International customer segmentation strategies and implementation

¶ … 2000, Dell's profits began to decline, growth had stopped and the company's share price was steadily decreasing. Kevin Rollins, who was the senior vice president for strategy at the time, was charged with the mission of rectifying the situation. Rollins thoroughly studied the organization form top to bottom before realizing that he problem was not just on of falling profits but actually ran much deeper. The core of the problems Dell was facing was embedded in its organizational culture and the inability of its employees to effectively work together. "Segmentation is the backbone of the Dell Computers operations. Based on segmentation, company takes its positioning and modifies its offerings for each segment's customers. Michael Dell says, "An Important element of virtual integration with customers is segmentation. The finer the segmentation, the better able Dell is to forecast what customers are going to need and when. Then coordination of flow of strategic information comes to stage all the way back to suppliers, effectively substituting information for inventory" Dell's Market Segmentation" ("Dell Computers"). From there, it is known that for Dell, basic understanding of diversity is crucial when developing strategies for relationship marketing.

Strategy

Dell grew rapidly and in the mid-1990's, sales reached an inflection point, soaring from $3.5 billion in 1994 to $25 billion in 1999. Dell had become the number one PC seller in the United States, and was number two worldwide. More importantly, profits were soaring thanks to the cost structure of the direct, build-to-order model. By turning its inventory over 60 times per year, Dell minimized the rapid depreciation costs that mark the PC industry, and by receiving payment from its customers before it paid its suppliers for components, Dell operated on a negative cash conversion cycle. This minimized Dell's working capital requirements and allowed it to achieve high rates of return on its invested capital. The result was an exceptional run for Dell's stock, which outperformed even Microsoft and Intel." (Dedrich & Kramer 2001) Dell has a need to sell products directly to the end-consumer through e-commerce. The company will have a better chance of becoming profitable by adopting the build to order model that other companies works within.

In order to overcome the issues, the CEO needs to consider group thinking and conformity so that everyone can work together. Working on a team can be very rewarding and exciting, but also frustrating if some of the team member are not committed to the team. Building a high performance team requires time, collaboration and most importantly communication. A team is described as a small number of people with complementary skills who are committed to a common purpose and approach for which they hold themselves mutually accountable. Group thinking and conformity focuses on the interpersonal transaction between managers and employee. Leaders are seen as engaging in behaviors that maintain a quality interaction between themselves and followers. The company is lacking group thinking and conformity because no one is willing to work together. In order to be an effective company, they have to conform as one so that productivity can be increased to make high profits. This effective form of communication and teamwork allowed people in the park with no problems because the team was organized and knew the proper procedure. A successful team also requires active listening, empathy, and being truly committed.

Solution

Rollins worked together with the founder of Dell, Michael Dell, to reorganize the corporate culture. It was decided that Dell needed a more collaborative management and communication style. The company organized itself to more like a team-based organization. It adopted a lateral structure that lacked hierarchy and was more informal. Employees were encouraged to practice self-managing behaviors and actively participate in the decision making process. It was important to the transformation process that all employees knew that their input was valued and that they all played a significant role in the success of the organization.

CRM strategy should analyze customer segments and make the appropriate determinations on whether each segment is profitable for their business and how to affect the purchase patterns of the segment so the business can experience the profitable attributes of CRM; loyalty purchasing, cross selling, up selling, etc. Direct Mail fits perfectly into the customer communication strategy for customer segmentation. With variable printing and data rich files a company can use their intelligence and print relevant Direct Mail that will move customers toward the purchase decision. Additionally customer communications should also enable the company to learn more about the customer over time so that it acts upon that information to better meet customer needs in the future. This is building "learning relationships" with customers, a fundamental CRM concept. A feedback loop must be built into the process so that the company can continually learn more about customers and their needs in order to improve the relevancy of its communications and offering in the future. Mail can provide the channel for this feedback, both in direct correspondence and by sending customers to web site, 800 #s or whatever channel they prefer"(CRM 2007).

The result of the transformation was that Dell regained its position as a front runner in the industry. Dell's profits were back up and the company was steadily growing again. Even more importantly, Dell had a new corporate culture that emphasized effective team work through cooperation, trust and cohesiveness.

Business Strategy (9) the Company's business strategy is based on its direct business model. The Company's business model seeks to deliver a superior customer experience through direct, comprehensive customer relationships, cooperative research and development with technology partners, computer systems custom-built to customer specifications and service and support programs tailored to customer needs Dell Direct Model (10) the direct model is based on the principle that delivering custom-built computer systems is the best business model for providing solutions that are truly relevant to end-user needs. This concept, together with the Company's flexible, build-to-order manufacturing process, enables the Company to achieve faster inventory turnover and reduced inventory levels and allows the Company to rapidly incorporate new technologies and components into its product offerings. In the same way that the Company's computer products are built-to-order, service and support programs are designed to fit specific customer requirements ("Dell Computers")