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It's What's on the Outside That Counts

Marketing: PC makers are launching massive campaigns to bolster brand awareness as they increasingly battle for buyers.


As the PC industry converges on Las Vegas this week for the annual Comdex extravaganza, one thing is clear: Never has brand been more important in selling computers.

A near-saturated consumer market and delays in new, must-have multimedia technology have dampened sales of home PCs just as two formidable contenders--Sony and Toshiba--are entering the already crowded field.

Faster processors and new operating systems have kept demand for desktop and notebook computers brisk among corporate customers, causing new players to jump into the latter arena as well, including Japanese electronics heavyweights Fujitsu and Hitachi.

It's no wonder computer makers are paying as much attention to what's on the outside of the box as the technology inside, launching massive marketing and advertising campaigns to bolster brand awareness in hopes of winning the hearts, minds and pocketbooks of computer buyers.

Already, Packard Bell, Apple, AST and other players who've slipped up on one or another of the fundamentals have seen sales and market share slither away. Even Hewlett-Packard, after a strong debut in the consumer segment last year, has stumbled of late.

"There's not room for all the notebook players. There's not room on store shelves for all the home PC brands. That's a formula for disaster," said Brad Johnson, who tracks the PC business for Advertising Age magazine.

Competitors are clawing after a domestic PC market that's come down to earth after growing nearly 25% during 1995, when consumers rushed to upgrade for Windows 95 and log onto the Internet. By contrast, analysts expect shipments to grow only 13% to 16% this year.


The slowdown is mainly due to home PC sales, which were flat in the third quarter, the first no-growth period in at least two years, according to analyst James Staten of Dataquest. By contrast, corporate PC sales are growing at a healthier 18% rate, with expectations of an even better 1997.

Analysts are bearish on the Christmas shopping season, which drives what is traditionally the computer industry's biggest quarter. The number of first-time buyers is tapering off, and innovations such as digital videodisc and Intel's MMX multimedia chip that were expected to be out by the holiday shopping season have been delayed until early next year, causing early adopters to hold off on buying new, more expensive machines.

In fact, analysts aren't expecting to see much that's new and different at this year's Comdex, which runs through Friday and is expected to draw more than 210,000.

"There's simply nothing compelling right now," said Bill Zinsmeister, senior analyst with International Data Corp., the technology researcher. "PCs are still about $1,500 and they really aren't doing much more than they did last year. They're doing it faster, but not doing new things."

Consumer electronics retailers such as Circuit City and Best Buy could be hit the hardest by yuletide blahs, while mail-order companies such as Dell and Gateway 2000 should continue to see the healthy demand from bargain-seeking second- and third-time buyers that has fueled their recent stellar financial performance.

Against this backdrop, hardware manufacturers are doing everything they can to wow would-be buyers: holding prices, tweaking PCs to include common-sense features such as better speakers and built-in modems in notebooks, and expanding customer service operations.

But PC makers' major focus is in building brand names through national ad campaigns and other marketing strategies. Together, hardware and software makers spent a record $1 billion on advertising in 1995 and are on track to exceed that this year, according to Advertising Age.

Fujitsu and Hitachi, both of which established U.S. subsidiaries earlier this year to enter the notebook market, are spending upward of $20 million each--the bulk of it during the fourth quarter--on TV, newspaper and magazine ads to get their names in front of consumers.

"We want to be a tier-one player within five years," said Mark Yahiro, marketing vice president for Hitachi PC Corp.

Gimmicks are in too. In a series of publicity stunts last month, Hitachi employees parachuted out of airplanes carrying the company's E series notebooks to prove that the machines aren't as delicate as some people believe. At Comdex, a good chunk of Fujitsu's booth will be occupied by a bright-red 18-wheeler outfitted as a showcase for the company's new Lifebook notebooks.

"Fujitsu owns 23 affiliates in North America. We're huge and we've been selling things like mainframes here for years. There's brand equity in the name," said Greg Chambers, Fujitsu PC marketing vice president.

But analysts aren't expecting success to come quickly.

"The reality is Toshiba and IBM are the two strong guys in the [notebook] market," said Edward Lee, an analyst with the Robertson Stephens investment bank. "It's a tough market to crack."


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