BRAND MANAGEMENT Case No. 1 INTEL: BUILDING a TECHNOLOGY
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BRAND MANAGEMENT Case No. 1 INTEL: BUILDING A TECHNOLOGY BRAND INTRODUCTION Intel’s corporate branding strategy, which many credit for the company’s unparalleled success in the microprocessor industry during the 1990s, stemmed from a court decision. On March 1, 1991, District Judge William Ingram ruled that the “386” designation used by Intel for its microprocessor family was a generic description and could not be trademarked. Intel had been confident that the judge would rule in its favor, and the unexpected court decision effectively invalidated Intel’s current branding strategy. This decision allowed competitors to use Intel’s established naming scheme, which would have been disastrous. Intel’s response was to develop a trademark name for its processor family, the now- familiar “Pentium,” and launch a corporate branding campaign designed to make Intel the first name in processors. Both moves proved to be enormously successful. Intel became one of the leading companies in the PC boom, enjoying virtually unchallenged market leadership through the 1990s. Problems arose, however, as the PC industry slowed down in the early 2000s. Intel faced a future where the PC which represented the core of the company’s microprocessor business, was no longer the essential tool for the Information Age. Wireless telecommunications devices were becoming increasingly popular, and they required different types of processors. The company had spent over three decades building the most recognizable brand in the PC microprocessor industry. Intel’s challenge in the new century was to extend into innovative categories while maintaining the equity in the brand and its microprocessor leadership position. In response to this challenge, the 2006 Intel retooled its brand identity, restructured its brand architecture, and launched an entirely new branding campaign called “Intel. Leap Ahead.” COMPANY BACKGROUND Intel Corporation was founded in 1968 by Robert Noyce and Gordon Moore. Soon thereafter, Andy Grove joined the firm and later became President and Chief Executive Officer. Intel’s initial focus was the integration of large numbers of transistors into silicon chips to make semiconductor computer memory. In 1978, Intel introduced the 16-bit 8086 processor followed by the 8088, the 8-bit bus version of the 8086 in 1979. These microprocessors were the first of the Intel “x86” line of microprocessors. At the time, Intel faced competition from a number of companies, the most serious being Motorola with its 68000 microprocessor. In response, Intel launched a campaign to make the 8086/8088 architecture the standard in the emerging microprocessor market. A critical milestone was IBM’s selection in 1980 of the 8088 as the exclusive microprocessor architecture for its first personal computer. The success of the IBM PC placed Intel at the center of the personal computer revolution and established Intel’s x86 microprocessor architecture as the de factor industry standard. Intel continued to produce chips with improved performance over the next decade. Intel introduced the Intel 386 SX microprocessors, which became the backbone of IBM’s and other manufacturers’ growing PC lines and positioned Intel for its explosive growth over the next five years. In April 1989, the company introduced the next generation microprocessor, the Intel 486 processor. In 1990, Intel sold approximately 7.5 million 386 and 486 microprocessors. Intel’s 1990 revenue from 386 microprocessor sales alone was estimated at be $850 million. As of 1990, Intel had $3.9 billion in sales, representing a 360 percent growth in 10 years, and $650 million in earnings, representing a 570 percent growth in 10 years. Intel microprocessors were found in almost 80 percent of all IBM and IBM compatible machines. The company, one of the largest semiconductor manufacturers in the world, was recognized as the undisputed industry leader. THE MICROPROCESSOR INDUSTRY IN THE EARLY 1990s Since 1986, Intel had been the only supplier of 386 and 486 technology. A number of competitors, however, had announced intentions to market their own versions of Intel’s 386 and 486 microprocessors in the latter half of 1990. The most serious threat came from Advanced Micro Devices (AMD), who in October 1990 announced its own version of Intel’s then hottest product, the i386 SX, called the AM386. In January 1991, two small semiconductors firms, Chips and Technologies and NexGen Microsystems, announced their intentions to introduce 386-compatible chips within the year. Many competitors claimed that their 386 microprocessors would rival certain configurations of Intel’s i486 chip. Whatever their true technological capabilities, Intel knew these chips could be named “386” or “486” and that it could do nothing to prevent such naming. Intel’s Branding Issues In the late 1980’s, there was a significant shift in the general focus of the personal computer industry toward the mass-market, non-technical business, and home PC users. Recognizing this shift, Intel moved from a “push” strategy to more of a “pull” strategy and began to redirect a portion of its advertising efforts away from computer manufacturers to actual computer buyers. Until this time, the consumer’s choice of a personal computer was based almost exclusively on the manufacturer’s brand image, such as Compaq, Dell, or IBM. Consumers did not think about the components inside the computer. By shifting its advertising focus to the consumer, Intel hoped to create brand awareness for Intel and its microprocessors, as well as build brand preference for the microprocessor inside the PC. Intel still considered the Management Information Services (MIS) community to be its primary buyer, but also recognized the growing importance of the retail or “Circuit City” buyer, as a significant market segment and wanted a message that spoke directly to them. As the market and technology leader, Intel was always first to introduce a new generation of products and establish the name and value of the new technology to consumers. With competing products, carrying the same or similar names, however, it became increasingly difficult for Intel to differentiate its products from those of its competitors. As a result, consumers were confused about who made a particular generation of microprocessor and what level of performance to expect. Consumers were confronted with a product “alphabet soup” that made establishing a point of differentiation and a distinct brand identity for Intel products increasingly difficult. In June 1989, the company experimented with its first print campaign targeted to the consumer. The $5 million campaign promoted Intel microprocessors through its numbers - the 286 and 386. The initial ad was an oblique but attention-getting print ad and outdoor billboard that mimicked graffiti by spray painting over “286” and inserting “386 SX.” The tag line read, “Now get 386 system performance at a 286 system performance price.” Within months, buyers began asking for personal computers with the Intel 386 SX chip. In 1991, the 80386 SX became Intel’s best-selling chip ever, shipping approximately 8 million units. Intel’s graffiti ad campaign successfully had introduced the microprocessor to consumers, and market research indicated that an increasing number of consumers identified with 386 and 486 microprocessor technology. EVOLUTION OF INTEL’S BRANDING STRATEGY During the fall of 1990 and winter of 1991, Intel was involved in a trademark case with AMD to prevent their use of the “386” name in a new AMD microprocessor. A negative verdict would mean that in the future any competitor could market its products under the same marks used by Intel. It would also mean that any computer maker could call a machine “386” without regard to the manufacturer who supplied the chip. Concerned about the possible negative verdict and feeling a general need to clarify strategy, Dennis Carter, vice president of Intel’s Corporate Marketing Group, began developing an alternative branding strategy, although he planned to wait until the court’s ruling to decide whether or not to implement it. In March 1991, Intel did lose the “386” trademark case. It was now clear to Carter that Intel needed to change its branding strategy and knowing that AMD would begin selling its own version of the 386 microprocessor within the month, created a sense of urgency. Within a few days Carter proposed a new processor branding strategy to Intel’s executive office. The strategy recognized Intel’s status as an ingredient supplier to PC Original Equipment Manufacturers (OEMs) and consisted of three elements, combining both push and pull communication strategies: 1) the use of a logo based around the words “Intel Inside” to represent Intel processors used in PCs; 2) the use of coop marketing funds to share PC OEM advertising expenses; and 3) an Intel advertising program to build equity. The strategy was accepted and Carter immediately established a task force whose sole mission was to implement this new branding strategy. The task force’s first action was to raise awareness of the Intel brand name. They launched a new ad using the “Intel: The Computer Inside” slogan. This ad asked the reader, “Quick, do you know the first name in microprocessors?” showing a blank line in front of the numbers 486, 386 and 386 SX. Turning the page, the blanks were filled in with the word “Intel.” At the bottom of the ad was the Intel corporate logo with the slogan, “The Computer Inside” below it. The ad copy sought to assure the reader that purchasing a personal computer with an Intel microprocessor inside was a safe and technologically sound investment, providing “the power and compatibility to take you into the future.” The task force established a new branding system within a month of the court decision. The primary focus of the new strategy was the establishment of Intel as a brand, transferring the equity of “386” and “486” microprocessors to Intel, the company.