Pricing Strategy of DELL

Presentation By
Rohit Kumar Singh
Aditya (Group 8)
 What is Price?
 Price is the amount of money changed for a
product or service, or the sum of the values
consumers exchange for the benefits of having
or using the product or service (Kotler et al.,
2003, p.332).
 Pricing strategies usually change as the product
passes through its life cycle, because there is
constrains on the company’s freedom to price a
product at different stage.
 Need of Pricing Strategy
 The ability of price to affect consumer
decision and its flexibility makes pricing
strategies important in meeting Dell’s
objectives in a competitive environment.
 The main objective of Dell is to produce
the low price and profitable laptop for the
customer.
Payoff Matrix
 Pricing Strategies Adopted by
DELL
 DirectBusiness Model
 Mass Customization
 Markup Pricing
 Bundling Pricing
 Strong Promotional Pricing
 Direct Business Model
Dell's direct business model is behind the firm's continued
success. Competitively, it:
 eliminates the need to support an extensive network of
wholesale and retail dealers, in turn eliminating dealer
markups;
 avoids higher inventory costs associated with "best
estimates" of product demand;
 avoids large inventories of obsolescent finished products
due to the rapidly changing technological market; and
 gives the firm the ability to maintain, monitor, and update
a customer database that can be used to shape future
product offerings and post-sales service and support
programs.
 Direct Business Model
 The bottom line - and of course that's where the
direct business model must truly be weighed - is
that Dell Computer Corporation is able to bring
the latest technology to its customers faster and
more competitively priced than many of its
competitors.
 Most recently Dell has taken the idea of directly
selling to customers on the Web, and sales at
Dell's Web site now make up 30 percent of
corporate business.
 Mass Customization
From the startup of Dell Computer, the
entire company - from research and
development to manufacture to sales - has
been listening to the customer, responding
to the customer, and delivering what the
customer asked for, in line with the direct
model.
 Mass Customization
 High-performance products. The standard, then, was set by
IBM, and that was what customers wanted - and what Dell
offered.
 Direct relationship with customers. Dell had an ongoing
dialogue with customers. The information gave the company a
competitive advantage in tailoring its products and
communications to customer thinking. Direct marketing also
avoided dealer markups. This remains true today - even with
the prices of PCs declining, such rates may still be as high as a
quarter of purchase price.
 Efficient and flexible manufacturing. The fledgling firm didn't
have much capital and the issue of inventory was a serious
one. Although the firm now garners most of the market share, it
continues to monitor inventory levels, practicing JIT to remain
flexible to build machines to customers' orders.
 Other Strategies
 Market Penetration Pricing
 Markup Pricing
 Bundling Pricing
 Promotional Pricing
 Refrences
 Kotler, Marketing Management
 Rebbaca Sunders, Business the Dell
Way
 URL
http://www.entrepreneurslife.com/thoughts
/entry/dell-marketing-strategies/