Intel Inside: The Co-op Proqrarn That Changed the Computer Industry

ADVERTISING AND PROMOTION (MKT 621)

Assignment No. 4

Marks: 10Read the following case study and answer the questions given at the end.

Intel Inside: The Co-op Program That Changed the Computer IndustryIf you were to ask most owners of personal computers what is inside their PCs, chances are they would respond by saying, an Intel. And theres a good reason why. Over the past decade consumers have been exposed to hundreds of millions of dollars worth of ads for personal computers each year that carry the Intel Inside logo. The logo has become ubiquitous in PC ads as a result of a landmark cooperative advertising program that is lauded as the most powerful ever and the definitive model for successful ingredient branding.

In 1989 Intel was the first computer chip manufacturer to advertise directly to consumers. Its goal was to persuade PC users to upgrade to Intels 386 SX chip from the 286. Known as the Red X campaign, the ads depicted the number 286 with a bold, spray-painted x over it. Dennis Carter, Intels vice president and director of strategic marketing and the architect of the Intel Inside campaign, was a marketing manager at the time and was working with a tech ad shop on Intels print, outdoor, radio, and in-store ads. He noticed that the ads were changing peoples buying behavior and that the company had a model of something that was working as Intel could communicate technical information in a basic way.

In 1990 Intel selected a new agency, Dahlin Smith White, Salt Lake City, which created the now-famous tagline Intel. The Computer Inside. The goal of the campaign was to build awareness and position Intel as the real brains of the computer. In early 1991 Intel began pitching the program to PC makers, and IBM, creator of the first Intel-powered personal computer became the first computer maker to use the logo. Intel then began talking to PC makers about the creation of a co-op fund in which Intel would take 5 percent of the purchase price of processors and put it in a pool to create funds for advertising.

The Intel Inside co-op program was officially launched in July 1991 and works as follows: In return for showing the logo in print ads and on the PCs, a computer maker can get back 5 percent of what it pays Intel for chips, with the money to be applied to ads paid for jointly by the PC vendor and Intel. More than 150 computer makers signed on to the program and began using the Intel Inside logo in their ads.

As the program began, Intel started playing up the logo in its own print ads as well. In November 1991 it moved the campaign to television with the classic Power Source spot, which magically took viewers on a whirlwind tour of the inside of a computer to show how the Intel chip streamlined upgrading of a PC. In 1993 Intel introduced the Pentium processor brand with a national TV campaign. However, the company was putting the bulk of its advertising budget into the Intel Inside co-op program. In 1995 Intel expanded the co-op program to include TV, radio, and in-flight ads. The move led to a boom in PC ads on television featuring the Intel auditory signature at the end of each commercial. In 1997 Intel expanded the co-op program to include Internet ads and provided incentives to PC makers to place ads on media-rich websites Intel has also extended the co-op program into retail promotions as well.

Since the co-op program began, Intel has pumped into it an estimated $4 billion, and this has been an awfully smart investment Intels share of the microprocessor market has grown from 56 percent in 1989 to nearly 83 percent in 1999, and the companys revenue has gone from $3 billion to nearly $30 billion. Nearly 90 percent of the more than 17,000 PC print ads run in the United States for the first nine months of 1999 carried the Intel Inside logo. The program has influenced a generation of PC users and propelled growth of the entire computer industry.

According to positioning expert Al Ries, Intel Inside will go down in history as one of the more magnificent campaigns of the century. He notes, Its brilliant and, in a sense, it pre-empted the branding of personal computers. Branding guru Jack Trout notes, They took an old idea _ ingredient branding._ which Du Pont pioneered, and took it into technology. Trout was an early believer in the program; he told Advertising Age in a 1991 interview that conceptually it was a good idea, although Intel would need consistent advertising over time for the logo to have much meaning.

In its early stages the program encountered criticism, as many advertising and computer marketing executives were skeptical about Intels ability to differentiate its chips. The head of one agency noted: Most people who buy computers dont even know that chip is there. They care about the performance of the computer. It really doesnt matter what the chip is. Well, they may not know exactly what a microprocessor chip does, but apparently it does matter if there is an Intel Inside.

Q 1. Why do you think the Intel Inside cooperative advertising program has been so successful? Give reasons.Q 2. Write down the example of any other company that might be in a situation to benefit from this type of cooperative advertising program and justify your answer.