Dell Learns to Listen

The computer maker takes to the blogosphere to repair its tarnished image

In the age of customers empowered by blogs and social media, Dell has leapt from worst to first.

Start with the worst. In June, 2005, I unwittingly unleashed a blog storm around the computer company. Terminally frustrated with a lemony laptop and torturous service, I vented steam on my blog under the headline: "Dell sucks." That's not quite as juvenile as it sounds, for a Google (GOOG) search on any brand followed by "sucks" reveals the true Consumer Reports for that company's customers. Thousands of frustrated consumers eventually commented on and linked to my blog, saying, "I agree." They were a leading indicator of Dell's problems, which the company—and analysts and reporters covering it—should have heeded. My story ended, I thought, that August when, after returning the Dell and buying a Mac, I blogged an open letter to Michael Dell suggesting his company read blogs, write blogs, ask customers for guidance, and "join the conversation your customers are having without you."

The following April, Dell (DELL) did join that conversation. It dispatched technicians to reach out to complaining bloggers and solve their problems, earning pleasantly surprised buzz in return. That July, Dell started its Direct2Dell blog, where it quickly had to deal with a burning-battery issue and where chief blogger Lionel Menchaca gave the company a frank and credible human voice. Last February, Michael Dell launched, asking customers to tell the company what to do. Dell is following their advice, selling Linux computers and reducing the promotional "bloatware" that clogs machines. Today, Dell even enables customers to rate its products on its site.

Has Dell really gotten the blog religion? I recently visited the company's Round Rock (Tex.) headquarters to find out. Founder Dell, who took back the CEO reins in January, acknowledges its problems—"We screwed up, right?" But then he starts to sound like a blogger himself: "These conversations are going to occur whether you like it or not, O.K.? Well, do you want to be part of that or not? My argument is you absolutely do. You can learn from that. You can improve your reaction time. And you can be a better company by listening and being involved in that conversation."

New Metrics for Success

Dell's worst problem had been that customers were having too many of the wrong conversations with too many service technicians in too many countries. "It was a real mess," confesses Dick Hunter, former head of manufacturing and now head of customer service. Dell's DNA of cost-cutting "got in the way," Hunter says. "In order to become very efficient, I think we became ineffective."

Hunter has increased service spending 35%, cut outsourcing partners from 14 to 6 (and is headed to 3), and retrained staff to take on more problems and responsibility (higher-end techs can scrap their phone scripts; techs in other countries learn empathy). Crucially, Hunter also stopped counting the "handle time" per call that rushed representatives and motivated them to transfer customers so they would be someone else's problem. At Dell's worst, more than 7,000 of the 400,000 customers calling each week suffered transfers more than seven times. Today, the transfer rate has fallen from 45% to 18%. Now Hunter tracks the minutes per resolution of a problem, which runs in the 40s. His favorite acronym mantra (among many) is RI1: resolve in one call. (Apple (AAPL) claims it resolves 90% of problems in one call.) He is also experimenting with outreach e-mails and chatty phone calls to 5,000 selected New Yorkers before problems strike, trying to replace the brother-in-law as their trusted adviser.

Has It Made a Difference?

The crucial word you hear at Dell is "relationship." Dell blogger Menchaca has led the charge in convincing bloggers that "real people are here to listen," and so he diligently responds and links to critics, and holds up his end of the conversation. "You can't fake it," he says. Dell's team is stanching the flow of bad buzz. By Dell's measure, negative blog posts about it have dropped from 49% to 22%. And the Dell Hell posts on my blog, which used to come up high on a Google search for the company, are now relegated to second-page search-engine Siberia. "That change in perception just doesn't happen with a press release," Menchaca says.

But reality still has to catch up to perception. To this day, I get blog comments and e-mails from disgruntled Dell customers. The University of Michigan's PC satisfaction scores show Dell dropping from 78% in 2006 to 74% this year. Internal Dell measurements showed satisfaction was actually much worse than that. A year ago, it was 58% among core users, even lower in the high end. That, Hunter says, made the boss "go ballistic." Today, Hunter's measurements show satisfaction among high-end customers at more than 80% and among core consumers at 74%—numbers that he says must further improve."I think what the Web has brought is the voice of that 25%," Hunter says.

Customer Collaboration

But the opportunities created by the conversation go far beyond dousing fires. The cant among executives trying to play the Web 2.0 game is that the customer is in charge. Well, if you really mean that, if you cede control to your customers, they can add tremendous value. Dell's customers not only make product suggestions and warn of problems, they help fellow customers fix them. Today, customers share their knowledge in so many ways that Dell's team says the challenge is to manage that knowledge and spread it.

To enable collaboration, the company is starting wikis that users can edit together. To encourage interaction, Dell plans to experiment with loyalty programs, rewarding good customers with gifts, opportunities to meet Michael, service upgrades, and possibly discounts. I ask whether they'd compensate helpful users, creating a marketplace of advice.

But Manish Mehta, head of e-commerce, is uncomfortable with payment, fearing it might compromise the credibility of these customers in their communities. And credible advocates are at the heart of the strategy Dell's new chief marketing officer, Mark Jarvis, is devising. "By listening to our customers," he says, "that is actually the most perfect form of marketing you could have."

I contend that this marks a fundamental shift in the relationship of customers with companies. Dell and its customers are collaborating on new forms of content and marketing, but note that they are doing this without the help of media and marketing companies.

Michael Dell predicts that customer relationships will "continue to be more intimate." He even speaks of "co-creation of products and services," a radical notion from a giant manufacturer. "I'm sure there's a lot of things that I can't even imagine, but our customers can imagine," Dell says, still sounding very bloggish. "A company this size is not going to be about a couple of people coming up with ideas. It's going to be about millions of people and harnessing the power of those ideas." Once you can hear them.

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