Thursday, April 19, 2007

Thoughts on ingredient marketing

I recently was reading an article in the LA Times about Seagate’s efforts to build brand identity as they enter the retail space. Inevitably, Intel Inside was brought up:

Seagate is trying to do what Intel Corp. did with its "Intel Inside" campaign — become a name that shoppers look for when they walk into Fry's Electronics or Best Buy stores. Today the semiconductor giant says its brand is valued at $38 billion, thanks in large part to the campaign it started in 1991.
The article goes on to quote an observer who says, "There's a lot of Intel envy."

Yes, there is. Also a lot of misunderstanding about the program and about what can be accomplished with ingredient marketing.

Intel’s website has a good history of the program, which explains a lot about why they deployed the program and what they were trying to accomplish.

A caveat about their website: It implies that the whole thing was dreamed up by Intel, which is not the way I remember it. The idea of applying ingredient marketing techniques to computer chips was presented to Intel by Medianet (now TradeOne), specifically by Rob Hand and Jay Koonce, more than a year previous to the roll-out, working from a proposal I had first made to Motorola several years previous and based on my department store experience working with fabric programs such as cotton. Rob, Jay and I reworked the Motorola proposal for Intel.

While Intel’s marketing people may not have come up with the original concept, they deserve full credit for recognizing a good idea when they saw it, and even more for building on it and enhancing it greatly.

I can’t count the number of times I’ve been asked in the past 10-15 years to design a program for somebody “just like Intel Inside”. The problem has been, generally, that their circumstances are very much different from Intel’s, most often in two important ways:

1) Money

Intel had about twenty tons of money that they threw behind the program (more about this below). Even at its outset it involved huge expenditures, and it’s probably well over a billion annually now.

I asked one of the computer components makers who told me they wanted a program “just like Intel Inside” how much they were budgeting for it. When they told me they had set aside three million dollars, I gently suggested that they consider alternative approaches.

Intel was trying to motivate companies like IBM, Compaq and H-P to do their bidding. It takes a lot of money to impress companies like that – don’t try it with a budget of three million.

Intel also backed their co-op advertising with a tremendous amount of national – especially TV. A confession: I’ve been guilty of trying to hype the importance of trade promo by pointing to Intel Inside as an example of using co-op advertising to build a brand name. While true to some extent, the effects of the national advertising were, obviously, vital as well. The big difference was that, in Intel’s case, the national advertising was in support of the co-op, rather than vice-versa.

2) Centrality of the product

When we applied the cotton example to chips, our thinking was that the chip was the defining element of the computer, just as cotton is the defining element of a garment. Styling and dyes may make a particular shirt more desirable than others, buttons may add to its utility, but without the fabric there is no shirt.

Similarly, NutraSweet has had success with ingredient marketing in conjunction with products such as Diet Coke because, while the cola would exist without it, it is NutraSweet that makes it a diet drink.

An ingredient marketing program can be a success with less-essential products, but I can’t think of any that have been anywhere near as successful. Window and appliance companies, for example, often subsidize ads by home builders who include their products, but these have minor impact, because the appliance is merely a feature – nobody is going to buy a house because of the dishwasher. The Intel Inside ads were arguing that the make of the chip should be the deciding factor in your purchase decision.

Further thoughts:
Why it should have failed (and why it didn’t)

Following up on that last sentence, in our discussions at Medianet, one of our concerns was that the program might fail because the computer manufacturers might recognize that buying into it was contrary to their own interests.

Intel Inside had the effect of commoditizing the computer industry (or, at least, speeding up tremendously a commoditization process that perhaps was inevitable). The message of the ads was that all the computers were pretty much the same – it was the chip that mattered.

I suspect that the computer company marketers were blinded by the piles of money Intel was throwing at them. In any case, none of them hesitated to cut their own throats – a lesson of sorts on the effects of greed.


RohitS said...

Great write-up. You just got a follower of your blogpost. It was indeed very helpful as we are in the same boat as Intel (though not at that scale) - trying to show that the value of the software inside a router is more important and differentiating factor.

Thijs said...

Great read, containing both factual information and a professional opinion on it. That makes it insightful. Thank you! I am now going to find out if it's still valid. Signed, a brand strategist.