Marketing man's next best friend

The US is seeing a new marketing trend for the PC market - one which, if indications are correct, may soon be seen on this side of the Atlantic.

For PC marketers and retailers, the dust has all but settled on yeth, if indications are correct, may soon be seen on this side of the Atlantic. another Christmas sales frenzy and, with it, another round of rebates, discounts, value-added hardware and software bundles, financing offers and retailer-specific programmes. So much for December sales promotion. Now, computer 'marketers' can go back to trying to figure out the meaning of a brand in this increasingly commoditised category.

Nurturing consumer loyalty has taken on a new urgency in the PC business, due in part to explosive growth in the sub-$1,000 segment, which analysts projected would account for more than 30 per cent of all system sales in the last quarter. Still, the influx of users, many of whom are first-timers, creates a new dynamic for computer marketers, namely, how to serve customers and keep them coming back.

The PC, after all, can enjoy a constantly upgraded life and industry watchers warn that computer companies must do more to create meaningful, longer term relationships with consumers, rather than focusing so heavily on first-time buyers. Creating a stable, meaningful identity in PC users' minds has become an increasingly complicated proposition since most PCs offer the same benefits, no different than any other packaged good, or for that matter, commodity.

'In some ways it's not going to be unlike selling soap,' says Ed Rice, senior executive director at Landor Associates, San Francisco, a corporate identity/image consulting firm. 'The sheer brilliance of the technology isn't going to be enough.'

Lower PC pricing has meant an influx of new users into the market - users who require and expect consistent after-sale support from vendors. Discounts or not, the PC purchase is still a costly business, and it is not taken lightly by most consumers.

Existing users and repeat purchasers may require less hand-holding, but this new, broader- based generation of PC users is looking for something more from the PC brand chosen. As in another major 'considered purchase' category, cars, marketers are increasingly hearing consumer demands for something beyond the product - a package of benefits, perks or, to borrow directly from automotive marketing handbooks, an 'ownership experience'.

Hewlett Packard, for one, has recognised this and embarked last autumn on a new, and still evolving, uni-brand strategy across its 17 consumer divisions. While HP, with its Pavilion PCs, DeskJet printers and digital imaging products, has risen to the number three spot in retail, consumers still view HP as a gargantuan technology company that has little relevance to, or comprehension of how, they live and work.

HP's new marketing theme, Expanding Possibilities, is designed to communicate the company's commitment to more ongoing relationships with its customers.

The company now encourages buyers to stay tuned to the brand they've chosen via an HP newsletter and Website, and offers one-touch internet access via an internet button on Pavilion models.

An even more enhanced interface being developed by the company is PhotoHP, an internet photography service expected to debut in early spring, which will offer consumers a way to post, share and store photographs via the Web and HP. The PhotoHP initiative, which has yet to get an official name, harnesses HP's strength in digital imaging and leverages the personal access point offered by the internet, both of which help HP build 'customer intimacy', says Chris Pedersen, worldwide consumer brand manager for HP Pavilion PC.

Some industry watchers insist that to build brand loyalty in today's commodity market, PC companies must return to their core values. Then, some contend, those values need to be drawn up and established for the first time, at least for the category's increasingly mainstream audience.

In the view of Martyn Straw, president of marketing consultancy Interbrand, New York, no PC marketer has really tried to brand itself, not even category leader Compaq. 'You can't argue with Compaq's business success, but it's not yet a branding success,' says Straw, whose company has worked for such tech players as IBM, Apple and Compaq. 'PC marketers have to go back to basics to create strong brand and user imagery. The consumer is perfectly ok with the notion that product differences aren't that great, so you must create value in the user imagery.'

There appears to be great opportunity to create a brand franchise in the category. According to an IDC/Link ACNielsen Homescan Tracker survey, the two oldest, best established brands, IBM and Apple, cornered the greatest intent-to-buy numbers. The survey found that about 47 per cent of existing PC owners remain undecided about which brand to buy when confronted with relatively similar offerings, say, three different Pentium II PCs, each offering 233 MHz clock speed, 32Mb of Ram, a 2.1 Gb hard drive and 56Kbps modem, for $2,199.

'The notion people have that computers are mostly the same keeps brand loyalty down, and the way they're based on price and feature per buck has de-emphasised branding and brand loyalty,' says Kevin Hause, senior analyst at IDC, Mountainview, California.

The IDC/Link survey, which tracked PC brand loyalty and purchase intentions in US households from last July through December, put IBM at the top of the list of brands expected to be purchased, with 10.8 per cent of buyers saying they were most likely to buy an IBM Aptiva.

Surprisingly, beleaguered Apple came in second with eight per cent, followed by direct marketer Gateway 2000, then Compaq and Packard Bell. After the top five came Dell, HP, Acer, Toshiba (which has since exited the consumer PC business), AST (which has all but withdrawn its consumer SKUs), Micron, NEC and Sony.

But the study also found that Gateway owners were the most brand-loyal - 77 per cent of those owners who actually bought a PC during the holiday purchase pe-riod, November 1996 through to February 1997, bought a Gateway product again. And for the second half of 1997, nearly 53 per cent of Gateway owners planned to call in for more of the same at the peak '97 holiday sales period.

'Gateway has the best brand loyalty now because they're creating a community around the brand that people want to associate themselves with,' says Hause.

Gateway's iconic, cow-spotted boxes, family-friendly attitude and consistent, down-to-earth communications help it stand out from the herd. The company has built a brand personality that has established relevance to even the computer illiterate. It's not just daft ads either - Gateway backs its techno-friendly message with price, delivery and service.

'Price and brand are by no means exclusive,' says Straw. 'Gateway has done a great job. All of their prices are competitive, and they're viewed as a high-value, trusted brand, not a low-priced brand.'

That Gateway sense of community is evoked in everything from the company's advertising and Website, to the relationships it builds over customer service lines and in its country store showrooms, which offer a unique, folksy retail interface. As a direct marketer, Gateway has a distinct advantage, gaining valuable information from ongoing customer conversations.

And Gateway hopes to make the connection between everyday people and its technology even stronger in an upcoming spring campaign.

'We're going to talk about the people of Gateway and how they do what they do,' says Jim Taylor, senior VP of sales and marketing at Gateway.

'We'll establish a very simple link that makes this purchase. We call our brand positioning silicon prairie because we think it fuses a bond between the sterility and ahuman components of technology and the need of people to still have warmth and passion and emotional content in their life. And their perception that when they get on this train they'll go to a new world. People want a wagon master, someone to help them get there - we want to be there to help them make those changes.'

HP and Compaq have less direct contact with consumers and may often only hear of customer complaints through an 800-line switchboard. Last autumn, both PC giants avoided speeds-and-feeds advertising, to produce softer, lifestyle-oriented themes, but for all the gloss, critics still say the advertising remains product, rather than relationship-driven.

'Compaq is trying to hit a chord deep in our psyche - it's aspirational advertising, but it's a rehash,' says Richard Zwetchkenbaum, an industry analyst based in Marlborough, Massachusetts. 'What does it really say about the company?'

'We have a clear iconic message baked into our product that has to do with the safety of computing and the possibility of it leading to a better life,' says Taylor. 'I don't know what Compaq is trying to bake into their product. That computing is a good idea, great. What is the value that it stands for? What is the human feeling?'

One criticism of most of the PC advertising today is the same one directed at the car business - that it is too coldly product-focused and does not talk to customers about what they need to know to make a confident decision with their thousands of discretionary dollars.

'At the end of the day, every computer brand is competing against all the other great brands - The Gap, Starbucks, Saturn, Nike,' says Straw.

'That's a kind of mass intimacy. But if you look at strong brands, there's a feeling of real closeness. That kind of intimacy is a real challenge, and the branding for most PC companies out there hasn't reached that sense of closeness or warmth that other successful brands have.'

Ironically, the ailing Apple computer has had the most powerful brand legacy of all, the glory of which it is attempting to regain with its Think Different campaign. Critics insist the campaign merely serves to buttress existing loyalties and impels long-time Mac evangelists to peddle the faith more actively.

Still, no ad airs in a vacuum. Concurrent with the campaign, Apple has embarked upon a programme to build on the strengths of its core user base, consisting of a series of relationship-building initiatives with the publishing/graphic arts and education markets. Its Power of 10 programme with schools offers 10 per cent of the purchase price of a Mac to a school in the purchaser's area.

The school accrues financial credit toward the purchase of its next Apple products. There's also the Apple Club, a Web-based group that users can belong to for a small fee. The club offers special mailings, deals and the Apple online store, where consumers can custom build and order a product off the Web. Apple plans to revitalise the Apple Club this spring in order to lure new customers with a variety of yet-to-be-determined retail and Web-based initiatives.

If truly breakthrough branding ideas are few and far between in the business, there are working models for successful relationship marketing. The industry has seen a wave of improvements in technical support, enhanced Websites, newsletters and built-in software guides, not to mention closer attention to the initial experience undergone by consumers as they unpack their new PCs and set them up.

Packard Bell NEC, which markets two lines of consumer desktop PCs popular with first-time buyers, has poured $100 million over the past 16 months into beefing up technical support. The company claims that hold times are now down to less than two minutes, compared to twenty minutes previously.

And its Cyber Trio software, built into the computer's systems, is designed to create a more user-friendly startup process, enabling people at all levels to set up a comfortable computing environment.

Acer, meanwhile, has designed InternetACE, an intuitive internet browsing aid for first-time PC consumers, into its spring Aspire line, which begins shipping this month.

Sony, a relative newcomer to PC marketing but an old hand at deciphering consumers' needs, is expected to develop products which tap into its consumer electronics and brand awareness.

Sony unveiled Club VIAO last autumn, a free Web-based programme for VIAO PC owners. The club positions VIAO as a fun creativity tool, offering tutorials on personal Web page design and tips on creating cards and other projects. There are links from the club site to tech support and message boards for members to communicate with one another.

Sony will add daily entertainment and industry news this spring and is working to develop an interactive email system to communicate with members.

'Our objective is to position Club VIAO as the gateway to the internet experience,' says Marty Ohno, marketing manager for Club VIAO.

IBM will extend its ambitious owner privileges programme from new customers to existing Aptiva owners and ThinkPad notebook PC owners this spring.

The Web-based programme was launched last autumn, targeting new users with a variety of discounts on software, accessories and other services in conjunction with six retail partners.

Besides discounts, members also get free software downloads, preferential treatment via tech support, and how-to guides and tips on getting the most from their Aptiva.

Such relationship marketing efforts, designed to lure new users, are in their infancy. But the potential that comes from leveraging existing customers cannot be underestimated. Personal computers are, after all, personal.

The way that each person uses his or her PC, especially to access the internet and online services, has become as personal an experience as an athlete has choosing trainers or someone choosing what kind of car they want to be seen in. The problem with customer intimacy programs, though, according to Zwetchkenbaum, is that many companies aren't yet willing to pay for them. 'Relationship marketing is seen as a cost, instead of extending value,' he says. 'But creating a lifetime relationship to produce an ongoing revenue stream increases satisfaction.'

Creating more dialogue and thus, hopefully, loyalty among consumers is seen as a must for computer marketers to wean themselves from holiday-centric revenue cycles.

While promotional pricing remains essential to driving retail sales, PC marketers need to find ways to do business on a more even keel across the calendar, luring consumers back not just with sales on PCs, but for software, accessories, peripherals, or consumables like inkjet cartridges and special papers for printers.

Keeping their proliferating retailers squarely in mind, computer marketers need to rethink more than ever just how big a part they can play in consumers' lives and how to communicate that on a more ongoing and relevant basis.

'If you assume the focus shifts from the market share of the consumer market to market share of consumer disposable income, the fact that you are selling a $2,000 PC versus a $999 PC may not make much difference,' says Scott Miller, an analyst at Dataquest, San Jose, California.

'The lifetime value of the customer is more important now,' says Henry Chiarelli, senior VP of marketing and merchandising at Computer City.

When Microsoft chairman Bill Gates posted his love note to the PC at last year's Comdex, he didn't mention the role that a brand can play in getting consumers to love their PCs.

But that is hardly surprising if one considers the virtual monopoly that Gates has created. Does Microsoft need brand equity to survive, or is ubiquity enough?

For the companies in the trenches, each with access to virtually the same technology and brain reserves, achieving a bond with customers will almost surely come from figuring out how best to relate the consumer need and desire to use their PC as the most versatile tool in their lives.

It's a tall order in a volatile, shifting landscape of razor-thin margins and swiftly changing technology. But the nature of branding is to transcend those forces.

'You want the brand to become a resource for the community, for everyone, in order to draw people into the brand,' says Dataquest analyst Miller.

'It's no longer just about computing,' says Taylor. 'It's about communicating.'

This article was originally featured in US magazine Brandweek.