The Nuttiness of Subtractive Marketing

IBM's second, more serious sin was committing the unholy practice of subtractive marketing. Subtractive marketing works by taking a successful product and subtracting key capabilities and features until the product is clearly different from, and inferior to, the original. The sub-tractive marketer then attempts to pawn off her second-class creation by advertising it as a "value" or a "money saver." It never seems to work. People will, if they have the choice, always refuse to buy something that brands them as not being able to afford anything better. Even people who are thrifty like to go in style; they just don't like paying for it.

Examples of subtractive marketing abound both inside and outside the high-technology market. In the auto industry, a classic example is the Ford Falcon. The brainchild of "whiz kid" Robert McNamara, the Falcon was designed from the get-go as a "people's car." In other words, it couldn't go very fast, it got good gas mileage, and it was economical to run. Extolling these virtues was the car's deliberately plug-ugly design, one that proclaimed the vehicle was in the service of the lumpen proletariat, those who only drive and serve. The lumpen proletariat didn't appreciate the sentiments the Falcon reflected, and although people who couldn't afford anything more bought the Falcon, they drove the car without joy and bought few of the optional accessories that made selling the car profitable.

On the other hand, the Ford Mustang when it was released in 1964 was a phenomenon, and Ford couldn't make enough of them to meet demand. Mustangs were fun, sexy, and desirable. Mustang owners were intelligent and cool people with a great sense of value, the type of folks you wished would invite you to a barbecue at their place. Of course, the Mustang also wouldn't go very fast (though it looked like it could), got good gas mileage, and was very economical to run. This is because it was, underneath its alluring sheet metal, nothing more than a reskinned Ford Falcon. But by dint of good design and the addition of key features that proclaimed the car wasn't for old farts (such as a snazzy steering wheel and bucket seats) and sporty options (such as high-profit, highperformance engines), the Mustang became a car you could aspire to whereas the Falcon was just a cheap set of wheels.

The Ford Mustang illustrates the other path IBM could have taken in the design of the PC Junior. Prototypes of other PC Juniors were built and examined before the disastrous "chopped" version was decided on—models that had faster microprocessors than the PC (one promising design incorporated the 80186,3 a hot little chip for its day), much improved graphics, a hard drive, the PC's bus, and so forth. In fact, several of these proposed designs were indeed more powerful and advanced than the IBM PC. Could any of them have been introduced without cannibalizing PC sales?

Easily, by executing a "building toward" marketing strategy. The PC Junior was intended to be a computer for the home, and games and entertainment are an integral part of that environment. To keep the PC Junior out of business, all IBM had to do was

• integrate a joystick directly into the PC Junior's keyboard,

• superglue several ROM chips containing the most addictive game titles IBM could find to the PC Junior's motherboard,

• make the addictive games immediately available to the user at the push of a key (a dedicated "Game" button on a normal keyboard would have been a nice fillip), and

• provide a "one-touch" screen blanker capability.

3 In fact, Tandy Corporation later introduced a PC based on the 80186, the 2000.

These features not only would have ensured Junior would not be bought by businesses, but you also would probably have been fired for bringing one into the office. No company would have touched a machine that permitted its employees to play games at their desktop at the touch of a button. Yet no one could have criticized IBM for building a computer that did exactly what it promised to do. And providing the PC Junior with advanced capabilities would have justified its premium pricing.

Subtractive marketing has also proved to be a particular peril for software developers because code bases are so malleable. Again and again companies have taken a popular software product, yanked out some key features (Whoops! There goes the spelling corrector!), slapped a quick coat of marketing "paint" on the skeletal remains, and voilà! A "lite" product is born. Over the years, publishers have created myriad "executive" word processors, "student" spreadsheets, "simple" databases, and so forth, all based on existing and popular products. None has ever been particularly successful.

And, in fact, several software publishers followed the PC Junior down the subtractive path, creating chopped versions of their flagship products. MicroPro, for instance, created a "Junior" version of its market-leading WordStar program.4 Tens of thousands of copies of the product ended up in the remainder sections of major retailers and in the back pages of Computer Shopper. Not having learned its lesson from WordStar Junior, MicroPro made the same mistake with a later "lite" product, Easy.

Amazingly enough, IBM's experience with the PC Junior seemed to teach the company little. With the exception of the IBM AT in 1984, which would be its last unqualified success in the desktop market, IBM continued to release a steady stream of computing clunkers, including the IBM Convertible and the IBM Portable, that missed the mark. IBM's funniest flop was a little-remembered debacle called the XT/286. This was an attempt to shoehorn an AT into an XT case. The XT/286 sported a cacheless microprocessor setup (cache is memory dedicated to storing programming instructions for the chip and speeds up operations), thus ensuring the system ran dog slow, and a case design that prevented

4 I spent a tedious 3 days in 1984 at a trade show in Boston demoing WordStar for the PC Junior to an audience already cognizant that the system was doomed.

buyers from inserting most AT accessory cards into the computer. The XT/286 quickly went to a well-deserved repose in the same landfills holding stacks of unsold PC Juniors and discarded chiclet keyboards.

It all culminated in the disastrous launch of the IBM PS/2 line in 1987, a marketing fiasco that demonstrated to the world that the PC standard now existed independently of IBM's control. Throughout the 1990s, IBM steadily lost ground in a market it had once owned. In 2004, almost a quarter century after the release of the first PC, IBM announced it was exiting the PC desktop market, selling out to Chinese company Lenovo, unable to compete with a company launched by a college kid in his dorm room (Michael Dell), an upstart cloner (Compaq), and a guy who talked to a cow (Gateway).

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