I interviewed Don MacDonald, vice president of global marketing at Intel, as one source in an Advertising Age story I did on how marketing departments deal with shifts in markets. As is typical, I could only use a small portion of the conversation, so here is an extended, and exclusive, Q&A.
ES. How are PC markets changing the Intel business landscape?
DM: [M]ature markets … make up about 50% of our revenues, perhaps more. We moved from a goal of roughly one PC per household. We now sell more laptops in the US than desktops. From a saturation perspective, it really becomes one per person in the family. The technology is becoming affordable. The average PC is … around $700. But in 1996, the average cost was $2,000. [But] the reality is less than 5% of the world has a PC. In some cases, you actually have village PCs. We’ve actually designed PCs that run off of car batteries because you can’t guarantee a constant supply of AC.
ES: When PCs are everywhere, how does that affect the Intel brand?
DM: If you actually look at the prominence of the Intel brand, we’ve made that much more pronounced. People had heard of Pentium or Centrino, but people didn’t realize it was from Intel. Look at the original Centrino brand. The Intel logo on it was so small, so trivial, that even I couldn’t tell there was an Intel brand on there. We’ve had tremendous change. The single biggest problem we have is that people are so much more comfortable with technology. Technology for consumers was scary. They wanted help. They looked to a brand to help them make a choice. Now they’re so much more comfortable, the problem there is to make people think about the technology.
ES: How do you do that?
DM: Job one is to make people care about the technology. You have to educate and explain that there are things you simply cannot do unless you have access to the latest technology. The reality is we’re delivering more and more goodness. But how do you communicate the goodness of [the platform]? We’ve gone way beyond standalone processors. A good example of this would be New York Central Library. Ten years ago it was a place where you borrowed books. Fast forward, and it’s a place you can go online, where you can borrow DVDs and CDs as well as books. What we have to do is extend the definition of a processor so it can represent so much more without throwing away our history.
ES: Can you give an example?
DM: A good example is wireless. There were nine years between the 802.11b spec being published and Centrino. In November 2002, there was a 5% attach rate of wireless to notebooks. In 2003, it was almost 100%. The average cost of wireless in December 2002 was $150. We were able to deliver wireless technology in March 2003 for less than $15. We made it very affordable and then drove our cost down.
ES: So you subsidized the cost to grow the market?
DM: Subsidizing is too strong a word. We knew what the average price would be through the year [and so started with that average price] Most business models are usually dictated by customer acquisition costs and customer support costs. We eliminated a huge number of support calls that otherwise would have [happened]. We spent $40 million in testing and took out hundreds of collars of cost per user in support. We had to break the chicken and egg. The same with VIIV. We’re at the very beginning of what is shaping up to be a whole new industry.
ES: How has the new market changed your marketing?
DM: PR in my opinion is by far the most important aspect of this. We have more emphasis on a fully integrated marketing campaign than ever before in history. The idea of just using an advertising campaign is gone. We have a unified campaign through the multiply theme. Online’s been very interesting for us. We had four days of dialog. We let people talk to the people who invented the products, one hour a day, four consecutive days. We had 25K people in the chats. In the past, to get 25,000 conversations for an hour, that would have been a more expensive event. If you actually look, particularly in the IT space, at how much you spent on your budget on media and then factor in media inflation … in an apples to apples comparison, we’re probably at 50% of the effective media spend of five or ten years ago. We’re having to place a premium on innovation in communication. If it’s relevant, you’ll still break through. If it’s not, you won’t. We’re ruthless about how we spend the money. If it doesn’t work, it gets cut.
ES: How has the marketing message changed?
DM: Originally, it would be business users thinking about buying technology. That would have been probably 30 years ago. Five years ago, it would be giving PC users faster PCs. Now we’re in the era of processing. Anywhere there’s processing, that’s our target audience and where we move away from one side fits all. Now we have five business units arranged around customers: digital health, digital home/entertainment, enterprise, mobility, and [the retail] channel. Most people don’t want to know how these things work – the 1.7 billion transistors. People want the benefits. They don’t want to know what pipelines you have to use to make it possible.