Branding lessons -How did Intel build a brand around a commodity?-Ingredient Branding

A few years ago, Microprocessor chips, as it was not seen outside the product, were an unknown component of PC for the end consumers. It was a commodity product. Intel was a dominant microprocessor brand in the 1980s with the launch of microprocessor 286, 386 and 486. Soon competitors were catching up with Intel. It was getting tough. In 1991, Intel lost its trademark violation case against AMD who had similarly named clone chip AMD 386. Intel realized that to remain as a leader in business for a longer duration, it needs to enter the mind of Consumer and that could be done only through branding.

It was a massive challenge as the product was a commodity component and also not visible to the consumer. How did Intel build a brand around a commodity?

UNDERSTANDING THE USERS

Except for programmers, gamers and scientists, the computer was a mystery for many target segments. Many of the end-users were uncertain about the quality and reliability of the computer product and they were not aware that microprocessor chip was a critical component. Intel sensed that microprocessor being a critical component of PC had an opportunity to enter consumer’s mind.

Through their research, they came across a market segment called “Achievers segment” — People made up of knowledge workers — who spent the majority of time in gaining knowledge, reviewing information and they were major decision makers in companies but they were not programmers. PC manufacturers like Apple were already targeting this segment by designing products that were easy and intuitive to use.

Intel felt that the company had to focus their communication, branding strategies to target this “Achievers” segment.

POSITIONING and DIFFERENTIATION

INTEL had already established it as a quality product manufacturer and an innovator among OEM companies — Operational excellence in creating complex new products with speed and good infrastructure. Intel believed that it could position its chips as a premium product. (Matches identity requirements of “Achievers” segment).

VALUES THAT WOULD RESONATE WITH CONSUMER

TRUST —Honesty is expected but Trust is earned. Intel had to show the world that the world’s best computers were driven by Intel’s chips. The one way to reach consumers was through well-known PC brands of that time. It needed to communicate that the reliability, quality, speed, consistent performance of PC, is controlled by Intel’s chip.

COMPATIBILITY & INTEGRATION — It was important to allay consumer’s fears. Intel had to convey that chip was compatible with the Softwares used by target segment and would play a major role in smooth functioning of those Softwares.

QUALITY SERVICE — Intel had strong service support center for OEMs which in turn assured end-users of quicker solutions to the hardware problems related to chips.

EXPERIENCE— Intel had a stronger infrastructure with a huge R&D facility. This helped the company to try out countless solutions as frequently as possible resulting in increased customer experience.

COMMITMENT — The “Achievers” category is like “Early Majority” segment and they would prefer a vendor who was assured to be around for a longer period — They need long-term association and commitment from vendors(basically for service support). Intel had a potential advantage here.

Intel instead of verbally communicating the values had to make customers experience the values.

TILT THE ODDS

As Michael Porter pointed out that first step for “Competitive Advantage” is to look at a market segment where competitive forces are weak.

Intel chose a premium segment as the competitive forces were weak. They avoided middle-level pricing as it is a market for nobody. The first step was to create a brand awareness but the company needs to invest wisely in creating a meaningful brand.

Factors That Would Help in Tilting The Odds in Intel’s Favour

Funds-As Intel was dominant in their market for a long time, they had funds to spend on advertisements, which their competitors lacked.

Innovations-Intel had an advanced R&D facility and also a huge one compared to their competitors. Intel could launch new products faster than the competitor and create a demand, rather than reacting to the market demand. Intel invested aggressively in R&D, which could not be matched by competitors or new entrants.

Threat Of Entry-To neutralize the OEM’s power, Intel standardized many of its components so that the component can fit more than one OEM vendor. This mutually benefitted OEMs and Intel for some time due to lowered costs and acted as a competitive advantage for Intel over other processor brands.

Demand Side Economics-Ability to compete within different strategic groups -Intel developed a low-cost product ‘Intel Celeron’ to fight low-cost wars with competitors. It also developed products to meet the requirements of high-end business offices and the gaming industry. Due to the diverse portfolio, Intel could maintain a large market share.

INGREDIENT BRANDING

Ingredient Branding — Promotion of a brand within a brand to end user — Simon, H., and Sebastian, K.

In 1991, Intel began Ingredient Branding programme (Intel Inside).

Factors That Played a Major Role in the Success of ‘Ingredient Branding’ Advertisements

No Discounts but Contribute-To create brand awareness, it was important to advertise the ‘Intel’ brand. As the brand’s name was unknown among end-users, the advertisements had to be along with a PC brand.

Look for a Strategy to grow the market rather than just aiming to grow the company’s market share

For Intel, it was clear that the PC brands had to be encouraged to advertise so that the overall PC market could grow and would be beneficial to both the parties. Without mutual benefit, every programme would fail. To motivate its partners to advertise, Intel team announced a 6% rebate on its purchases of Intel microprocessors, which would be transferred into OEM partner’s advertising budget that paid for up to 50 percent of the advertising. The PC partners were asked to present the “Intel Inside” logo on the product and in their product advertisements. Advertising for computers exploded due to this program.

Differentiate-Intel convinced OEM partners to create a sub-brand for products having competitor microprocessors. In this scenario — customers realized that they were buying a computer without “Intel Inside”.

OEM partners were happy as they got a 10% premium for “Intel Inside” products from end-consumers plus advertising support from Intel.

Clarity — Is it possible to write a better statement than “Intel Inside”? -Maybe. It was written in the language of consumers — Findable, memorable, desirable. The sentence was easier to talk about, easier to remember for the consumers. No buzzwords, fluff. Simple positioning statement.

PEAK-END RULE — The peak-end rule is a psychological heuristic in which people judge an experience largely based on how they felt at its peak (i.e., its most intense point) and at its end. Intel team brilliantly utilized this psychological principle.

Have you seen PC manufacturer TV ads? The ‘Intel’ logo appears only at the end of the ad with a specific music. That music has become synonymous with Intel. Why did Intel team choose to display the logo at the end rather than at the beginning or in the middle of the ad? The first thing everyone would remember from an event is the “Ending” part. If you end well on a high note — you create a positive impression and a special place in mind. The Intel music provides that pleasant sensation. Everyone could remember the Intel Logo and the sound. The logo doesn’t just appear — It gradually grows on the screen. — Psychology helps.

BRAND PORTFOLIO STRATEGY

Brand Portfolio Strategy also played a major role in ‘Intel’ branding’s success. It improved brand communication and increased brand awareness.

The Importance Of Naming — Intel’s brand portfolio strategy too played a crucial role in “Intel Inside” programme’s success. In 1992, Intel wanted to launch a successor to 486 chip but was afraid that the competitors would be soon coming with a similar name. Thinking from a consumer’s perspective, the Intel team realized that it would be tough for consumers to remember numerals as many other products were following the same path. A text would be easy for customers to remember. Instead of calling Intel 586 — the chip was named “Pentium”. Can the competitors call their chip as “Pentium”? Was it easier for customers to spell, communicate and remember?

Endorser Brand, Brand Extensions-“Intel Inside” became an endorser brand for the “Pentium” instead of sub-brand so that over a period of time, it could be an individual brand. This strategy avoided confusion among users and helped Intel to launch multiple products like Pentium 2, Pentium Pro, Pentium 3, Pentium MMX(Branded Technology) and Pentium 4, as Pentium brand has grown among the minds of consumers and people considered them as Intel’s product without Intel’s logo.

Sub-Brand-In 1998, Intel sensed a demand for mid-range high-end servers and workstations. The company felt that the Pentium brand name may not be suitable for those servers. In the consumer’s mind, the Pentium brand was associated with lower-end personal computers for homes. It would be tough to change that association. They needed a new name and the name should show some association with the Pentium brand and at the same time, should give a feel of advanced technology. They named the new brand Xeon.

Stand-Alone Brand-In 1999, as PC market crossed “Early majority” segment and entered “Late Majority”, Value segment emerged and demand for low-cost PCs was on rising. Intel observed that using the Pentium brand would be extremely risky as it was meant for premium customers. So, they launched a “Celeron” low-cost brand with Intel as an indirectly linked endorsement brand. They didn’t associate ‘Pentium’ with Celeron as they were afraid of jeopardizing the ‘Pentium’ brand.

In 2001, a new processor has been built from the ground up — entirely new architecture — 64-bit(instead of 32-bit) — capable of delivering a very high performance. Intel needed to communicate that this new chip was qualitatively different from the existing processors. They called “The Itanium” processor instead of “Pentium 5”.

It was clear that host of critical brand portfolio decisions helped ‘Intel’ to thwart away competitor threats and enter new markets.

CONCLUSION

Intel Programme raised awareness for both processors and PC in general. Consumers and business decision makers(Achievers) alike started observing what was on the inside of the computer before making a purchase. Intel created an impression that it makes something that worth paying more for. 
Intel reached market supremacy, created brand equity comparable to the level of a consumer goods manufacturing company and still continue to be a leader. Intel showed that Ingredient branding could be successful if it is well thought out.

References — Making the invisible visible — Philip Kotler, Sticky branding -Jeremy Miller, Illuminate — Nancy Duarte, Competitive Strategy — Michael Porter, Brand Portfolio Strategy — David A Aaker, Ingredient Branding case study article — Stuart Whitwell.