Inside Intel Inside

Submitted by Team Think Tank

May 16, 2013

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Q: 1.What do you think of the different advertisements of Intel and their evolution? Critique their
promotion strategy?

The case details Intel’s evolving advertising strategies from early 1989, to early 2002.

The “Red X” advertisement campaign targeted end users of computers (B2C) directly rather than
design engineers of OEMs (Original Equipment Manufacturer - B2B). This campaign clearly
identified and addressed two facts – the first being that 386 was better (faster and also
compatible with user’s software running on slower 286) and second it was available at the same
price as that of the current 286 processor. As a result of the campaign’s “graffiti style” encoded
message, the end users became aware of the superior capabilities and software compatibility of
386 processors. Such awareness ultimately led to the rising sales of 386.

With newer, faster processors launching every couple of years, Intel adopted a co-operative
advertising which prominently put Intel logos in OEM’s ads and on their computers. This co-op
marketing was supplemented by Intel’s own advertising. The co-op campaign was effective
because it reinforced the message that Intel’s reliable and leading technology (i.e. faster, better)
microprocessors were really what powered the OEM computers. At the same time the campaign
also promoted OEMs computers (Exhibit 3). Alongside, Intel’s own advertising campaign used
creative, special-effect driven informative advertisements for end users. These ads for 486 and
Pentium family of products educated potential customers of where the product was (at “heart” of
PC) and also of all the different types of computing tasks users could perform by using the
computers that contained Intel processors. By the end of 1990s this two pronged marketing
campaign ultimately contributed to Intel becoming the sixth most valuable brand and market
leader by a wide margin in the PC business.
Intel adopted a “low-key” advertising campaign for its low-cost Celeron processor. As a result,
Intel gained only modest market share for lower end market components. This strategy was
interesting for two reasons, one - Intel’s manufacturing required high capital investments and
two – the returns on those investments were also very high. Given these reasons, it is clear why
Intel spent the majority of the advertising budget on marketing high-profit Pentium processors
and scaled back on marketing Celeron which cost less and therefore fetched smaller profits.

In 2002, Intel again shifted its advertising campaign to begin marketing based on experience and
feeling of the product usage rather than the features of the product itself. This “heart of digital
world” campaign does not provide any technical details of the product, yet represents and
therefore aligns with, Intel’s core values of innovation and creativity. It also helps Intel that
negative publicity about the campaign made consumers sit up and notice Intel’s products.
It is worth noting that up until 2002 the successful “blue men” campaign was always promoting
very strong product portfolio. But by Feb 2002, Intel is at a turning point where it has strong
marketing campaign but no promising new product portfolio (yet) to market

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Q2: Should the Intel brand be extended? Why or why not? To what products? How will
consumers / channel members respond? Should their promotional strategy remain the same or
change? If yes, what should be the changes? If not, why not?

Intel is the leading manufacturer of microprocessors in the world dominating 80% of the global
market share for personal computers. Out of Intel’s total revenue, only 11% comes from Mobile
computer microprocessors. This shows that Intel has not explored the cell phone and PDA
market yet. This is something for Intel to explore especially as sales of PCs are stagnating while
sales of portable devices such as cell phones and PDAs appear to be growing at a healthy rate
(Exhibit 13).

Intel’s move to integrate flash memory onto cellular baseband chips was technically
revolutionary. Business wise, it also allowed Intel to explore a new market. Since the PC market
has been maturing and there could be significant opportunity for cell phones with flash memory
and microprocessors, Intel should therefore extend its brand to cell phone products by using the
proven “Intel Inside” campaign. There are several reasons why such extension could work and
be advantageous - Intel has all the required resources and channels to extend its brand thus it
would be easy to leverage economies of scale, advertising, distribution of the new product under
same brand. Further, Intel’s differentiating strategy has historically been the first company to
market an innovative product. However, such brand extension does carry risk (albeit low one) of
diluting the brand equity if the technically revolutionary cellphone fails. Also it should be noted
that we do not see the market for PDAs gaining momentum if the cell phone market starts using
microprocessors and acts like mini computers. In short, cell phones might be better a substitute
for PDAs. Hence, we do not recommend extending Intel’s brand name for PDAs.

The consumers might be confused about the meaning of such extended brand and its relevance
with new product – cellphones with flash memories and microprocessors. Also, by expanding the
brand, Intel might have resistance from retailers and OEM partners as they would like to
advertise their final product rather than ingredient of the product. To avoid resistance from OEM
and to avoid confusion in customer’s minds, Intel shouldn’t completely discard the co-branding
strategy of “Intel Inside”. Intel instead, should advertise their logo differently compared to the
previous method (stickers on the product case) because cell phones have smaller surface areas
than PCs. Following are several different ways in which brand promotion could be - Intel can
embed logo on the welcome screen of the phone enabling consumers to see the logo when they
switch on/off the phone, additionally advertise logo on the packaging boxes of the brand new cell
phones and on manuals of phones. Other sales promotion techniques that Intel could employ
would be creating a template (reference design) for cell phones using their chip and software
from Microsoft. This strategy reduces the R&D cost for cell phone makers and helps get new
entrants in the market. This strategy helps Intel itself to increase the sales of their own chips.
This strategy was proven when Intel applied similar strategies for their chipset and motherboard
business. This strategy helped to increase their sales of microprocessor for PC. Again, we
wouldn’t change this strategy as this helps reach a larger customer base and generate new
customers resulting in increasing Intel’s market share.

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