Michael Dell vs. the Red Screen of Death

You must not attempt to be all things to all people. For example, you cannot successfully position your company simultaneously as a discount seller and a premium, top-of-the line retailer. The confused signals will paralyze buyers. You won’t get their money. First, you must target your market: the initial market and your follow-up market after your company grows. In 1984, Michael Dell targeted his market: small-businessmen who wanted to buy their first desktop computer, which they knew they really had to own.

Second, you must decide what is the hottest hot button of the typical member of your initial targeted audience. Michael Dell identified this early: low price. He had a great USP for his company in 1984: a very low price for a small-business product. He also added the following as back-up benefits: customized assembly, reasonably fast delivery, and good service. The No. 1 risk with any USP is that market conditions can change.

When you position your entire product line one way in order to meet the demand of one segment of the market and your targeted audience decides that it wants something else, you will hit a brick wall if you stick with your original USP. Dell Computer has finally hit this wall. With price competition driving PC profit margins to the level of minuscule, Dell’s original USP is dead. We can see this in the company’s stock price: down.

Dell’s biggest problem is that PCs have become a mass-market commodity. They all work pretty much the same. The features are the same. They are all dirt-cheap. There is no significant profit in selling one at a time. The steady progress of the free market has killed Dell’s USP. Now what? RELIABILITY IS NOW THE PREFERRED USP A computer’s price today is almost irrelevant to the business user. What worries him most is downtime. He can lose far more money during downtime than the retail cost of the computer. This is why computers had better be reliable. High reliability is different from good service. Good service means this: “We fix it fast for free.”

Reliability means this: “You won’t need our terrific service.” If word gets out that users are suffering from reliability problems, it’s the kiss of death. I bought a Dell laptop three months ago. It has never worked properly. It produces a blue screen every few minutes. Then it shuts down. My son (a full-time microcomputer repairman) spent hours trying to get the unit to work. He told me that the blue-screen problem is a familiar affliction of Windows. It’s called “the blue screen of death.”

It is so common that it has an acronym: BSOD. I had paid good money ($1,500) for the laptop. I now want an exchange, or at least a factory repair. I called Dell service. It took a long time to get through. I finally got a very polite Indian on the line. Problem: He had a script and he stuck to it. “Do you have your machine in front of you?” “No, it’s at my home.” “Please get your machine in front of you.” “But it is at my home.” “Please get your machine in front of you.” “But I just want to send it back for an exchange or to get the factory to repair it.” “This is an operating-system problem. Do you have your machine in front of you?” I decided that this was a dead end.

So, I sent Dell’s Customer Division a letter explaining my situation. A week later, I got a call from N. N asked if I had contacted technical support. I told her about my experience with the Indian with the script. I told her that I assumed Dell was now using service people in India. She did not correct me or indicate otherwise. I reminded her about my son’s failure. “What procedures did he go through?” Not surprisingly, I didn’t know. “You must contact technical support.”

I explained that I would do this if she would give me a phone number that does not take 15 minutes to get through to someone. She offered none. She reiterated that I had to go to technical support. N’s job is to direct calls back to India. She does her job efficiently. Future sales? Not her department. Good will? Not her department. Helping to move Dell’s USP from low price to high reliability? Not her department.

IT’S NOT EASY, BUT YOU CAN CHANGE YOUR USP

Dell Computer is now facing the same problem that IBM’s Boca Raton PC plant was facing when Michael Dell was a freshman: an inability to respond effectively to new market conditions. It is rare for a company to successfully exchange its USP for a new one, but Dell had better do it and do it fast. When the price of any item falls so far that buyers can no longer distinguish one seller from another, sellers must find some other way to tell buyers, “Buy from me.” Dell has to sell something else besides price. If it’s selling service, it’s selling service by way of India — which means phone time spent on hold. It means that businessmen must become unpaid computer-repair co-workers. (“Do you have your machine in front of you?”) Dell had better sell reliability. Because, when it comes to consumer support, Dell has become “not my department.”

WE CAN SEE DELL’S PROBLEM IN THEIR TV ADS

Take a close look at Dell’s latest TV ads. Here is what those ads tell me:

1. Dell is targeting first-time home-computer buyers, not businesses.

2. Dell is trying to persuade viewers that talking on the phone to 22-year-old boys — all Anglos — is a better way to shop than going into a store.

3. Dell is trying to persuade viewers that at a store they will get pressured by uncaring, ignorant salesmen. First, it’s the wrong audience. There is no money in first-time home-computer buyers. Second, if you don’t sell a product line that works every time, right out of the box, you had better not have a support staff located in India. You had also better not train 24-year-old girls to re-direct legitimately irate buyers back to India.

Third, by trying to sell the old way, over the phone, Dell is fighting an uphill marketing battle. Buying in a store means that the buyer is buying from a human being who can be held responsible for a warranteed product that doesn’t work as advertised. Michael Dell is trying to sell to non-businesspeople who are first-time buyers. These are unskilled, late-coming adults who are not buying with business-generated money. They have no in-house support staff. These people are not time-sensitive in the way that businessmen are. They will patiently wait for their calls to India to get through.

So, Dell is restructuring its technical support system for these people. Dell is treating its business buyers as if they were home-computer users. Dell is telling the firm’s core buyers: “If you want help from us, go to India!” I’d rather go to Gateway. Dell is sending out conflicting signals: some TV ads for racks of servers (bought by very large businesses) and other ads for befuddled adults who are buying their first home computers. This is evidence of a company in deep trouble and an ad agency in high cotton. Dell Computer no longer has any identifiable USP. It is now trying to be all things to all people. This will produce a lot of red ink. Call it the red screen of death.

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