Will the Holy Grail of marketing revive Dell?

December 5, 2007: 8:21 AM ET
Dell XPS m1330
If Dell wants to regain its former glory, it will have to do a better job selling laptops like its XPS m1330; and that means new marketing methods. Image: Dell

Two years from now, we'll be hailing Dell as a marketing innovator -- or snickering about its failed attempt to decode the art of hype.

Either way, the struggling computer maker is promising a spectacle that marketing experts everywhere will be watching with keen interest. This week Dell (DELL) announced that over the next three years it will pour its considerable $4.5 billion marketing spending into an unprecedented partnership with marketing giant WPP.

The goal of the effort is twofold. First, Dell executives want to bring all marketing efforts under one roof, rather than continue spreading them among 800 agencies worldwide. Second, they want to invent a new way to measure the bottom-line financial benefit of every online ad, TV commercial or press release Dell puts out -- basically, to crack the code of marketing buzz.

Dell 1-year chartSound ambitious? It is. Marketing can be murky stuff. Assigning a value to computer chips or hard drives is one thing. But how do you put a dollar value on marketing gems like Apple (AAPL) CEO Steve Jobs' Macworld keynote speech, or the Maytag repair man, or the Energizer Bunny?

If Dell and WPP can figure it out, the marketing effort could play a major role in the company's turnaround effort. Dell has lost ground to rivals such as Hewlett-Packard (HPQ) in part because other companies have more experience reaching out to customers where they shop, rather than just connecting to them by phone, mail or Internet. Such marketing savvy is increasingly valuable in the technology business as customers view tech devices as portable style items, not just as stay-at-home appliances.

'Wave of the future'

Dell has launched a new global retail strategy to adapt to that new reality, and gain ground on its competition. A new analytical marketing model that allows the company to reach more customers and spend less money would be a definite plus.

"That kind of marketing is the wave of the future," says Eric T. Bradlow, editor-in-chief of Marketing Science and a professor at The Wharton School of the University of Pennsylvania. "Given Dell's expertise in data collection, it is ambitious, but it's something that's possible."

Michael Dell
Founder Michael Dell had a groundbreaking model for PC manufacturing; the company now wants to do the same for marketing. Image: Dell

That elusive formula has been described as the Holy Grail of customer outreach. No company yet has discovered the secret, so there's reason to doubt Dell will be the first. Then again, Dell has a track record with Holy Grails – years ago the company revolutionized manufacturing. Its number-crunching system made Dell the biggest and most efficient PC maker in the world, until rivals figured out ways to close the gap.

"This really means applying the same kind of discipline to marketing that Dell revolutionized in the supply chain," says Casey Jones, Dell vice president of global marketing. "We've got phenomenal data. All we have to do is connect the dots."

Connecting the dots

But boy, are there a lot of dots. To do this right, Dell will have to track every marketing campaign, public relations effort and product price shift, and watch how these and other factors affect sales. The volume of data will be so great -- and the analytical challenge so complex -- that Jones felt Dell had to run all marketing through a single agency for it to have a chance of working.

To help execute this ambitious plan, Dell picked an ambitious agency. WPP, a multi-billion-dollar conglomerate built by raider Sir Martin Sorrell, owns properties such as mainstream marketer Young & Rubicam, online specialist Beyond Interactive, mobile-focused M:Metrics, and TV measurement firm AGB Nielsen. It was WPP's experience with measurement that sealed the deal -- Dell needed a company equally comfortable with advertisements and analytics.

There are also plenty of downsides to cozying up with one big partner. Similar strategies have backfired before. For instance, Dell stuck to exclusive relationships with Microsoft (MSFT) for operating systems and Intel (INTC) for chips for too long -- competitors used open-source software and chips from Advanced Micro Devices (AMD) to get a jump on Dell.

A calculated risk

And then there's the matter of hedging bets. If the relationship with WPP sours, Dell could have a hard time switching gears, says Tülin Erdem, a marketing professor at New York University Stern School of Business. "You have all your eggs in one basket," she says. "Any time you have only one relationship, there's the risk that if something goes wrong, everything will go wrong."

Investors seem to have lost some confidence in the company. The stock is down 23 percent from its October high, as investors expressed disappointment that Dell is spending so heavily to get the company into better fighting shape.

Despite the cloud over Dell, Erdem admires the gutsy marketing move. "Given Dell's problems over the last few years, obviously they had to do something," she says. "It's a calculated risk. If it works, it will be wonderful."

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