A Business Strategy That Is More Than Just Product Placement

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The deal: Hewlett-Packard forms entertainment alliances with movie, TV show and music producers.

The result: Buddying up to Hollywood has helped turn HP from an industrial brand nearly five years ago to an entertainment provider and an identifiable brand among consumers.

When the new DreamWorks movie Madagascar opens later this month, most consumers won’t see Hewlett-Packard
HP ads will promote the fact that its technology was used to create the soon-to-be released animated film 'Madagascar.'

in the movie. The Central Park Zoo animals in the animated feature won’t be using HP computers or its digital cameras, but make no mistake, HP is there -- in the technology used to create the lush animation. HP’s DreamWorks partnership is one of its longest-running "entertainment alliance partnerships," dating back to before the first Shrek movie in 2001 for which HP also supplied technological support.

After Shrek 2, HP produced a TV commercial announcing to the general public that its technology was used to create the popular film's sophisticated animations -- a move that commingled HP's brand image with the glitz and glamour of a Hollywood smash hit. A similar campaign will be used for Madagascar, the latest DreamWorks project produced with HP hardware and software systems.

More than product placement

For HP, the business model is more than product placement because the company is selling its technology and services to DreamWorks while at the same time exploiting the brand-boosting impact of its high-profile association with such a leading-edge entertainment enterprise. In recent years, it has assembled similar deals with a list of entertainment partners that includes Viacom, Starbucks and Universal Music Group and TV shows like Bravo’s Project Greenlight and the upcoming That ’70s House on VH1.

"It’s very tempting for companies to do vanity deals, that is, ally with celebrities and big names, and then make a big initial splash," said Stacy Katz, director of entertainment marketing for HP. "What we’re most proud of at HP is that we partner for the long term and we deliver for both our partners and our customers. And we get the maximum return on our investment."

HP’s entertainment strategy was born under former CEO Carly Fiorina, and while some point to her affinity for the glamour of Hollywood as the strategy's driver, it had become clear that HP had to do something to change its consumer image. HP was known for its great technology, but its image was just that of another computer maker before it embarked on the entertainment push. The first deals were enterprise heavy and behind the scenes, with consumer-facing marketing and advertising following later.

Leaving stodgy image behind

"It's taken HP out of its existing image as forward-looking, but still stodgy, old-line tech company and put it in the realm of entertainment provider," said Roger Kay, an IDC analyst. "Just the fact that people are aware of HP as a brand is a big step. In the past that wouldn’t have happened. They were an industrial brand for years until about five years ago."

Analysts agree that HP’s challenge in the hyper-competitive electronics and technology industry makes any broad one-stop shop marketing strategy a challenge, but they also agree that the strategy has been working in changing consumers’ image of HP.

"They’ve been very aggressive in trying to position HP as the company that understands entertainment and can do everything from soup to nuts," said Rob Enderle of Enderle Group. "Their belief, and I would agree, is that if you can own the entire food chain, you will have great economies of scale."

Although Ms. Fiorina is gone, don’t expect the entertainment strategy to similarly disappear under new CEO Mark Hurd. Mr. Hurd has already committed to executing the strategy Ms. Fiorina laid out, and the board, as well as other key executives at HP, are strong supporters.

HP deal to make Apple iPods

One important key to HP’s strategy has little to do with marketing or Hollywood alignment, and that's product innovation. All the Hollywood glamour and buzz in the world won’t compel consumers to buy mediocre products. To that end, HP has been adding hip consumer electronics, such as flat screen TVs and DVD movie projectors. They’ve also struck a deal with Apple to make and sell Apple iPods from HP, crafted a Windows-friendly version of iTunes and sell customizable tattoo skins for the device. HP is also pushing forward with its digital camera and printers with bundled versions and more sophisticated and customized products.

"One of the things HP is really interested in is the ability to personalize and customize your technology," Ms. Katz said. The company announced a partnership with Universal music star Gwen Stefani earlier this year in which Ms. Stefani will create and help promote a digital camera she designs. More such deals are expected.

For HP, the entertainment partnerships are the foundation, but creative marketing and great products are needed to succeed. HP needs to build its entertainment brand image for much more than the movie and TV industry. It will use those connections and products to fast forward the company into a broad entertainment company, both as provider and enabler in the new digital world.

"It’s about more than just owning the digital home and the equipment in someone's living room. It’s everything from creation to consumption of all digital entertainment," Mr. Enderle said.
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