PC marketers fight through industry slowdown

As the personal computer industry reaches its 20th anniversary this summer, computer manufacturers are fighting to stay afloat following a battering of tech recessions and falling prices.
The second quarter of 2001 saw the Canadian PC market decline year-over-year for the first time ever. According to research specialist IDC Canada, shipments of consumer branded PCs in the second quarter declined 13.8% compared to a year earlier, as Canadian consumers continued to refrain from buying new PCs.

As the personal computer industry reaches its 20th anniversary this summer, computer manufacturers are fighting to stay afloat following a battering of tech recessions and falling prices.

The second quarter of 2001 saw the Canadian PC market decline year-over-year for the first time ever. According to research specialist IDC Canada, shipments of consumer branded PCs in the second quarter declined 13.8% compared to a year earlier, as Canadian consumers continued to refrain from buying new PCs.

Consolidations and buyouts in recent years have eliminated some players from the industry altogether. Now, ailing manufacturer Hewlett-Packard has reacted to the economic crisis with a much-publicized acquisition of Compaq Computer, which looks set to dent the industry still further. According to IDC Canada, Compaq and Hewlett-Packard ranked third and forth in the Canadian PC market in the second quarter of 2001, (behind Dell and IBM) with year-over-year declines of 4.1% and 4.9% respectively. The proposed merger will form an $87-billion giant – the world’s largest computer company – which is likely to monopolize a huge chunk of the industry, forcing rival firms to boost their competitive marketing tactics.

Michelle Warren, market analyst with Toronto-based Evans Research, feels that industry players could be making more of the opportunity to promote themselves.

‘None of the big PC companies seem to have stepped up their advertising a great deal, which is surprising in view of all the questions surrounding the merger,’ she says. IBM, Dell and Toshiba should all be looking to increase brand presence now, according to Warren.

How the PC landscape ends up depends very much on the first half of next year, she adds. ‘There will be less competition overall, but if Hewlett-Packard and Compaq decide to combine their brands it will certainly change the playing ground,’ she says.

John Stanisic, hardware research analyst at IDC Canada, adds that Microsoft’s launch of Windows XP, due at the end of the year, could also have an impact on the flagging market. ‘The consumers will be the first to want to switch over to this new system, so all the manufacturers should be taking advantage of the opportunity to advertise,’ he says.

‘It takes a lot of work to merge two companies, so in the short term we will see a lot of competitors approaching Hewlett-Packard and Compaq customers,’ he adds.

IBM is well-known for special offers and a strong advertising presence, and this has continued steadily since the merger was announced. Marketing team head for PCs at Markham-based IBM Canada, Susan Taylor, says: ‘IBM has a really strong presence in daily newspapers – both national and regional, as well as in magazines – and that will continue through the fall.

‘We do a lot in the way of co-marketing with business partners, resellers and distributors who sell our products,’ she continues. One of IBM’s advertising strategies is to ask consumers, via print ads, to call the retailers directly. ‘This tactic has been well received by our business partners and consumers, as customers appreciate the attention that local business partners can offer them,’ says Taylor.

IBM also has a Canada-wide road show planned this season. ‘It is a good way to talk to our customers and business partners across the country,’ says Taylor. ‘We are able to bring out a whole fashion show of our latest and greatest products.’

Last month, a new series of 30- and 60-second direct response TV spots hit the air to promote IBM PCs directly to the back-to-school market. The spots are aimed at students and home-based business people who are looking to make an immediate purchase, and are also supported by print ads. To order a computer, viewers are asked to call an IBM employee at a 1-800 number or to log onto IBM’s Web site.

Perhaps the most visible marketing for IBM of late was its very targeted summer blitz over Toronto’s urban core. The Blue Velocity campaign, created by Toronto-based Ogilvy & Mather, spanned wallscapes, vinyl posters and buildings, as well as streetcars on the King and Queen Street lines in Toronto.

‘We identified that there is an area within [Toronto's] urban core where there is a grouping of ‘Net Gen’ companies, and we developed a surrounding strategy to hit targets at many different points in the day in as many places as possible,’ says Graham Calderwood, senior partner and group account director at Ogilvy & Mather. This meant that while the ads appeared in the sports and entertainment sections of the Post, Globe and Star, they also appeared in magazines of a less corporate nature such as Eye and Now.

Blue Velocity was scheduled to finish at the end of August but IBM is still experiencing some bonusing in the form of wallscapes and subway ads. Advertising manager for IBM, Pam Aziz, says: ‘The initial response to the campaign has been great. The majority of the campaign has come out of the market now and all signs point to success.’ Bonusing is expected to continue into November.

Also set to do battle for market share this fall, notebook computer giant, Toshiba of Canada has launched a contest to boost sales of its Satellite 3000 series notebook. Running from Aug. 21 to Oct. 31, the contest offers notebook consumers the opportunity to enter a draw to win golfing holidays.

‘Our target demographic skews heavily towards the golfing community, so this is a great attraction,’ says Mary Ann Yule, VP marketing at Markham, Ont.-based Toshiba of Canada ISG (Information Systems Group). ‘We are already getting fantastic feedback from retailers and consumers.’

Toshiba and its Toronto-based agency, Ambrose Carr Linton Carroll, are focusing advertising efforts on the back-to-school market.

As with previous years, we are working with the education reseller

community,’ says Yule.

On a global scale, Toshiba is stepping up its sponsorship priorities, with plans to sponsor the 2002 World Cup.

Dell Canada, which has managed to maintain its number-one position for market share in the Canadian PC industry despite the slumping market, views the merger as a prime opportunity to steal wary consumers away from Compaq and Hewlett-Packard.

‘There is a huge opportunity here for us to gain market share and to accommodate any growth in the industry,’ says Heather Simmons, director of marketing at Toronto-based Dell Canada. ‘We will be continuing with a strong promotional calendar and are ready to help any Hewlett-Packard and Compaq customers who are considering a transition to Dell.’

Dell is running several specials on software and peripherals in an effort to boost PC sales. Promotions

currently include reduced prices on digital cameras, printers and MP3 players.

Unlike many of its competitors, Dell increased shipments of PC products by 19% worldwide during the last quarter, while most other manufacturers saw a decline. Spokesperson for Austin, Tex.-based Dell Computer, Mike Maher, says that the secret to Dell’s success lies in its close relationship with its customers.

‘We are closer to people who buy our products so we don’t have to guess at what they want,’ he says. Maher says Dell’s cost structure also provides an advantage over other manufacturers.

For the time being, Compaq and Hewlett-Packard continue to operate as separate companies, with entirely separate marketing and advertising plans, although when the merger is finalized, it is expected that the operations will be combined.

Richmond Hill, Ont.-based Compaq Canada is offering a whole range of price reductions and promotions around its PC range to ensure that its customers are not swayed by uncertainties surrounding the merger. At the moment, it is offering consumers up to $250 off the purchase of a Presario monitor when they purchase a Presario 5000, 70000 or 4100 desktop PC. Free installation and Internet access is being offered with the purchase of a Presario product.

Rob Ireland, manager of corporate communications at Compaq, says that a three-prong marketing strategy is currently in play, focusing on the back-to-school market, new innovation products and promoting the various ways of purchasing products.

Similarly, purchasers of certain Hewlett-Packard PCs in Canada will receive three months’ free high-speed Internet access between Sept. 15 and Oct. 31. Productivity software and DVDs are being given away by the Mississauga, Ont.-based operation with the purchase of Pavilion notebook PCs from Sept. 1 to Feb. 28, and up until the end of October, purchasers of the HP Jornada 520 series colour pocket PC will receive a free compact flash memory card.

Irving Frydman, VP of marketing communications at Mississauga, Ont.-based Fujitsu Canada, believes that manufacturers such as Dell, Toshiba and IBM have a lot to gain from the merger. Fujitsu is not competing in the same circles as the merged company, with its focus on software and spervices rather than PCs. From his vantage point, Frydman predicts: ‘Hewlett-Packard and Compaq will be facing a lot of changes with their resellers, distribution and partners, as well as creating uncertainty with customers, so competitors stand to benefit.’

With files from Sandy Brown