Dell still No. 1, but blogger, battery recall dent image

BRAND IN TROUBLE: Damaged by customer-service criticism

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Two years ago: Dell led worldwide PC shipments with a 17.9% share and an even stronger 33% in the U.S. Dell's solid brand aura was attributed to consumer-electronics pushes such as plasma TVs and MP3 players (before the iPod exploded), charismatic founder Michael Dell, ubiquitous online and print advertising, and entertaining broadcast work ("the Dell dude" and "interns").

Today: Dell still leads worldwide PC shipments with a 19.3% share and has the same U.S. dominance with 33%. But its brand image has been damaged by rampant online customer-service complaints-driven by BuzzMachine blogger Jeff Jarvis' rants, which began last June-and more recent viral videos of Dell laptops smoking or on fire. Dell responsed with uncharacteristic swiftness in the battery recall.

Old tagline: "Dude, you're getting a Dell."

New tagline: "Purely you."

What's changed: The customer-service firestorm and slow response are taking a toll, but increasing competitive pressure, lack of retail stores and a failed consumer-electronics push have added to Dell's difficulties.

Who's changed: Mr. Dell is now chairman, stepping down to bring in new blood: operations wunderkind but relative unknown Kevin Rollins. CMO Michael George departed last November and hasn't been replaced. BBDO, Atlanta, was hired six months ago, replacing DDB, Chicago.

Brand champions: One-third of all computer households own Dells. As IDC analyst David Dauod said: "Out of 3 million laptops sold per quarter, a few have to be deficient. It's in the numbers-[but] when issues occur, you have to have a quick response."

Brand detractors: Mr. Jarvis, of course, although he recently praised Dell's blog effort and personal customer-outreach program.

Role of advertising: Minimal, although the new effort does hark back to Dell's strong roots and "the power of our direct business model," a Dell spokesman said. Dell's direct-to-consumer sales revolution, the so-called Dell Effect, makes brand advertising less important than direct marketing and customer service. Ads show a Dell PC being assembled, and the voice-over is a customer-service rep helping a customer configure and order his computer-the one being assembled-reinforcing the direct and made-to-order model Dell was built on.

Role of customer service: Huge. A lot of "if only" there, but suffice to say that Dell seems to be admitting missteps and, by rededicating resources to service, trying to address complaints. Staying the course and further improving will be key.

Marketing spending: $939 million in 2005, up 23% from 2004.

Who's on the hook: CEO Rollins could be called out as some investors beg for Mr. Dell to step back in. BBDO's on the line to make sure its work hits the target. And the yet-to-be-named CMO will likely be under siege from Day One.

Prognosis: Dell is still No. 1 in consumer PCs and is not likely to concede the title easily. "Dell's issue now is that it has to convince the market that it can learn, that it's adaptable and can adjust its business model accordingly," said Roger Kay, analyst, Endpoint Technology Associates. Meanwhile, Dell will need to keep an eye on HP as it attempts to convert its mind-share advantage to a market-share one.
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