What are the advantages, disadvantages, and limitations of this system?

Question

What will be an ideal response?

Answer 1

Advantages
• Can provide customer with maximum flexibility, customization, and variety at no extra cost (in fact, at lower costs because of other reasons).
• Can provide customer with latest technology in microprocessors or other peripherals almost as soon as they are available to vendors.
• Allows for lower (zero) finished goods inventory than competitors who support retail trade/VARs.
• Minimizes threat of obsolete products in channel.
• Allows vendor to have direct access to all customer details that can be used for cross marketing/selling opportunities.
• Allows vendor to be selective in servicing customers and varying incentives to different customers.
Disadvantages
• Restricts access to only those customers who use this channel.
• In a retail environment, all brands are displayed and therefore brought to the attention of the customer. In this case, if the customer does not call, then the vendor is out of the picture and there is no way to switch these customers.
• A customer who likes to touch and feel available options will not even consider this channel.
• Service and support of unsophisticated customers can be disastrous and exorbitantly expensive.
• Image of the company could suffer based on stereotyping of mail-order firms.
Note: The instructor could take some time to expand the discussion of transaction versus relationship customers beyond the Direct Model to encompass Dell’s business strategy to service the two markets. This discussion could be centered around the students’ perception of Dell prior to reading the case. There will be several students who have purchased PCs from this company who can explain the Direct Model as they saw it. Most of them will point out that they were surprised to learn that Dell treats them differently from the relationship customers. It is possible to use their observation to explore the issue of whether Dell wants them as customers. Morton Topfer says that Dell wants to “. . . sell to the educated customer . . .”