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Which direct PC vendor is experiencing increased sales from medium-size businesses?


Dell Computer Corp. is seeing the growth, spurred in part by a direct marketing effort from Lowe Direct, New York.

Dell Direct, a Dell division with U.S. sales of $800 million, targets home users and small- and medium-size businesses. Worldwide company revenue is about $3.3 billion at Dell, the world's No. 1 direct PC marketer.

Dell Direct markets PCs via the direct channel, chiefly through phone sales. The company is famed for its "just in time" approach, custom making PCs via phone orders.

For the six months ended July 31, Dell Computer earnings shot up 166.9% to $126.8 million on sales of $2.3 billion, up 43.8%. The Dell Direct division reports seeing sales gains as well.

The division's direct marketing program targets medium-size businesses of 100 to 2,500 employees, a market that has primarily been overlooked by computer companies.

"No one has focused on it. It is an $11 billion PC market and no one talks to them. Most [companies] target the Fortune 2,000 or home buyers," said Bob Lieber, Lowe Direct CEO.

The agency's research indicated the medium-size business segment was into IBM Corp. and Compaq Computer Corp.

"They are [management information system] people. They viewed a company like Dell for the PC home buyer, but not for them. According to focus groups, this segment wanted technical information, served up in an easy-to-digest format, no puffery," Mr. Lieber said.

Lowe's direct marketing program to this segment centers on a binder of information mailed to the head of information systems. "DELL IS" is the headline, followed by "for Information Systems."

The binders mailing went out to about 4,000 people beginning in February 1995 in place of the catalogs previously used for the medium-size business segment.

A direct mail letter in the binder reads in part: "We want to be one of your top PC vendors. But we realize that [information system] managers in companies like yours have dramatically different needs from home and small business buyers. So we've applied everything we've learned from servicing many of America's largest corporate accounts to serve your needs more effectively than ever."

The binder is divided into different sections. One section reads, "Is a direct PC vendor really in the business for the long haul? DELL IS." Dell then invites readers to check Dell's stock on the Nasdaq exchange.

Dell projected an 11% response rate to the program's first wave, but got closer to 14%, Mr. Lieber said. "An additional 30% [on top of 14%] have said, `I'm not in the market yet, but I want you to stay in touch with us,"' he said.

The medium-size business segment falls "into a group that needs more services than a small business would need, but they don't necessarily have the volume to command the attention of the major computer companies. We are seeking to use the advantages of the direct model to fill in that gap," said Ben Bentzin, director of marketing for Dell Direct. Lowe Direct won Dell from Bazzirk, Austin, Texas, in February 1994 after a review of the $12 million to $15 million direct marketing account.

Goldberg Moser O'Neill, San Francisco, continues to handle Dell's general ad account.

Lowe Direct's proposal showed Dell how to grow business 30% "on a budget of $7.9 million rather than $12 [million] to $15 million. We put up numbers and they had their jaws open," Mr. Lieber said.

Lowe Direct also rolled the dice in that review by taking out a print ad in Dell's hometown paper, the Austin [Texas] American-Statesman. "If Michael Dell opened a direct marketing agency can you imagine what it would be like? We can. Lowe Direct."

"It is that front-end work. We adopted a front-end focus, we understand the dynamics of a business model, revenue and market share. We do front-end work and research and we know" the business, Mr. Lieber said.M

Laura Loro coordinates Direct Marketing. Contact her at (609) 784-9090; fax, (609) 784-9119; or 904 Champlain Drive, Voorhees, N.J. 08043.

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