Unsterilizing the silicon: PC marketers have commoditized their business

Brandweek, Jan 12, 1998 by Tobi Elkin

PC marketers have commoditized their business. Now they must create brands that mean something more to consumers than just a machine.

For personal computer marketers and retailers, the dust has all but settled on yet another holiday sales frenzy and, with it, another round of rebates, discounts, value-added hardware and software bundles, financing offers and retailer-specific programs. 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 commoditized 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 garner more than 30% 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 their customers and keep them coming back. The PC, after all, can enjoy many an upgraded life, and industry watchers warn that computer companies must do more to create more meaningful, longer-term relationships with consumers, rather than focusing so heavily on fuss-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," said 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-the-sale support from vendors. Discounts or not, the PC purchase is still a big-ticket one, and not weighed lightly by most consumers. Existing users and repeat purchasers may require less hand-holding, hut this new, broader-based generation of PC users is looking for something more, something extra, from the PC brand that's chosen. As in another major "considered purchase" category, automobiles, 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 recognized this and embarked last fall 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 No. 3 spot at retail, consumers still view HP as a gargantuan technology company that has little relevance to, or comprehension of how, they live and hack. HP's new marketing theme, "Expanding Possibilities," though, is intended 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 at Home newsletter and Web site, and offers one-touch Internet access via an "Internet" button on Pavilion models.

An even more enhanced interface being developed by the company is Photo.HP, 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 Photo.HP 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," said Chris Pedersen, worldwide consumer brand manager for HP Pavilion PCs.

Some industry watchers insist that to build brand loyalty in today's commodity market, PC companies must return to their core values. And 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, N.Y., 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," said 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 imagery and strong 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, garnered the greatest intent-to-buy numbers. The survey found about 47% 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 56K modem, for $2,199.