Dell's woes continue

The New York Attorney General is suing Dell for not delivering on it's customer service. This is not surprising as Dell have really soiled their reputation in the last few years.

Dell's spokesman claims these complaints are from a "a small fraction of Dell's consumer transactions in New York". A read of their 161 comments to date on the ABC story indicate otherwise.

The big problem for Dell is they've chased the bottom of the market. The consequences were inevitable: To maintain margins they had to lowered levels of service and the cheap prices attract the toughest customers.

Computers are a difficult, complex product at the best of time. As I pointed out in a previous post, selling technology is not like selling baked beans. Pile and high and sell 'em cheap only works if you can fob off aggrieved customers when the technology fails or is beyond them.

For retailers, this has been quite easy. They job fob the customer off to the manufacturer. Dell's cutting the middle man means they have nowhere to fob the customer off to.

The problem for the channel and direct seller like Dell is the bottom of the market is populated with demanding customers with tight budgets. These people want to buy a Hyundai but they want Lexus level support.

There's no way around this if price is your only selling point. The key is not to go to the bottom of the market. Stay in the mid to high range where you'll sell far fewer computers but you'll keep your margins and reputation.

This is largely the strategy of Apple. Although they do lapse sometimes.

For myself, I don't know why Dell chose this path, my suspicion is that the stock market and renumeration agreements were rewarding unit sales numbers, so the bosses didn't care as long as more boxes were sold. Now they are suffering for chasing the bottom of the market, just as Packard Bell did.

I suspect it's too late for Dell to overcome the "cheap but dodgy" label. It might be time for Dell to split their range, keep the Dell brand for the cheapies and rebadge their high level computers and support. Just as Toyota did with Lexus.

The sad thing is the Japanese worked hard to associate their brands with quality. They took a generation to shed the "cheap but dodgy" label. Dell have done the opposite and trashed a good name.