promote their brands and leave
the distribution to dealers, Dell on the other hand is both producer and distributor every time the
customer is to be influenced.
Figure 2 – PC market in the UK, Q4 2005. All form factors
Andre;
41%
Dell;
25%
HP; 17%
Acer;
7%
NEC/
Packard
Bell; 9%
th
Source: IDC PC-tracker, 4 Quarter 2005
As already mentioned, the intense competition has led to a sharp focussing on pricing campaigns. For
Dell this, therefore, requires that their pricing strategy, value propositions and underlying processes are
working perfectly to combat competition.
The above should also be seen in the light of the UK online market which has exploded in recent years:

It is estimated that in 2005 the marketing budget for online advertising in the UK increased by
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66% to more than 15 bn DKK (£ 1.4 bn).

One in five British internet users shop online once a week .

Overall the number of shoppers is expected to reach 25 million and annual purchases via
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online will increase to 235 bn. DKK (£ 21.8 bn) towards 2010.
*
On average the British internet user is online 33 hours each month.

…. but that said, on average the British internet user spends only 44 seconds per web page.
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_____________
3
Interactive Advertising Bureau UK, March 2006
UK Office of Communications, www.ofcom.org.uk, 2006
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Datamonitor, www.datamonitor.com, 2006
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Nielsen/Netratings, January 2006
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Needless to say, that the battle to make oneself known online will be intensified. Research has shown
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that internet users can spend as little as 50 milliseconds to assess a homepage and this further
supports the great demands made on online advertisers to capture the attention of the internet
audience.
The lucrative online market in the UK has, however, also brought about some less positive effects for
advertisers. In recent years, „click-through‟ and „open‟ frequency for banners and e-mails have been
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falling. This means that internet user does not click on the web banner or the recipient of e-mail does
not open it at all. This situation depicts an overall market where online ads can easily be daunting for
internet users and even become an irritation factor.
_____________
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Nielsen/Netratings, January 2006
Computerworld, 17th January 2006
DoubleClick Internal Benchmark Statistics, 2nd Quarter 2006
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5.
Target group
This case focuses on Dell‟s online initiatives in relation to private customers and small/medium
sized businesses in the UK. Dell has been successful in establishing themselves in both of these
segments in the UK. Their strategy, where the aim is to reach as many customers as possible in
both segments, makes it obvious to use a cost effective media such as the internet.
The online strategy is concentrated on two front‟s viz. direct marketing and the more traditional
online mass communication e.g. web banners.
The direct marketing part taps into their internal e-mail database, where private customers and
businesses have agreed to receive relevant offers and promotion news based on very attractive
prices. In addition Dell subscribes to e-mails from external data providers. To ensure that the e-mail
hits the most relevant and profitable target customers, the database is segmented using criteria
such as whether the e-mail address can be supplied gratis, the quality of the e-mail domain and the
specific details stored on each recipient.
Dell‟s in-house analyses show that communications from their internal e-mail databases generate 9
times more sales than from e-mail addresses bought in. The explanation for this is probably that
customers are more willing to take up offers from newsletters, which they have chosen to receive.
In their segmentation process, Dell work among other things with:
1.
2.
3.
4.
5.
Private customers versus businesses
Existing customers and prospective customers
Simple scenario models
Purchase data
Lowest deciles versus highest deciles (potential)
In addition, Dell use analysis of the entire database for selection and placement of web banners on
the most appropriate homepages, which will be seen by more existing customers and prospective
buyers within the relevant segment.
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6.
The solution model
Based on Dell‟s internal visions, the development of the PC market in the UK and the evolution of the
internet as an advertising media, AdPeople devised a strategy on the following principal lines:



The competitive environment and the online market in the UK – the need for a short reaction
time (time-to-market).
Cost effectiveness.
A simple and effective operational set-up.
To meet Dell‟s challenges, AdPeople developed the DellShareTM portal which is also being used in other
areas of Dell‟s direct marketing activities.
DellShare is a comprehensive workflow system designed for the internal marketing
departments of global players. The system delivers significant cost reductions and quality
improvements due to efficiency improvements in the overall planning and production process
in terms of project and team management, quality assurance, template design and
outsourcing coordination capabilities in both online and offline production. Additionally
DellShare integrates brand management, marketing, planning and coordination, the creative
process, production and budget control and workflow management into a single operational
web based and team based web portal.
The architecture consists of several flexible independent modules and tools which can be
integrated in a customized solution and scaled to clients‟ specific needs.
AdPeople applied that part of DellShare which can be used to generate powerful banners and
e-mails. This process is based on an extremely tight structure which can help Dell regional
marketing management to quickly adjust banners and e-mails to meet local market
requirements.
Figure 3 – Updating of web banners:
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As shown in Figure 3, the process of updating and developing new banners begins with Dell briefing
AdPeople through the DellShare system. The required formats are selected and thereafter AdPeople
create the master templates. These templates are then forwarded directly by e-mail to Dell‟s regional
offices (in this case the UK), where adjustments are made to suit the local price structure and
competitive situation. Thereafter the banners are made ready and sent to the banner-hosting partners
who update the existing live banners on the homepages.
By using DellShare, AdPeople have been able to produce and update banners up to 33 times faster
than hitherto.
Sending of e-mails
DellShare is also used to send e-mails and the process is very much like that for banners, but with a
slightly longer production and updating processes as e-mails often consist of several elements.
Creative strategy
Before the implementation of DellShare, Dell used an out dated and non-integrated platform, where emails and banners were not harmonised. Moreover, the design of these had no recognition effect in
relation to Dell‟s own website and their own overall creative universe. Also the style of photography used
in product pictures was of low quality. Overall these parameters gradually resulted in a negative effect,
whereby customers increasingly chose not to click on Dell‟s banners or open e-mails received.
E-mail and banner before the use of DellShare
In order to improve customers‟ perception of Dell, AdPeople also developed a new creative platform in
connection with the implementation of DellShare.
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The main objective was to produce an uncomplicated platform which would meet all the needs of online
elements. At the same time the creative platform should:



Enhance customers‟ quality perception of Dell‟s products
Make the production phase more effective
Provide an impression of uniformity between Dell‟s homepage, e-mails and banners
Since customers, as previously mentioned, spend an extremely short time on their spontaneous
decoding of online elements, both e-mails and banners were developed with the following simple model
in mind:





No exaggerated use of capital letters and punctuation
Avoidance of large fonts
Use of “web-safe” colours
Readable product names
Sharp, clear and high quality product pictures
In continuation of the above rules and to make updating as easy and fast as possible, it is only possible
to change the product picture, the price, the date and the text. Neither the backdrop nor adjustments to
the elements can be changed. This is to ensure uniformity in the overall design and to improve the
impression of quality. Apart from the obvious desire to advertise Dell online, the uniformity throughout
online advertising helps customers to decode e-mails and banners and thereby improve awareness.
Viewed as a whole, AdPeople and Dell have succeeded in keeping the creative platform very simple:



It creates a uniform experience of Dell
It is production effective – both in terms of cost and time
It provides a central key message: A great deal
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E-mails and banners with the use of DellShare

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Media strategy
To make full use of the creative strategy and to combine this in the best possible way with the media
strategy, both online marketing projects and online ads are given high priority. Dell‟s desire is to reach
as many existing and prospective customers as possible in the most cost effective way possible. For
instance, homepages most visited are selected in preference to PC sites for specialists.
DellShare banners are based on Flash which is far more cost effective than the traditional production in
gif format. The savings from this, among other things, is invested in more share-of-voice on the internet.
Banners are also utilized by Dell to segment private PC users and businesses. In order to „hit‟ the small
and medium sized business segment, banners are placed on the largest news sites and homepages
providing business related contents. In the same way, banners aimed at the private segment are placed
on homepages for sport, culture, music, popular news sites etc.
It is a simple and effective media strategy which helps Dell to reach as many existing and prospective
customers as frequently as possible.
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8.
Results
By implementing the strategies mentioned and utilizing DellShare in the UK, Dell has been able to
exceed their own targets in 2005.
The main objective for Dell was to increase quarterly sales in 2005 by 30% over the same quarter in
the previous year. The DellShare portal has meant that online activities can be achieved at lower
costs and faster. Combining this with the new creative design has enabled Dell to further improve
effectiveness.





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In the UK Dell sales in Q4 2005 increased by 32.4% over the same period in 2004
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The UK market share increased from 21.5% to 25% over the same periods
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34% sales increase generated from e-mails
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43% sales increase via banners
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48% sales increase generated from partners (sales generated through external homepages)
Evaluating these results against the three overall objectives viz. cheaper, faster and better,
AdPeople‟s strategy has also been a success.
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The cost of producing banners has been reduced by 32% . This reduction stems mainly from a
significant shortening of both development and production times in producing banners. This
minimising of time-to-market is demonstrated in Figure 4, where the production time of 800 banners
is reduced from 3 ½ days to 2 ½ hours. Updating of banners on homepages for the whole of EMEA
can be carried out via DellShare right down to 20 minutes from the time AdPeople have received
the brief from Dell.
Figure 4 – Banner production time
Source: Internal AdPeople analysis
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11
IDC EMEA PC tracker, Q4 2005
Internal Dell analysis
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These reductions enable Dell to react extremely fast to market changes and competition
threatening prices. At the same time the reductions also strengthen Dell‟s opportunity to
further exploit the potential of the internet as an advertising medium, by the significant
curtailment of time-to-market‟.
The third objective was to improve the creative level in order to lift customers‟ perception
of Dell. As shown in Figure 5, during 2005 Dell enhanced customer perception of their
products and at the same time they offered the best prices in the market.
Figure 5 – Quality vs. Price, UK PC market, Q1-Q4 2005
Source: IDC PC Tracker, Q4 2005.
The results show that AdPeople together with Dell have created a simple and effective
creative strategy in the UK market, where competition is intense and time-to-market is
paramount.
With the use of the DellShare system, Dell can in close co-operation with AdPeople
implement this strategy and execute it effectively in the market. At the same time the
savings made in the marketing budget – achieved by faster production times - can
instead be allocated to further development of Dell‟s online activities.
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