Wintel Not Inside Please

The 'Wintel-twosome', Intel and Microsoft's Windows, are in trouble. In mid-1991, Intel launched its two-year, 8100 million 'Intel Inside' advertising campaign to sell personal computer buyers on the virtues of its microprocessors, the tiny chips that serve as the brains of microcomputers. In 1994 that was followed by an $80 million campaign to persuade consumers and businesses to buy PCs based on its latest Pentium microprocessor. So what, you say? Lots of companies run big consumer ad campaigns. However, although such a campaign might be business as usual for companies like Nestle, Shell and Unilever that market products directly to final consumers, it is anything but usual for Intel.

Computer buyers can't purchase a microprocessor chip directly - in fact, most will never even see one. Demand for microprocessors is derived demand -- it ultimately comes from demand for products that conrain microprocessors. Consumers simply buy the computer and take whatever brand of chip the computer manufacturer chose to include as a component. Traditionally, chip companies like Intel market only to the manufacturers that buy chips directly. In contrast, the innovative 'Intel Inside' campaign appeals directly to computer buyers - its customers' customers. If Intel can create brand preference among buyers for its chips, this in turn will make Intel chips more attractive to computer manufacturers. According to Industry observers: 'Intel is treating the (PC) industry merely as a distribution arm, seeing the PC user as its ultimate consumer,'

Intel invented the first microprocessor in 1971 and for 20 years has held a near-monopoly, dominating the chip market for desktop computers. Its sales and profits have soared accordingly. In the decade since IBM introduced its first PCs based on Intel's 8088 microprocessor, Intel sales have jumped fivefold to more than $5 billion and its earnings have grown ever) faster. Its popular 286, 386, 486 and Pentium chips power

Marketing Highlight 7.1

most of the microcomputers in use today.

However, a rush of imitators — Advanced Micro Devices (AMD), Chips & Technologies, Cyrix and others • - have begun to crack Intel's monopoly, marketing new and improved clones of Intel chips, Intel has responded fiercely to the eloners, slashing prices, spending heavily to develop new products and advertising to differentiate its products. It has cut prices on its new processors faster than for any new chip in its history. Moreover, Intel invested hugely in R & D to get new products to die market more quickly. The Pentium II microprocessor is a veritable one-chip mainframe. The Pentium contains 3 million transistors and will process 100 million instructions per second (MIPS), as compared to only 0.5 million transistors and five MIPS for the 386 chip. New software ensures tb.'it compxiter users need 'Pentium power'. Standard Microsoft Windows 95 and Office 98 are increasingly sluggish without Pentium-like processors, so users are often forced to trade up.

Still, the clone makers are likely to continue nipping at Intel's heels, and advertising provides another means by which Intel can differentiate its 'originals' from competitors' imitations. The 'Inrcl Inside' campaign advances on two fronts. First, in its brand-awareness ads, Intel attempts to convince microcomputer buyers that Intel microprocessors really are better. The ads carry the message 'It's amazing what you can do with a Pentium processor'. After spending little on advertising for many years, other hi-tech firms are now spending a small fortune on building brands.

It remains to be seen whether the 'Intel Inside' campaign can convince buyers to care about what chip comes in their computers. But as long as microprocessors remain anonymous little lumps hidden inside a user's computer, Intel remains at the mercy of the clone makers. In contrast, if Intel can convince buyers that its chips are superior, it will achieve even more power in the market.

The reaction of IBM and Compaq, the leading PC supplier in the United States and Europe, sug

LEAS

buying to hay airline which such a gests that Intel may be being-too successful. For years Intel and Compaq collaborated in bringing Intel microprocessor-based PCs to markets, but the two firms are hardly on speaking terms now, Eckhard Pfeffer, Compaq president and chief executive, has accused Intel of undermining Compaq's marketing effort. 'What upsets us generally is that a component supplier should try to influence the end user. The end user market is not their business. They are interfering,' says Andreas Earth, head of Compaq's European operations. Not surprisingly, Compaq's latest PCs for the consumer market will have an AMD microprocessor inside.

IBM is also annoyed about the rapid obsolescence of the Intel products it buys. 'Customers are telling us to slow down the pace of technology,' says IBM's Chairman, Lou Gerstner. 'How powerful a computer do you really need on a desk?' To challenge Intel's dominance, IBM is linking with Nexgen and Cyrix to give credibility to its clones.

The world is also turning against Bill Gates' Microsoft, the other half of the increasingly hated 'Wintel twosome'. In the USA and Europe the firm's anti-competitive behaviour is under scrutiny, particularly Microsoft's bundling of its Web browser with its dominant Windows operating system.

Will Intel and Microsoft successfully assure their dominance of the microprocessor and software markets, or have they forgotten the golden rule: the customer is always right? Will their dominance melt like that of the earlier hi-tech darling: IBM?

SOURCES: Quotes from Kate Bertram!, 'Advertising a chip you'll never see', HuKiness Marketing (February 1992), p. 19; and Richard Brandt, 'Intel: way out in front, hut the footsteps arc getting larger', Business Week (29 April 1991), pp. 88-9. See also Robert D. I lot', "Inside Intel', Justness Week (1 June 1992), pp. 86-94; Bertrand, 'Chip wars'. Business Marketing (February 1992), pp. 16-18; Alan Deutsohman,'If they're gaining on you, innovate'. Fortune (2 November 1992), pp. 56-61; Richard Brandt, 'Intel: what a tease - and what a strategy1, Business Week (22 February 1993), p. 40; Louise Kehoe and Alan Cane, 'Chips down for PC partner', Ffiioncfcrf 'limes (20 September 1994), p. 21; Louise Kehoe and (JeoffWheelwright, 'Breaking windows', Firutnmal Times (4 October 1">94), p. 16; "High-tech brands: so.ip powder, with added logic'. The Kctinamist (6 December 1997); "Beleaguered Microsoft: why Bill Gates should worry', The Economist (20 December 1997); 'Persecuting BUI', The Economist (20 December 1997); Louise Kehoe, 'Hard ease for software', Financial Times (22 January 19S8), p. 27.

goods directly from Procter & Gamble, and universities buy mainframe computers directly from IBM. Bull and so on.

RECIPROCITY. Business buyers often practise reciprocity, selecting suppliers that also buy from them. For example, a paper company might buy needed chemicals from a chemical company that in turn buys the company's paper.

Shaken by European Airbus's success in the airliner market, market leader Boeing has started a worldwide review of its purchasing policies. They intend to mateh aircraft parts contracts to countries that buy Boeings. With an apparent eye on the Canadian government's purchase of search-and-rescue helicopters and Canadian Airlines InternationaS's 737 replacements, Boeing warned: '<>ur Canadian business placement must understandably be market based, as it is elsewhere,17

LEASING. Business buyers are increasingly leasing equipment instead of buying it outright. Everything from printing presses to power plants, business jets to hay balers, and office copiers to off-shore drilling rigs. The biggest buyer of airliners in the world is not a large airline but GPA, a company based in Ireland which buys airliners to resell or lease. The lessee can gain a number of advantages, such as having more available capital, getting the seller's latest products, receiving

Figure 7.2

A model of business buyer behaviour better servicing and gaining some tax advantages. The lessor often ends up with a larger net income and the chance to sell to customers that might not have heen ahle to afford outright purchase.

A Model of Business Buyer Behaviour

At the most basic level, marketers want to know how business buyers will respond to various marketing stimuli. Figure 7,2 shows a model of business buyer behaviour. In tills model, marketing and other stimuli affect the buying organization and produce certain buyer responses. As with consumer buying, the marketing stimuli for business buying consist of the four Ps: product, price, place arid promotion. Other stimuli include influential forces in the environment: economic, technological, political, eultural and competitive. These stimuli enter the organization and arc turned into buyer responses: product or service choice; supplier choice; order quantities; and delivery, service and payment terms. In order to design good marketing-mix strategics, the marketer must understand what happens within the organization to turn stimuli into purchase responses.

Within the organization, buying activity consists of two main parts: the buying centre, made up of all the people involved in the buying decision, and the buying decision process. Figure 7.2 shows that the buying centre and the buying decision process are influenced by internal organizational, interpersonal and individual factors as well as bv external environmental factors.

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