Tech firms get TV-ad savvy

For years, consumer companies like Coca-Cola, McDonald's and Ford Motor have used TV ads to bolster their brand and help sales. Now many tech companies also are turning to TV to reach their business customers, boost their stock price and help with hiring.
Written by Sam Ames, Contributor
A TV ad shows Martin Luther King Jr entoning "I have a dream" and then the camera pulls back to reveal an empty Washington Plaza as TV viewers hear: "Before you can inspire, before you can touch, you must first connect. And the company that connects more of the world is Alcatel."

Alcatel makes equipment for international telecom carriers such as Deutsche Telekom, AT&T Latin America and Telecom Italia, and it's a safe bet that most TV-watching consumers will never see an Alcatel product. Yet the company has invested millions into an ad campaign that includes print and TV spots.

And Alcatel is not alone. Other technology companies such as Cisco Systems, Nortel Networks, EMC and Applied Materials also have embarked on pricey TV advertising campaigns. Applied Materials will spend US$30 million on a campaign that will run until the end of this year.

Why? For years, consumer companies like Coca-Cola, McDonald's and Ford Motor have used TV ads to bolster their brand and help sales. Now many tech companies--though they sell primarily to other businesses rather than directly to consumers--also are turning to TV to reach their business customers, boost their stock price and help with hiring.

"The bottom line is that most tech companies have no clue about what they are going to be making in five years. But the brand, which is part of the customer relationship, that's what endures," said professor Rashi Glazer of the Haas School of Business at the University of California at Berkeley.

Given a market that is becoming more crowded and competitive every year, and with innovation able to remove any intrinsic product advantage in months, Glazer and others say technology companies are looking for any angle to promote themselves above the competition, and TV is becoming an important battleground.

But will the same TV watchers with a craving for a Big Mac care about microchips?

Applied Materials, Alcatel and other companies say they are not trying to reach all consumers. Instead, these companies are wooing the hearts and minds of select groups, namely investors, current or future employees, and the top executives at companies who make purchasing decisions.

Perhaps the most important audience for these advertisers is the so-called C-level executives (CEOs, CFOs, CTOs) who run the companies that buy products and services from Alcatel, EMC and the rest.

"When you are building a brand from the ground up, the focus for us is on our core customers, investors and prospective and existing employees," said Brad Burns, senior vice president of communications at Alcatel.

Cisco Systems ran TV ads with the slogan "Are you ready?" in hopes of linking the company with the promise of the Internet.

"We were targeting the business decision maker in all sizes of companies, across all industries," Kathleen Watson, an advertising manager at Cisco, said in an email interview. "TV was only one component of an overall integrated marketing campaign."

Applied Materials limits its ads mainly to CNN, CNNfn, CNBC and prime-time network TV shows. Nortel also placed its ads during times and shows when C-level executives were most likely to tune in, said Andrew Lark, vice president of corporate marketing.

Tech companies are willing to make the investment. Total TV ad spending by nonconsumer companies such as telecom equipment makers grew to US$166 million last year from US$106 million in 1999, according to research done by Competitive Media Reporting, a New York-based advertising research firm.

"You can't afford to be brand X," said Tom Hayes, managing director of global corporate affairs at Applied Materials.

Chip giant Intel turned to TV advertising for its long-running "Intel Inside" campaign, aiming to set its chips apart from the competition.

Before the 10-year-old campaign launched, analysts say, consumers did not care which processor ran their PC. But Intel successfully made that choice a factor in the purchasing decision and studied previous strategies by NutraSweet, Dolby and Teflon, which, like Intel, create an ingredient in a finished product.

"We view our brands as a critical part of our company, like R&D," said John Travis, director of worldwide consumer promotions at Intel.

But for technology companies such as Nortel, Cisco and Applied Materials, which predominantly don't even sell indirectly to consumers, simple awareness and name recognition can help sales, as well as have less tangible benefits on stock price and employee retention, executives say.

"Customers are more willing to open the door for a salesperson if you are a credible company, and we believe advertising helps facilitate that," said Alcatel's Burns.

Others put it another way. "Nobody ever got fired from buying from IBM or AT&T," said Berkeley's Glazer.

Burns said that before the TV ads, only 6 percent of people surveyed in the United States could name France-based Alcatel as a telecom company, and that Cisco, Nortel and Lucent Technologies scored higher.

After three months on the airwaves, the company says, the campaign elevated its profile. "It was an incredible success in achieving brand awareness, which was the primary objective," Burns said.

Applied Materials had similar awareness problems. Even though it was relatively well known on Wall Street and in the engineering community, surveys showed its familiarity levels among audiences was in the neighborhood of 16 percent before the ads ran.

"The level of understanding was somewhat shallow, so they knew about us, but they didn't know much about us," said Applied Materials' Hayes, who said that Cisco and Intel recorded rates of 56 percent and 66 percent, respectively, in the survey.

"It's only anecdotal, but I think we've moved awareness mightily," Hayes said of the ad campaign.

Nortel's Lark said the company tried about a year ago to use TV ads to change its perception from that of an old phone-switching equipment company to a maker of advanced Internet gear.

Lark also said TV advertising could help keep customers aware of Nortel's product line so that they might wait for a box that will come out in six months rather than going for a niche competitor that has it now.

But some see TV advertising by equipment companies as a waste of time, because their message is sent to people who are not customers. "A brand is a promise to a consumer," said analyst James Nail of Forrester Research. "There is no promise Cisco can make to 'Joe-average' consumer," because that person is not a customer, Nail said.

Nail also suspects that big companies appear on TV because they feel all big companies should run ads regardless of whether it fits within the business plan. "That smacks to me of more corporate ego than marketing strategy," he said.

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