Prepared By: Hari Pd. Adhikari

Question No. 1

Analyze Gateway’s decisions to change advertising agencies so many times over the past six

years. Identify and discuss specific factors that may have led to each decision to change

agencies?

ANSWER

“Sometimes, although the cost incur it’s required to change the ad agency for a lots of hidden

benefits”

Throughout the case of Gateway, there is a set of common reasons which forces the company

owner Ted Waitt change the ad agencies from the past six years. The company promotes its

product with some obvious reasons: i.e. Profit, sales volume, market share and consumer

awareness/ brand image, same had been done by Gateway in its time.

Profit Maximization: Profit maximizing with the increase in sales volume is one of the common

goal of any company. Gateway also tried to maximize its profit with either way of changing the

theme of the ad or enhance its sales. Turning its past, Gateway’s revenue took the highest peak in

2000 reaching $9.6 billion while the company’s market share was 8.2 percent, being the third top

PC maker in the U.S. behind Dell and Compaq. Gateway started running the ads showing Fox in

January 2001. Side by side, Gateway was also discussing about the future of such ads with many

agencies. After Jeff Weitzen’s resignation as CEO, Ted Waitt started to control the daily

operations of the company and he showed a net loss of $94.3 in the fourth quarter of 2000

indicating Gateway's core PC business was not profitable. After some days of Waitt’s control,

Gateway dismissed McCann-Erickson as its agency. Gateway management decided to dilute the

unusual and crude aspects of its corporate image and create an identity for the company as a

maker of sophisticated computer technology with the latest and advanced components. Then

Gateway continued using advertising developed by Siltanen/ Keehn into the fall of 2002.

However, S/K’s tenure as Gateway’s agency of record was short-lived as the company parted

ways with the agency after 10 months and moved its advertising to the Arnell Group, New York

in October 2002.

Differentiation and Brand Image: The consistent reviews in the Brand image and the

communication with customer is very important element in modern business because the

customers are becoming so tech savvy and value conscious. As competitive and highly growing

PC industry, the differentiation and brand image are very important for the competitive

advantage. However, Gateway has struggled to find an advertising theme that resonates with

consumers and clearly differentiates the company from competitors such as Hewlett Packard

(HP)/Compaq, Dell, Sony, and Apple.

In this process of differencing, Gateway changed advertising agencies five times over the past

six years and three times in a 14 month period from early 2002 to 2003. A week after dismissing

DMB&B, the new CEO announced the hiring of McCann-Erickson worldwide, one of the largest

agencies in the world. The trend of changes at Gateway continued. In April 1998, the company

dropped 2000 from its name, shortening it to Gateway as it felt that the “2000” autograph would

become dated in the new millennium. The company also introduced a new logo featuring a hand-

drawn version of its signature cow-spot box. So it is very clear that gateway try to improve its

Brand image and built strong relationship with customer through the advertising agencies that

why Gateway change its advertising agencies so many time.

Sales volume/ Market expansion: The Company’s first outside agency was Carmichael Lynch,

Minneapolis who was hired to handle its television advertising. In addition to Carmichael Lynch,

Gateway had retained the services of the London-based Finex agency to handle its European and

Japanese creative as the company’s sales in these markets were increasing. As Gateway 2000

grew rapidly and its international sales increased, the company decided it needed a global

agency. In March 1997 the company moved its estimated $70 million worldwide account to

D’Arcy Masius Benton & Bowles, a global agency that could help the company with its growing

international business.

Apart of these reasons, there are some other general causes of changing the ad agency frequently

by any companies. The reasons are:

Barrier to change agencies are low & getting lower: The Company can change the agencies

whenever and wherever they like without breaching the contract. There are no any strict barriers

to the choice of the agencies.

Abundant choice/ easy to get into: To change the ad agency is very easy because, it’s the client

(company) who can decide simply which firm to choose.

To get the best wisdom from the crowded idea economy: Idea is a great source of product

success these days. To get the best out of the alternative, the company goes for searching the

right options.

Full range of human emotion: The personal attachments, relationships, loss of trust, fear of

change, pride, poor chemistry, misunderstanding, and neglecting behaviors are also the causes of

changing the ad agencies by the companies. That’s why it is said that Companies never fire

agencies, people do. Selecting the ad agencies is a contract game which is highly influenced by

the personal pressures like: friends, associates etc.

Sometimes, the change in agencies is also made for quickly reaping a tangible return from the

new agency partners than its competitors.

Question No. 2

Discuss how Gateway’s frequent agency switching has affected the company’s branding and

positioning efforts. What recommendations would you make to Gateway management

regarding its agency switching and its impact on the company?

ANSWER

So far the Gateway is involved in changing the shift of the ad agencies from in-house to out-

house for many times, it’s all for the creation of brand image and differentiation of the product

than its competitors. Until 1993, Gateway 2000 relied solely on in-house print advertising. As

the company grew rapidly, it decided to add television ads to the media mix and simultaneously

used the out- house and in- house advertising department. The first ads from the new agency

retained the “You’ve got a friend in the business” tagline that Gateway had been using for

several years. A few months later the agency introduced a campaign theme saying Gateway goes

“From South Dakota to the rescue.” An agency executive explained the rationale behind the

campaign by noting that “South Dakota is a state of mind, a way of doing business, and dealing

with people.” However, Gateway and DMB& B got off to a rocky start as both sides grappled

with the precise roles of the agency and the in-house group and thought of how to collaborate

with each other.

The agency’s creative approach was geared more toward traditional advertising that used actors

and scripted TV spots, such as one showing a family in a computer store where piped-in music

segues into advice that the family can get what it really needs from Gateway. The company also

introduced a new logo featuring a hand-drawn version of its signature cow-spot box. Gateway

also began changing the process of transforming itself from a manufacturer of personal

computers into a company that would derive its revenue from a variety of sources.

The “beyond the box” strategy was designed to diversify Gateway’s offerings to include PC

financing, Internet access, and various other computer-related accessories and services. New

advertising from Leo Burnett broke in May 2003 using yet another new tagline, “The Comforts

of Gateway.” The goal of the new advertising is to underscore Gateway’s unsophisticated charm

while positioning the company as a solutions provider for an increasingly complex technological

world. The first commercials from Leo Burnett depicted a small town Americana’s main street

coming to life as people use their computers and other personal electronic items.

So, with all these ups and downs in the ad agencies, promotional campaigns, mixing of in-house

and out-house advertisings, the branding and positioning have been affected. To get a clear

figure of brand image, the company must be concerned more on the effective concept which can

make customers feel that the product is theirs. Sometimes, there might be debate behind a good

advertisement regarding who should be awarded: a Brand manager or an Ad agency.

Switching the ad agencies can have both the negative as well as positive impact on the overall

performance of the company in terms of promotional effects. The recommendations as well as

the effects of agency switching are as follows:

Perceived life span and the reality of the relationship with advertising agencies are different.

The relationship between the company and ad agency is perceived to be short term but the

impact of such relationship can be clearly seen in the message of the advertisements with long

term impacts.

Ad agencies actually try their best to win the business for the company. Their works and

creativity are reflected in the advertisements they prepare. If the clients keep on switching the

agencies then the actual delivery of the efforts will be lower by the agencies which affect the

promotional performance of the business.

Ad agencies are one of the source of innovative and transformative ideas which works

properly when it get regular social supports which is also reflected by the terms of the

relationship with company.

If the company keep on changing ad agencies, the strategy of the company can be leaked-up to

its competitors by the agencies because its not the agency that speaks, it’s the people working

there. And we know that people are the social being.

Regular relationship with a single agency can be more of value attachments which can also build

the trust among each other. But if the promotional effects are less effective then the relationship

should be separated from the business and should think wearing the glass of business, profit and

sales. So, the effects of switching ad agencies is branding depends on when, why and how

conditions.

Question No 3

If you were an executive at an advertising agency and Gateway’s decided to switch agencies

again, would you advise your account development team to pursue the company’s

business? Why or why not?

ANSWER

I would recommend my account development team to accept that offer and pursue the

company’s business for the major reason: i.e. the OPPORTUNITY that I get. The history of

Gateway shows it followed various in-house and out house advertising agencies but could not get

success in tracking the business in right direction which can be capitalized by our company.

In the process Gateway changed advertising agencies five times over the past six years and three

times in a 14 month period from early 2002 to 2003 but the most of the time agencies could not

reverse its declining sales in the stagnant personal computer industry.

The company knows that the personal computer, as well as other segments of the consumer

electronics industry, have become extremely competitive and having a strong brand image is

critical for companies who want to continue to compete in these markets.

Virtually every business organization uses some form of marketing communications. However

the way a company organizes for these efforts depends on several factors, including its size, the

number of products it markets, the role of advertising and promotion in its marketing mix, the

advertising and promotion in its marketing organization structure. Many companies have all

those structures as needed to boost their promotional effects in the market. Gateway might be

search of that sort of ad agencies which can fulfill its needs of reversing its declining sales and

build strong brands image to help its market. At an executive of advertising agency, I want to

take those kinds of challenges related to advertising and promotional campaigns maintaining the

image of my agency too.

Finally, I want to take this challenge of accepting Gateway’s proposal to create a long term

value based relationship with the company by creating the attractive promotional campaigns as

per its needs and the customers’ desire according to the advancement level of consumers.

For creating long term relationship with the company, I would guide my account team to focus

more of Value to the client, not on profit to the agency. Because, I know the fact that the

value to the company is ultimately converted into the profit to the agency.

I would direct my team to become the Value creator/ contributor to the Gateway company rather

become Order taker and simply adapt their needs only.

Prepared By:

Hari Pd. Adhikari

MBA, PHOENIX Submitted on: 26th

September, 2011