Marketing Strategies Used By Intel To Create A Sustainable Market Position

Contents

EXECUTIVE SUMMARY

TERMINOLOGY/ POINTS OF REFERENCE USED

INTRODUCTION

STRATEGIC MARKETING ISSUES FACED BY INTEL
Figure 1: A situational example of ingredient co-branding
Figure 2: HP/ Intel co-branded advertisement

FUTURE OPTIONS FACING INTEL
Figure 3: SWOT Analysis for Intel
Figure 4: Product development process

CONCLUSION

REFERENCES

EXECUTIVE SUMMARY

Unlike conventional Business-to-Consumer (B2C) marketing models, the microprocessor manufacturing industry has often unconventional routes to market such as direct Business- to Business (B2B) sales as original equipment manufacturers (OEMs) found in household and standard business computer equipment but also as the bedrock of higher end server equipment manufactured by companies such as Hewlett Packard (HP) and IBM. (Hewlett Packard, 2010 & IBM, 2010)

It is with this in mind that this report will examine how Intel utilises marketing strategies in the marketplace as well as providing an analysis into how this then translates into tackling of the issues it faces and the options it has with regard to building a sustainable competitive market position.

The methodology used in this report will employ a thematic and pragmatic view of the microprocessor industry by looking at recent marketing campaigns and techniques used by Intel. It will then go on to define business issues that Intel face or is likely to face in the near future and an analysis of what options Intel has to build a sustainable market position. An initial SWOT analysis will give the framework for this final section by identifying Intel's position in the market compared to its competitors.

This report will explain how Intel has developed a mechanism to align its branding and marketing strategy with those of its clients in the Home and Office market computing sector; Intel's use of an integrated co-branding approach in its advertising will be explained in more depth. This report will show that Intel's continued market hegemony is deeply rooted in its heavily invested Research and Development departments' innovation towards providing the types of technology needed by its clients such as low power consumption Central Processing Units (CPUs) when competing with companies such as AMD and ARM Holdings.

There are several limitations of this report that should be outlined should there be the need to replicate this research in more depth; there is a distinct lack of primary research namely an investigation into long term advertising campaigns which a longitudinal study could yield underlying marketing strategies. Whilst this report does briefly outline the industry players, due to the logistical limitations, a future report could contain an in-depth analysis of all major industry players and how they have integrated marketing communications into their market strategies.

TERMINOLOGY/ POINTS OF REFERENCE USED

"Cloud computing" Cloud computing is Internet-based computing, whereby shared resources, software and information are provided to computers and other devices"

"IC" Integrated Circuit

"Issues" Problems and events encountered that require active planning to circumvent, mitigate or navigate

"Intel" Intel Corporation

"Marketing Strategy" Marketing strategy is a process that can allow an organisation to concentrate its limited resources on the greatest opportunities to increase competitive position

"Microprocessor" Integrated circuit semiconductor chip that performs the bulk of the processing and controls the parts of a system

"Microprocessor Manufacturer(s)" Companies and organisations that design, manufacture or licence Microprocessors

INTRODUCTION

The Intel Corporation is one of the most recognisable global brands (Interbrand, 2010) with a market appraisal reflecting a $32 billion (~£20 billion) price tag attached to its brand alone ranking it seventh in the world.

Intel is the world's leading microprocessor and semi-conductor manufacturer holding in 2009 a 14.1% share of the global market with its next closest rival Samsung Electronics taking approximately 7.6%; it should however be pointed out that Samsung's appearance in the industry is slightly misleading as its products are generally used in proprietary situations in Samsung's own entertainment product lines and ancillary computer hardware such as Random Access Memory (RAM). (Samsung, 2010) AMD, a direct product rival holds just 2.3% of market sales and therefore considerably less purchasing power when it comes to research and development and the ability to exploit its economies of scale. (iSuppli, 2009)

Intel's market position is defined by its continual evolution and development through its speed to market from research and also more recently through innovation in power management systems and efficiency measures stemming from the increase in demand from mobile devices and restrictions in the field of battery longevity. (Brassington and Pettitt, 2006. p. 945 & Intel, 2009).

STRATEGIC MARKETING ISSUES FACED BY INTEL

Strategic marketing issues faced by Intel are deeply rooted in its lack of end-user customer contact, especially in the B2C market segment. In response to this one of Intel's major marketing strategies has been to develop ingredient co-branding (See Figure 1.) which is used to leapfrog the brand into the end-user consciousness beyond that of its initial client base in B2B situations.

Figure 1: A situational example of ingredient co-branding

Abbildung in dieser Leseprobe nicht enthalten

(Source: Jobber, 2004. p. 283)

The aim of Intel's campaign to ingredient co-brand meant convincing technology manufacturers that their products would have a higher perceived value if Intel was included in their own marketing. In turn this led to the creation of brand awareness for Intel chips' quality that was synonymous with the manufacturer's direct customers. According to Whitwell (2005), "The first step was to commit Intel to a fully integrated brand strategy. They chose to invest in "ingredient" branding - the creation of equity as an input brand."

The successes of this came from the Intel's established reputation for quality that was developed in the 1980s and 1990s with the reliability and performance of the 8086 line of processors.

Taking a quick look at a Hewlett Packard advertising (See Figure 2.) it can be seen that the Intel branding and logo takes a large and distinct position, almost rivalling the HP branding in size and importance. The largest text on the advert is clearly "Intel Centrino Core 2 Duo Processor P7550" meaning that Intel's brand equity has been readily adopted by HP to co­brand and add value to the final product.

Figure 2: HP/ Intel co-branded advertisement

Abbildung in dieser Leseprobe nicht enthalten

(Source: Netaffilia, 2010)

The success of this co-branding exercise is reflected in market research commissioned in 1991 and 1995 where in just four years brand awareness of Intel rose from 24% to 94% respectively. (Whitwell, 2005).

Not only was this strategy based on product quality but it was also incentivised by Intel offering volume discounts for program participants. This had a two-fold effect; increasing Intel's pricing competitiveness for large B2B customers and increasing brand exposure whilst simultaneously reducing direct marketing costs for the Intel brand.

A common problem associated with ingredient co-branding can be seen in the effect these campaigns have on brand dilution however Jobber (2004 p. 283) points out that the "carried brand equity... was greater than the sum of its parts" in such cases as Intel's marketing alliance with IBM.

Intel has been one of the most successful architects of ingredient branding with distinctive logos being incorporated into partner advertising and television campaigns; it is in this subject area that they pioneered the use of the 'Sonic Logo' a five note (D b D b G b D b A b ) harmony. It was developed as a mnemonic jingle from which consumers can create a positive brand association. (USPTO, 2010) As part of this sensory campaign Bartholme and Melewar (2001) state that, "Intel as a brand has managed to get its sonic logo played every time a commercial of an affiliated company is broadcasted." It is the aim of this mnemonic to deliver and further Intel's corporate presence in the minds of the end-user.

Intel spent approximately $6.6 billion (~£4.2 billion) on Research and Development in 2009/10 (Deffree, 2010). It is this high level of innovation expenditure that has the potential to give a reputational dimension to its brand image; R&D spending by Intel's closest industry rival Samsung has been relatively stable at $2.2 billion (£1.4 billion). (Ibid)

Chauvin and Hirschey (1993) indicate that larger research and development spending has a big and consistent upward influence on the market value of a business, which can translate well into developing a market reputation and brand kudos in the marketing sphere.

Intel has recently developed its own advertising which relies on furthering its own brand equity and awareness through television media such as the 'Sponsors of tomorrow' campaign which aims to "humanize [sic] their brand." (CBC, 2009).

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