Marketing in the IT sector is without doubt becoming more
Branding techniques - traditionally the forte of consumer marketing -
are being used in preference to the product-specification type of
selling previously favoured by business-to-business marketers in this
The companies’ new-found enthusiasm for branding strategies comes as
they shift toward targeting their business consumers direct, which is
making those in the sales channel rather nervous. For the resellers in
the middle, the future is far from rosy, as the big names want direct
dialogue with their customers.
’A few years ago marketing people in IT companies didn’t know what a
brand was,’ says Geoff Dowell, chairman of business-to-business
marketing agency Dowell & Associates. ’Now, instead of pushing product
down people’s throats, they are trying to put a personality to their
corporate values.’ IT companies are reaching out to the business market
via a ’look and feel’.
Coupled with this, direct marketing is on the up in the
business-to-business arena as it recognises the success this element of
the marketing mix has enjoyed in its neighbouring consumer field.
Detailed database information means IT marketers can narrow down their
target and reach specific individuals, upping their chances of
generating immediate sales leads.
And in the business field they’re fighting it out over the still
relatively untapped small and medium-sized enterprise sector, with
differing degrees of success.
The drive toward all things direct was kicked off, at least in part, by
Dell Computer. It is jostling for position in terms of PC sales in the
UK having turned its back on IT’s traditional tiered distribution
channel. According to the 1998 survey conducted by the information
technology research arm of Banner Corporation, Dell pulled in a 31%
share of desktop-PC sales to large organisations, ahead of IBM and only
just trailing Compaq.
Among smaller outfits, it achieved joint second place with Compaq,
taking a 12% market share.
Dell is also one of only a handful of players that is actually making
e-commerce - that is the sale of product direct to users over the
internet - work. David Moore, marketing manager for Dell UK Direct and
Ireland, claims the company is generating sales over the internet worth
dollars 6m (pounds 3.7m) per day worldwide and dollars 1m (pounds
600,000) per day in Europe, which must be making its rivals sit up and
Dell operates a cheaper sales model which is attractive to an
IT-literate corporate market. Some in the market predict that Compaq and
IBM in particular could follow suit. Both are adamant that they are
committed to their existing sales channel, but some in the channel are
Their brand-building and direct-marketing drives are only serving to
fuel dealers’ fears that they will be marginalised. ’There will be a
change in the emphasis in channels - there already has been,’ says
Dowell. In the US, both players have recently kicked off some direct
In the UK, Compaq last year set up a pounds 22m call centre in Glasgow,
by its own admission aimed at forging a closer relationship with its
small and medium-sized business customers. William Knocker, Compaq’s
director of marketing services, says a lot of Compaq’s direct-marketing
activity is now based on calls to and from the centre: ’We are changing
the approach to become far more accessible to the customer,’ and, he
claims, to the company’s channel partners too. He is at pains to point
out that sales made by the centre are fulfilled via the reseller
Resellers are sceptical, however, and believe the new approach is just a
means by which Compaq can build up a direct relationship with users so
that it can eventually squeeze out smaller resellers. Compaq did not
help dispel these fears when, earlier this year, it refused to stump up
a cash-back offer to a dealer who would not hand over the details of the
customer it was selling to.
Compaq said a condition of the promotion was that dealers hand over the
Compaq argues that it targets customers direct so it can match them to
the skills of the most appropriate reseller.
IBM too has been accused of gearing up for a shift in sales channels
through its branding drive, a move viewed by resellers as designed to
get access to customers. IBM denies it has any plans to go direct. While
market players agree we will not see the complete erosion of the
reseller channel, its role is likely to change to become more
value-added and service-oriented.
Despite disputes over shifting sales channels, most IT manufacturers
will agree that they are digging deeper into the corporate pocket than
ever when it comes to forking out for an image facelift. Dowell &
Associates estimates that IT firms are spending between 3% and 5% of
their turnover on marketing and communications and that the figure is
rising, with some companies splashing out as much as 10% of their
turnover on above-the-line only. Dowell believes the bulk of the
marketing budget - between 35% and 40% - is being spent above the line,
but that direct marketing, which accounts for 20%, is growing.
Apple has made one of the most significant branding pushes of the IT
pack this year with its pounds 2m ’Think Different’ campaign. Alan Hely,
Apple UK’s marketing director, says the campaign targeted customers in
the ’creative content’ and education fields, as well as IT decision
makers and consumers who ’needed reassuring that Apple was still around
and had a lot to offer’.
Comparing the Apple brand to Nike, he argues it is ’the only lifestyle
brand in the industry’ and says the aim is to communicate ’what Apple
stands for; it’s not about the product’.
Hely says that close to three-quarters of Apple’s marketing budget is
spent on the ’communication of the brand’ via press, poster ads, TV and
radio, with the remaining quarter spent on public relations, carried out
by Bite in the UK.
’For Apple, PR is fundamental; the press love to talk about Apple,’ says
Hely. When the company launched its latest offering, the iMac, via a
’big-bang approach’ in May, he estimates that the value of the PR in
media terms worldwide hit dollars 35m (pounds 21m). But Apple needs to
reach out to a wider audience. Hely says that next year it will fix its
aim on the SoHo arena to uncover ’how we start to readdress that market
where we have lost our way’.
IBM is also exploiting its brand equity, with its huge above-the-line
campaign positioning itself as the company that ’makes e-business a
The company, which has a pounds 1.6bn global media spend, is driving a
consistent approach to pushing its brand worldwide, creating a one-stop
marketing shop which reflects the global nature of its products. The
centralised push follows its move a few years ago to consolidate its
advertising business into Ogilvy & Mather Worldwide.
IBM builds brand
More recently IBM streamlined its direct-marketing activity, hacking
back its roster of more than 30 direct-marketing agencies worldwide to
just four. In April it launched a centralised pounds 20m European
campaign based on its e-business theme.
According to Knocker, Compaq also is ’moving more toward a customer
focus than a product focus’ and shifting the emphasis ’into customer
Aside from the change of direction signalled by its recent call-centre
project, it is being forced to rebrand following its dollars 9.6bn
(pounds 6bn) acquisition of Digital in June.
It marked this ’milestone in the history of Compaq’ in the UK with a
pounds 1m-plus campaign in the national and business press to ’signal at
a brand level the future direction of the company’. The ’Compaq better
answers’ push used an icon of the letter ’q’ in Compaq to pose various
questions, which the company claims it now has better answers to, due to
the greater expertise gleaned from the joint venture.
Knocker says advertising eats up close to 40% of its marketing budget,
with 30% going on sales promotion, 25% on direct marketing and the
remaining 5% on PR. Like most manufacturers it also ploughs money into a
joint marketing fund, aimed at keeping those in its distribution tier
But not all the IT players are convinced of the branding ideology. Dell
is eschewing the trend toward the ’corporate personality’, instead
focusing its efforts on the small and medium-sized enterprise sector,
with ’99.9% of advertising in the UK directed at SMEs’. Its marketing
strategy reinforces its direct-sell approach via very targeted direct
mail, site visits by sales people, telesales, sales promotion and
It has 30 or 40 programmes running at any one time.
’We are trying to open up the sales process immediately. Rather than
saying ’we are Dell and this is what we’re about’, we’re saying ’we are
Dell, this is the product, this is the specification, this is the
price’,’ says Moore. ’We are trying to use the products to carry the
brand attributes. In the SME market, value for money is the key.’
He says the company is ’highly segmented’ in its approach to marketing,
splitting its potential customer base into five sectors in the UK
according to size of company, from corporate sales to The Times Top 100,
down to its consumer business and tailoring its marketing activities
Dell’s direct model enables it to do this, he argues: ’If you’re Hewlett
Packard (HP) or Compaq you can’t segment by employee size or company
size because you’re doing everything through a network of dealers and
you don’t have a direct relationship with your customers.’
He claims that Dell is also better able to judge the effectiveness of
different campaigns since it can monitor customer response directly.
Manufacturers who use an indirect sales model ’spend and hope’ in terms
of their marketing budget, he says.
Another company keen to extol the virtues of direct mail as a
cost-effective means of profile raising and generating sales is HP,
which is using the medium ’more and more’, according to Darren Wall,
Laser Jet printers marketing manager.
He says the company has in recent months even shifted some of its
above-the-line budget to below-the-line activities.
Direct-marketing agency Perspectives deals with the bulk of its
The direct marketing approach is bound up with its efforts to reach the
SME sector since IT is ’now going into much smaller businesses than in
the past’, and as Dell and others are discovering, there’s money to be
made in this burgeoning arena.
HP itself, together with Perspectives, has set up its Small Business
Council, which pulls together the company’s different product divisions,
designed specifically to discover how to touch the hearts and minds of
SMEs. It is using this combined marketing weight to target small
businesses, but is channelling sales through dealers.
Rationalising the mix
HP has pared its marketing down to a basic mix of direct mail and print
advertising. But the print campaigns are aimed at larger corporates.
’The difficulty we’ve seen with print advertising campaigns to SMEs is
that the media is very large and can get very expensive very quickly,’
He adds there is a lack of good specialist small-business press. Wall
points out that HP is moving away from television advertising, which
’hasn’t been a terribly good return for us’. TV for the
business-to-business audience doesn’t offer the right levels of
But while they’re headed in the right direction, or at least a
direction, IT marketers still have some ground to cover. Indeed,
European IT marketing forum The Foundation argues that ’despite the vast
combined purchasing power of their customers, most European technology
vendors are failing to target these customers effectively and are taking
a generally slack approach to marketing.’
Lack of focus
A survey of 100 IT marketing directors carried out by The Foundation in
May saw 22% of respondents admit that their market segmentation strategy
centres around what is easiest for their own internal infrastructure,
with 31% justifying their segmentation strategy by arguing ’that’s the
way we’ve always done it’.
A third of respondents said they do not conduct any research into their
target markets, a quarter do not treat any of their market segments
differently and many marketing and sales departments within the same
vendor organisations segment the same markets differently.
Dowell says: ’Most companies are not focusing enough on where they’re
trying to mop up.’
He thinks that it is a problem prevalent among smaller IT players:
’Smaller companies, if they’re not careful, will get trodden on if they
don’t build their brands in the next couple of years.’
Dowell believes that they must focus in on their targets and stop trying
to ’capture as much as they can of the whole marketplace’.
DIRECT MARKETING ON THE UP
Direct marketing in the business-to-business field has ’developed slowly
in a quiet, revolutionary kind of way’, according to the general manager
of Emap Direct, Simon Lawrence. But a number of recent developments mean
business marketers, and IT marketers in particular, are finally taking
the lead from the consumer operators.
Over the past four or five years the development by companies such as
data provider TDS of geodemographics for business, which identify the
characteristics of businesses according to their postcode, has enabled
better profiling of business behaviour.
More recently, the merging of some of the biggest owners of business
data is paving the way for more in-depth profiling. Previously IT
marketers have had access to three sources of business information: that
filed at Companies House; publishers’ data, such as business-press
circulation lists; and directories like Yellow Pages or Thomson.
In March, Emap Direct merged with TDS, meaning customers can gain access
to the TDS data list, together with business-press circulation data from
Emap. In a separate move, Yellow Pages forged a strategic alliance with
Equifax, which boasts a significant financial-data list.
IT marketers like Dell and HP are at the forefront of the
direct-marketing push. The dynamic nature of their business, says
Lawrence, means they are constantly seeking to open up new markets such
as the SME sector, and with more data available, highly targeted
direct-marketing activities enable them to do this efficiently.
The 1997 business-to-business trends survey, published by the Direct
Mail Information Service, has shown that direct mail sent to business
managers is viewed as more useful than ever. Previous barriers to the
impact of direct mail are becoming less of an issue as marketers improve
their aim, and direct mail is ’on target to sustain its role within the
UK IT MARKETERS SLOW TO EXPLOIT INTERNET’S POTENTIAL
’In the business-to-business sector, people are only just waking up to
what the web can deliver,’ says Neil Colling, managing director of
Strategies, a specialist database-enabled web-site developer.
The US is leading the field in using the internet as a marketing tool,
with the UK market trailing behind. ’If you’re in the US and you’re in
IT that’s where people look up information - you do not have an option,’
he says. The UK market, meanwhile, has in most cases not moved beyond
posting product catalogues on web sites.
Banner advertisements, scattered across the web to attract users to
individual pages, are proving popular among IT companies, with most
dabbling in this arena. But it is an ’area that’s got a long way to go’,
according to Compaq’s William Knocker. He says that while Compaq does go
in for banner ads he is not convinced it’s working 100%. ’I don’t think
we’ve got it down to a fine art yet; we don’t have a grip on the return
we’re getting.’ He adds that ’users of the net are not that influenced
Other IT players are trying to spice up their banner offerings to
differentiate them from the sea of electronic teasers, for example by
introducing interactive elements. And they’re wising up to the
importance of location; search engines are a popular place to put ads to
maximise exposure to internet users. But Colling points out: ’The thing
most people don’t realise is that the major way of marketing a web site
is through conventional methods.’
Colling says companies should focus on extracting registration
information from visitors to their web sites so that they can target
them via e-mail later. He says: ’The original and best-push technology
is still e-mail,’ and points out that IBM is the only company he has
seen using this technology effectively as a marketing tool.
Apart from Dell, networking giant Cisco is the only other player doing
any real e-commerce. Barriers to its take-up in the UK include the risk
of conflict between manufacturers and their sales channels. But Colling
believes that it will take off since the internet ’is an effective place
to shop’. He says once a standard PC’s price drops to pounds 200 and
internet connection charges fall, the volume of e-commerce will go up.
’I think in the next two years we will see dramatic changes,’ he
PR AT THE CENTRE OF IT ACTION
PR is standing its ground as an essential part of the marketing mix.
Specialist consultancies are among those in the fastest-growing sector
in public relations, and general agencies trying to gatecrash the party
to snatch a piece of the action.
Apple, which employs Bite in the UK and monitors its PR quarter by
quarter, views it as fundamental. Alan Hely says: ’For our 4% market
share we get greater press coverage proportionally.’ Andy Tait, Intel
marketing and PR manager for Northern Europe, agrees it is a ’very
important’ part of the mix. Intel opts to keep tabs on its output with a
’large department’ in-house, generating the bulk of its PR.
Jonathan Simnett, Brodeur APlus director, argues PR is ’so important’ in
the IT marketing mix because of the rate of innovation in technology and
its complex nature. ’Advertising is good at building effective brands,
but it’s more valuable to get editorial coverage because it is effective
at explaining what a technology does.’
PR companies with specialist IT knowledge are very much in demand due to
their ability to communicate complex subject matter.
Nevertheless, some general agencies are sneaking into the top ten.
The branding push and the move away from product specification means PR
agencies have their work cut out. Tariq Khwaja, associate director at
Text 100, which numbers Microsoft among its clients, says: ’It’s the
year of the business decision-maker for technology companies.’ The
question for PRs and their clients used to focusing on technical IT
managers is ’How do I get to the boardroom?’ The answer is to push
business benefits more strongly than technical features and is seeing a
move toward PR firms promoting their clients on the back of issues such
as the Millennium Bug.
Top ten IT PR agencies
Agency Total income 1997 IT income
1 Text 100 pounds 6,182,000 pounds 6,182,000
2 Brodeur APlus pounds 3,708,000 pounds 3,597,000
3 Firefly Communications pounds 3,310,000 pounds 3,145,000
4 Harvard Public Relations pounds 4,314,000 pounds 2,718,000
5 Hill & Knowlton pounds 18,753,000 pounds 2,625,000
6 The Argyll Consultancies pounds 2,717,000 pounds 2,527,000
7 Weber Public Relations pounds 10,417,000 pounds 2,500,000
8 Shandwick UK pounds 23,861,000 pounds 2,386,000
9 Edelman Public Relations pounds 7,127,000 pounds 2,352,000
10 Charles Barker BSMG pounds 6,841,000 pounds 2,189,000