It didn't seem as if he was asking for much. When the CD drive on Peter Ulyatt's Dell desktop computer failed this summer, he called the support crew at Dell (DELL ), where he'd bought the $1,600 machine nine months prior. Armed with an extended warranty that cost him an extra $300, the Pasadena (Calif.) retiree got on the phone and waited. After sitting on hold for 45 minutes, a technician whom Ulyatt could barely understand came on the line and diagnosed a "software problem." Ulyatt's call, transferred to the software technician, was dropped. Calling back, Ulyatt waited on hold another 45 minutes, asked for the software desk, and waited a half-hour more before hanging up. "At the moment, I'm not high on Dell's service," says Ulyatt, who plans to buy two new PCs in a year or so. "When I buy again, I will look at others beyond Dell."
Ulyatt's ordeal is not an isolated case. All tech companies have some unhappy customers, of course, but recent surveys suggest the ranks of frustrated Dell Inc. owners are growing. Complaints to the Better Business Bureau rose 23% in 2004 from the year before, and they're up another 5% this year. And Dell's customer-satisfaction rating fell 6.3%, to a score of 74, in a survey by the University of Michigan. Dell's score puts it right at the PC industry's average for the study, in which Apple Computer Inc. (AAPL ) led the way with an 81. Still, it's a big decline, especially for a company that has often topped the list. "We've never seen a drop like this," says professor Claes Fornell, who ran the survey.
Plenty of people are going public with complaints. Media critic Jeff Jarvis has recounted his frustrations on his blog. Web sites such as ihatedell.net have popped up. Helaina Burton recently spent three hours talking to a half-dozen Dell reps -- all to solve the simple problem of a faulty keyboard. "I certainly won't buy another product from Dell," she says. "I will make sure that any other prospective Dell customer I meet knows what kind of treatment they'll get."
Could such sentiment lead to trouble for the world's largest PC company? Over the past decade, Dell's dependable support, combined with competitive prices and build-to-order convenience, made it the default choice for millions of consumers. Its market share continues to rise overall, and it holds 28.8% of the U.S. consumer market, up from 28.2% a year ago, according to researcher IDC. However, a sagging reputation could slow sales, jeopardizing the company's plan to reach $80 billion in revenues by 2008. In the most recent quarter, Dell missed its sales target, one reason its stock has dropped 18%, to $34, since the start of the year.
Dell is working to reverse the service slide. John Hamlin, senior vice-president of Dell's U.S. consumer business, says the company is hiring a few thousand additional reps this year and striving to reduce call transfers. Already, he says, hold times have been cut in half from earlier this year, and internal weekly surveys of 5,000 customers show a 35% increase in customer satisfaction from a year ago.
Now the company, which revolutionized how PCs are sold with its direct model, has plans to change how PC support is provided. On Sept. 28 it announced a line of higher-priced PCs, dubbed the XPS line, that will come with improved levels of service. XPS owners who call in for help will be routed onto shorter queues to dedicated teams made up of the company's "best" phone reps, says Michael A. George, general manager of Dell's U.S. consumer businesses. "The goal is for the vast majority [of XPS owners] to wait for less than five minutes."
That's one of several ways in which Dell will encourage customers who want more support to pay extra for it. In November the company will launch a slate of new offerings, including remote assistance so technicians can take control of the customer's PC to fix problems. And early next year Dell will introduce a series of one-year memberships so customers can opt for various levels of help, at various prices. One of the options will likely include a quarterly PC tune-up, in which a techie would remotely clean up the hard drive and check security settings.
All of this adds up to a quiet attempt to reset customer expectations in the PC industry. While execs won't say so publicly, the message is clear: That new PC you bring home comes with only the most rudimentary support. More hand-holding costs extra.
Indeed, Dell is rolling back some of the perks that now come standard. BusinessWeek has learned that in mid-October, Dell plans to redefine the term "free shipping" for its low-end models. Instead of delivering them to the customer's home, Dell will mail them to the nearest post office for pickup. These customers have to pay extra for home delivery -- although it comes standard with pricier models such as the new XPS line.
It's tough medicine that fits with Dell's pragmatic approach to business. The company is the No. 1 player in the U.S. consumer PC market. But sales to U.S. consumers carry margins of 6% -- compared with 11% for corporate buyers. The new "pay-up" strategy could help make sure the consumer unit doesn't eventually become a drag on earnings.
Some industry experts think Dell's plans are simply a practical response to plummeting prices. "Consumers want to have their cake and eat it, too. They want that $300 PC but expect the same support that came with a machine that 10 years ago cost $2,500," says Stephen Dukker, who founded home PC maker emachines Inc. in 1998.
Other key PC makers are increasing the pressure on Dell. Apple, which consistently ranks high in customer surveys like Michigan's, recently decided to start using chips from Intel Corp. (INTC ), making it a more direct competitor to Dell. And Hewlett-Packard Co. (HPQ ), Dell's biggest competitor, seems intent on distinguishing itself with customer service.
Over the past year, HP has launched several initiatives to build loyalty. One lets HP employees key in information on product glitches they hear about from customers, who then are supposed to receive a call from a rep within 48 hours. Another is a diagnostic tool HP developed to help consumers figure out what kind of problem they have, even if it doesn't involve HP gear. Dell won't help customers with non-Dell problems unless they pay extra. "Given today's digital lifestyle, it's vital," says Diana L. Bell, HP's senior vice-president of total customer experience. "We have to do more than say, 'here's the product, and catch me if you can."'
A common refrain from Dell customers is that the company seems to want to hide from them rather than help them. Edward Huebner, a Detroit sales manager, called Dell to ask about upgrading the software on a Dell DJ music player. He couldn't get the assistance he wanted on the phone, so he tried Dell's online chat service. But there were delays of as long as five minutes between responses. Huebner gave up and tracked down an answer on an online message board. Afterward he posted this parting salvo: "You've lost a customer for life." A Dell spokeswoman says a five-minute wait is "outside the norm."
Huebner's experience may be a warning sign. If customers don't go for the new "pay-up" plans and service keeps sliding, Dell may have to put more money into solving the problem itself -- or risk having more consumers defect to rivals.
By Louise Lee in San Mateo, Calif., with Emily Thornton in New York