Micron Took The Risk; Fell As A Result

By on June 5th, 2013

Micron Electronics, a direct seller of computer systems, is ready to raise brand awareness, and maybe raise a little hell in the process.

The Nampa, Idaho-based company, a distant third after Deli Computer Corp. and Gateway in direct selling of personal computers in the U.S., is known by savvy computer users for manufacturing powerful products with leading-edge technology and for winning prestigious industry awards. But overall brand awareness is virtually non-existent.

compaqSo Micron is in the midst of a radical repositioning, a rebuilding so significant that insiders are calling Micron a $2 billion start-up. Next month, it will unveil a new, more defined branding strategy.

Micron will target small and midsize businesses, including home businesses, as well as individuals, analysts say, rather than the Fortune 500 companies that are so well-served by Compaq Computer Corp., Houston; Dell, Round Rock, Texas; and IBM, Armonk, N.Y.

To accomplish this, the company has been recruiting management and marketing executives who are considered among the best minds in the industry, along with a new advertising agency, a public relations agency, a database company and a Web site design company.

Add to this Micron’s zeal to be innovative and outrageous, and the company promises to be one of this year’s most interesting brand creation stories.

Ready for a turnaround

A turnaround is in order. The most recent snapshot of a reason: Micron reported net income of $5.9 million for the third quarter of fiscal 1998, which ended May 28, on net sales of $340.8 million, compared with net income of $19.7 million on net sales of $511.4 million for the same period last year.

So Micron, with increasingly poor financial results, consolidated domestic and international operations and reassigned about 400 of its 4,000 employees to its parent, Boise, Idaho-based Micron Technology., a $4 billion manufacturer of memory components. The company shelved international expansion plans and began recruiting top computer industry managers.

The task is to create a brand strategy that will increase awareness.

“It’s not that they don’t have outstanding products. . . . I think they do. What they don’t have is a brand,” said Scott Miller, senior industry analyst for Dataquest, the San Jose, Calif., research unit of Stamford, Conn.-based Gartner Group. “Micron’s biggest issue is creating demand, and branding can help you do that. . . . If you go out and ask customers why they would buy Micron, they say, ‘I don’t know.'”

The new Micron team vows the company will do whatever it takes to be more than a blip on the PC radar screen. To get a sense of how significant the changes will be at the usually conservative Micron, consider Michael Rosenfelt’s title. Mr. Rosenfelt, who joined the company in March, is creative director-marketing weasel.

“We’ll kick down doors to be successful,” he said. “There will be an aggression the likes of which Micron and the PC industry has not seen before.”

pcMr. Rosenfelt had gained acclaim for his marketing prowess as founder of Power Computing, the highly successful manufacturer of Mac clones that was acquired in September by Apple Computer, Cupertino, Calif., and which earned a reputation for in-your-face, outrageous marketing.

Micron’s U.S. market share is 2.0%, compared with 9.4% for Dell and 7.2% for Gateway, North Sioux City, S.D. The worldwide picture is even more bleak: A share of 0.74%, compared with Dell’s 5.6% and Gateway’s 3.2%, according to Dataquest.

Team captains

To mastermind the rebuilding, Joel Kocher, 42, on June 22 was appointed chairman-CEO. Tapped in January as president-chief operating officer, he will continue to hold the title of president.

Mr. Kocher replaces Joseph Daltoso, 36. Mr. Daltoso, who was chairman-CEO of Micron since its inception in April 1995, will provide consulting services to the company for an indefinite period, after which he plans to retire.

Also, Mark Gonzales, a former top Apple marketing executive and VP-marketing for Be Inc., a Menlo Park, Calif.-based software company, joined Micron in February as VP-worldwide marketing. Bill Coins, a former executive at Apple and Power Computing, is VP-branding.

Micron recently hired Bam! Advertising as its advertising agency of record. The Austin, Texas-based agency replaces Trahan Burden & Charles, Baltimore, which was fired, said Mr. Rosenfelt, after Micron discovered it had low brand awareness levels despite spending $65 million on advertising last year.

Bam! created Power Computing’s ads. Agency principals David Bernert and Mike Bevil have experience in high-profile accounts including Sega of America, Redwood City, Calif.; Motel 6 Corp., Dallas; and Dell.

Direct Impact, Austin, headed by Janet Rubio, who formerly was responsible for Dell database marketing programs, will handle Micron’s customer contact management, database marketing and direct marketing.

Other partners include Frog Design, Sunnyvale, Calif., for industrial design and product development, and its new-media division in Austin for Web site, interactive and electronic commerce. Krause Taylor Associates, Campbell, Calif., will handle public relations.

Micron’s current ad campaign from Bam! is creating quite a buzz: One already has been pulled. They take an anti-advertising flavor and use language not usually found in PC ads. “If you just bought a notebook, don’t read this ad or you’ll probably get pissed off,” reads one huge black headline on a bold yellow background.

The ads are running in core computer magazines, including PC World and PC Week, said Mr. Bevil.

The ads “are garish,” Mr. Rosenfelt said. “We don’t try to be obnoxious, but we ran 14-page inserts before and no one knew us. Calls are up 20% to 40% over previous ads.”

Maybe the ads have brought in too many calls. The “pissed off” ad was pulled after negative response. “I think it was a little too jarring for PC buyers,” Mr. Bevil said.

Creating customer loyalty

So in mid-August, Micron will launch the new positioning.

“It will be a very precise, very well-defined strategy,” Mr. Bevil said. “With the new brand strategy, you could say Micron is taking a risk, a gamble. They won’t be wishy-washy. They will put a stake in the ground for what Micron stands for.” Micron will shift from being product driven to customer driven, and research indicates its customers are intensely loyal. “They talk of falling in love. . . . That is missing in the PC industry,” Mr. Rosenfelt said. “Apple buyers were giddy, excited; there were bumper stickers. With Micron, you see that evangelism.”

An important piece will be Micron’s online marketing effort. Mr. Rosenfelt estimates Micron does a larger percentage of total business online than either Dell or Gateway. Stephen Shore, formerly director of market development for PC World Online, is Micron’s director of Internet marketing.

While analysts agree the new Micron team is impressive, it may not be enough.

“The dynamics of the industry make it very difficult to build a PC business today,” Dataquest’s Mr. Miller said. “Three years ago, building a PC business was much more opportunistic.”

For example, the PC industry is characterized by pricing strategies that often lead to low margins. Top-tier companies enjoy stronger name recognition, offer broader product lines, and have more significant marketing, financial and technical resources than Micron.

Also, it’s become harder to differentiate technology in the PC industry.

“It comes down to marketing, broadly set, not just marketing communications. . . . Product capabilities have a very fleeting advantage in the PC business, so you need more than that,” said Eric Lewis, manager of personal systems research in the Mountain View, Calif., office of Framingham, Mass.-based International Data Corp., a high-tech research company.

However, Mr. Gonzales said he expects opportunities for product innovation to increase next year.

“If you look at it that the product is only hardware and software, then yes, our industry has matured. But the product is also service, support, the process of selling and how you work with the customer,” he said.

Opportunities for growth

In addition to brand name recognition, Micron sees its opportunity for growth tied to customers increasingly accepting the direct sales channel worldwide.

“People and the press focus on overall growth of the market, but I see a war between direct vendors – Dell, Gateway and Micron – and indirect vendors like Compaq, IBM, HP (Hewlett-Packard Co., Palo Alto, Calif.),” Mr. Gonzales said.

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