For most of this time, Intel was unbranded and unknown. Only Sili- con Valley insiders and computer enthusiasts are really interested in
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where the chips come from. Even though it already held over 80 percent of the PC-chip market, Intel decided that it wanted to be- come a known brand as well as extremely successful. Intel wanted everyone to be aware what was inside computers doing the real work.
The result was its Intel Inside campaign, which was hugely expen- sive and successful. People are now aware that Intel makes chips.
From nowhere, Intel became a top-ranking brand. By 1993 Intel was voted the world’s third most valuable brand by Financial World magazine. Valued at $17.8 billion (compared to the worth of its near- est competitor at $4.1 billion), Intel only lagged behind Marlboro and Coca Cola. Quite an achievement.
Intel followed up its initial campaign with one for its Pentium chip. The logic behind this was that the Pentium was the newest and most powerful PC-chip on the market. The Pentium was Intel’s suc- cessor to the highly successful 266, 386 and 486 chips.
After its launch at the beginning of 1994, Intel anticipated sales of the Pentium would reach in excess of 10 million units by 1996.
The campaign encouraged people to switch from 486 machines to Pentium PCs. All very laudable but, as Intel made the 486 chips, the company was waging a campaign against itself. The campaign worked – it increased awareness of the Pentium . . . and also succeeded in annoying companies, such as Compaq, which were still putting their efforts into selling 486s. Compaq’s marketing needed to find ways round the suggestion from the chip maker that the 486 was basically obsolete.
Of course, having revealed to the world that it makes the chips, Intel’s troubles begin if the chips go wrong. It may be three million transistors on a minute bit of silicon, but we expect it to be perfect and, thanks to Intel’s marketing, if there is a fault in the chip we now know who to blame. Forget Dell or IBM, call Intel.
“With Intel Inside you know you’ve got . . . unparalleled qual- ity,” read an Intel advertisement. The “unparalleled quality” boast appeared a little excessive late in 1994 when Thomas Nicely, a math- ematics professor at Lynchburg College, Virginia, achieved interna- tional renown. Professor Nicely found that his three Pentium com- puters were making mistakes and then, in an effort to get to the bottom
of the mystery, shared his discovery on the Internet. Thanks to the miracles of modern technology, a minor mathematical problem be- came an international incident. And, thanks to Intel’s advertising, people knew where the fault lay.
In December 1994, IBM announced that it was halting ship- ments of the affected PCs and Intel was forced to adopt a vigorous damage limitation exercise. Intel’s first reaction was that IBM’s tests were “contrived.”
The fault was small – Intel calculated it would afflict the average user only once every 27,000 years; IBM countered that some cus- tomers could encounter the fault every month. “For a customer with 500 Pentium-based PCs, this could result in as many as 20 mistakes a day,” said IBM. Coincidentally, IBM was also developing machines with its own chip – “After years watching Intel build its brand at IBM’s expense, Big Blue must have found this as emotionally satis- fying as a long-suffering sugar daddy cancelling an errant mistress’s credit card,” observed The Economist.2
Whatever the nature and regularity of the flaw, Intel clearly had set itself up. Ironically, the problem with the Pentium was far less significant than flaws found in previous chips – the only difference was that Intel had marketed the brand too successfully. Not only had five million Pentiums been manufactured, but the Pentium was backed by an $80 million marketing campaign to encourage the mar- ket to make the switch from the old (the 486) to the new (the Pentium). This came on top of the estimated $70 million spent on the Intel Inside campaigns.
Intel’s problems were largely of its own making. It created the brand and has to live with the consequences. Also, it is clearly a victim of its own success. The bigger the name, the bigger the brand, the keener competitors, onlookers, commentators and journalists are to topple it from its pedestal.
The media attention over the Pentium is one of the few false moves in the company’s entire history. Andy Grove’s initial pro- nouncements seemed to suggest that the controversy was caused by ignorance and media hype – “We are quite clearly anxious to have this event behind us, but given that this has become a major event in
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the mass media, involving people who are not accustomed to dealing with sophisticated mathematical terms like random divides, oper- ands and floating points, quite frankly we don’t know what to do,”
said Grove.3
Initially Intel offered to replace chips for customers who could prove that their machines were needed for accurate complex compu- tations. It was only later in December that it offered to replace pro- cessors free of charge. “Our previous policy was to talk with users to determine whether their needs required replacement of the proces- sor. There was a resentment to our approach – it appeared that we at Intel were arrogant, we were telling customers what was good for them. Maybe we have been thick-headed . . . . but we finally figured it out,” observed Andy Grove.4 On 22 December 1994 Intel took a full-page advertisement in the Financial Times to apologize – “No microprocessor is ever perfect,” it said “What Intel continues to be- lieve is that an extremely minor technical problem has taken on a life of its own. Although Intel firmly stands behind the quality of the current version of the Pentium processor, we recognize that many users have concerns. We want to resolve these concerns.”
As Moore’s Law predicts, such distractions quickly become his- tory. Technology and Intel move on. The focus of Intel’s marketing has moved from selling product features in the early 1970s to direct partnership with the final customers of the company’s microproces- sors. It has moved on with remorseless speed and a rare clarity of purpose and thinking.
Chips and gravy
• 1968: Intel founded with the aim of making semiconductor memory practical.
• 1971: 4004 microcomputer introduced – managed 60,000 operations in one second. Followed by the 8008.
• Mid-1970s: “In the mid-1970s, someone came to me with an idea for what was basically the PC,” Gordon Moore recalls.
“I personally didn’t see anything useful in it, so we never gave it another thought.”
• 1981: Intel’s range included the 8086 and 8088 processors.
IBM selected the 8088 as the basis of the first PC.
• 1982: 286 chip.
• 1985: 386 processor – over 5 million instructions per second.
• 1989: 486 processor – 50 times faster than the 4004.
• 1993: Pentium – 1,500 times faster than the 4004.
• 1995: Pentium Pro.
• 1997: MMX technology introduced to enhance multimedia performance; Pentium II.
• 1998: Celeron processor.
Notes
1 Cane, Alan, “Chips with everything,” Financial Times, Novem- ber 15, 1993.
2 “Intel’s chip of worms?” The Economist, December 17, 1994.
3 Kehoe, Louise, “Article of faith challenged,” Financial Times, December 14, 1994.
4 Kehoe, Louise, “Intel offers to replace Pentium microchips,”
Financial Times, December 21, 1994.
K ellogg’s
he Kellogg logo is invited to breakfast in more homes around the world than any other brand. The company has domi- nated the breakfast cereals market for decades, and owns 12 of the top cereal brands – including Corn Flakes, Rice Krispies and Froot Loops.
William Keith Kellogg, who started mass-producing corn flakes in 1906, insisted on high quality standards, and took great care over every detail of production. Counterfeit products were a problem even then. To ensure that customers would not buy inferior imitations he had his signature printed on every packet. Leading brands have been using similar strategies ever since.
At its zenith in 1988, the company enjoyed more than 40 per- cent of the US ready-to-eat market. Since then, however, lower priced store brands have begun to take a bigger bite out of the $8 billion American cereal market.
In 1997, Kellogg, the industry leader, was still deriving 80 per- cent of its worldwide sales from cereal. In the U.S., however, the cereal market is barely growing, with consumers switching to bagels and other breakfast products they can eat on the move.
Despite its huge market presence and instant consumer recogni- tion, in the next few years Kellogg faces some tough decisions. It offers a fascinating snap shot of one of the world’s great brand com- panies at a critical moment in its history.