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Gateway

University Case Study
by

Kapil Khatwani

on 15 December 2012

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Transcript of Gateway

Searching for the Right Advertising Agency Gateway Carmichael Lynch, Minneapolis
1993
A new genre of commercials which were "unscripted" & “folksy ads” were kicked off for Gateway's television advertising. Jeff Weitzen March 1998 - Gateway Changes at Gateway Continued , the company dropped 2000 from its name & introduced new logos... April 1998 October 2002 Achievements Factor of Change The company grew rapidly and its international sales increased.
Hence, there was a need for a global agency. Founded in 1985 in a U.S. Midwestern farmhouse, Gateway has grown into one of the world's best-known technology brands with millions of satisfied customers. Starting with a $10,000 loan guaranteed by his grandmother, a rented computer and a three-page business plan, founder Ted Waitt turned Gateway into a revolutionary company whose innovations helped shape the technology industry. Company Background Continuing Mission Gateway remains dedicated to making the experiences of buying, owning and using a PC convenient and trouble free for its customers. As Gateway pushes into new frontiers, it remains dedicated to its original objective of helping people improve their lives through technology. Products Gateway's Struggle to find an advertising theme The Timeline in which Gateway Computers Changed 10 Advertising Agencies to develop & sustain a competitive Advantage 1993 2005 2002 1997 1998 2000 Achievements Factor of Change 1997 $70 Million Worldwide Account Created a tagline which ran for years “You’ve got a friend in the business”. Introduced a campaign theme saying Gateway goes “From South Dakota to the rescue.” The agency and the in-house group failed to collaborate.
Also, the agency’s creative approach was geared more toward traditional advertisement that used actors & scripted TV spots which were disliked by Ted Waitt. Key Factor of Agreement - Strategic Thinking & Chemistry Match between Gateway & Agency DMB&B A small creative Boutique Ted Waitt decided to step back from day to day operation & Jeff weitzen was hired as new CEO.

A week after dismissing DMB&B, the new CEO announced the hiring of McCann-Erickson Worldwide, one of the largest agencies in the world. Henry Corra was brought back along with another small agency Campaigns "Lets talk about your Gateway" "YOURWARE" "People Rule" Featuring actor Michael J.fox as a spokesperson of gateway trying to understand consumer technology issues such as how to choose the right PC. Targeting Consumers Achievements Factor of Change - 2001 Gateway’s revenue hit an all time high in 2000 reaching $9.6 billion while the company’s market share was 8.2 percent, making it the number three PC maker in the U.S. behind Dell and Compaq. Industry observers view - Speculation was that Gateway had become increasingly dissatisfied with the level of service from McCann since the agency had won the Microsoft account in 1999. Gateway's View
"McCann's Creative work was more "Corny" than "folksy" and that the agency really did not understand the company's Mid-western Culture. McCann's View
"The dismissal was part of the wholesale changes & Management Shakeup that accompanies the return of Tedd Waitt Targeting BUSINESSES "Gateway@Work THE ADVERTISING AGENCY PITCH Soon After Ted Waitt took Control once Again, Several Agencies made presentations to Gateway ** Most Observers Speculated that Gateway would be awarding the account to Fallom which appreared best understand the folksy, midwestern Culture of the Company.

** However, Negotiation broke down due to STRATEGIC DIFFERENCES and Gateway decided to move its advertising back in-house once again & Waitt turned to his friend Henry Corra to direct the company commercials. 2002 Achievements Factor of Change Focused on brand building for Gateway with ads ranging from humorous spots featuring Ted Waitt with a talking cow.

Both the client and agency felt that Gateway had a great deal of brand-building potential with the campaign as a cow had been a symbol of the company since it was founded. The Company decided to move its advertising in a new direction. The change was part of Gateway’s decision to move away from the folksy, rural image and brand itself as a more modern and hip company.

Also a research showed that the campaign made by S/K raised consumer awareness but was not helping to build the Gateway brand.

Studies showed consumer's perceptions about Gateway's Advertising as "Entertaining, Friendly & Midwestern" yet did not fit well in business space & also there was decline of perception on key attributes such as technology leadership & Reliability. Achievements Factors of change Branding work included redesigning of the “cow spot” logo and the Gateway Country stores and integrating a new creative tagline that had been developed by S/K – “Gateway: A Better Way.”

As a part of its new strategy Gateway began offering over 150 digital electronics products including a complete selection of digital cameras, digital video gear, MP3 players printers, software as well as Gateway’s own plasma TV with a 42 inch screen. However, the company’s sales decline continued as 2002 revenue dropped to $4.2 billion and the company reported a loss of $309 million.
Gateway, along with other PC manufacturers faced intense competition from Dell which continued to cut prices in an effort to increase its market share over HP which has completed its acquisition of Compaq Computer in 2002. May 2003 "The comforts of Gateway" B2B print & TV ad campaign
“Humanology.” Goal of new advertising To underscore Gateway’s folksy charm while positioning the company as a solutions provider for an increasingly complex technological world. Consumer Campaign The Acquisition of Acquiring privately held eMachines, which was one of the fastest growing and most cost efficient personal computer companies in United States. Merger made Gateway #3 player in the US personal computer market, nearly 7% overall market share and 25# of US retail PC market.

eMachines CEO Wayne Inouye named CEO of Gateway & Ted Waitt takes position of Chairman.
Second move: back away from selling televisions and other consumer electronic products and instead focus more on its core business of personal computers. Inouye's 4 Strategy Moves to revive Gateway Close all of Gateway’s 188 retail stores as he felt they were too costly to keep open. Third Move: would have to add more employees and infrastructure to operate a successful consumer electronics business. Fourth Move: decided to sell Gateway branded computer through retail channels such as Circuit City, Best Buy, Office Depot in addition to its direct channels. January 2004 September 2004 - July 2005 Handled the creative work for Gateway before resigning the account in less than 10 months.

The agency issued a statement that read "During the time that we worked with gateway, we were unable to agree upon the strategic direction of the brand. Moved creative work to this agency who were doing online and direct response work for them and had crafted its back-to-school campaign for 2005

Grey starting working on its b2b advertising while Leo Burnett continued to handle the consumer campaign. End of 2005
Inouye’s turnaround strategy might be working as Gateway sales for the year were $3.85 billion up from $3.65 billion in 2004.

Concern:
As the year end financial report showed Gateway was performing well at retail, but poorly in other areas.

In early 2006
Wayne Inouye resigned from his position as CEO within less than 2 years on the job.While he was successful at slashing Gateway’s costs and focusing the company back on its core computer business, he has still found it difficult to revive the company in the face of the stiff competition and slim profit margins in the personal computer industry.

Meanwhile, the Woo Agency continued to handle Gateway’s advertising as the new management team looked for ways to revive the struggling company amid speculation that it might be acquired by another firm.

"Yourware" A major Strategic Move
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