Intel's new strategy demands new partner

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Eric Kim hasn't wasted a day of his four-month tenure as Intel Corp.'s marketing chief. Given carte blanche to change Intel's marketing strategy, he's given that freedom a workout.

He has recast the entire Intel approach, moving from a broad overall image brand program to a system that assigns a brand manager to products such as Centrino and Pentium. The system has more in common with consumer-package-goods companies like Procter & Gamble than it does with most technology companies' marketing departments.

The marketing shift necessitated a new kind of ad agency relationship, and last week Intel heralded the arrival of a holding company model with the hiring of Interpublic Group of Cos. to its global $300 million account.

The change in marketing follows a sweeping reorganization of the whole company including dozens of executive changes and several newly created divisions. The Intel shakeup comes on the heels of a rough 2004 which saw a chip-set recall, another one delayed, readjusted financial targets, and lateness in announcing innovations like a dual-processor chip. It lost a bit of market share, but more importantly it lost buzz to much smaller competitor AMD. Lately Intel's fortune has begun to swing the other way; Dell recently said it would not use AMD chips after it had flirted with the idea, and financial reports have been rock solid with steady gains, which is important for a stock Wall Street uses as a tech bellwether.

The fundamental changes at Intel are being driven by the market, particularly in marketing. Years ago, Intel competed mainly in the personal-computer space where its goal was to produce faster and better chips. The marketing goal was to link Intel Inside to trust and quality. Today's emerging market for Intel products is much broader and includes mobile products as well as consumer electronics and the digital home, which requires a different marketing style, Mr. Kim said.

While Mr. Kim was specific that his primary agency would be McCann Worldgroup, he also endorsed the one-time ease of negotiation and flexibility inherent in using a holding-company system. "We will now have many other entities that may be of value on a project basis. We're already set up rather than having to go back and negotiate a new deal each time," he said.

That also means quicker to market each time, which is especially critical in the fast-paced dynamic technology industry.

Worldgroup CEO John Dooner said Intel would instantly be a top 10 account for the agency, and growing. While neither he nor Mr. Kim would say when work would break, Mr. Dooner said the relationship is off to a quick start. "We just won the business this week and we've already started working with literally hundreds of people involved around the world," he said.

Mr. Kim's sweeping changes to Intel marketing are a welcome relief to industry watchers who were growing weary of stumbles.

TIGHTER MESSAGE

"He was given carte blanche when he came in with the understanding that the executive team had to agree to allow him to run the department his way. It really looks like he is fixing marketing problems they've had for years," said analyst Rob Enderle of the Enderle Group. "With the centralized effort built around platforms, their message will be much tighter. This is something they probably should have done years ago."

Still there are challenges ahead: Dual-core processing will take center stage in 2005, and the new org chart is still being implemented even as chairman Andy Grove, a key leader since the company was founded in 1968, retires in May. Mr. Kim will report directly to Paul Otellini who will become CEO in May. Although a long-time Intel executive, Mr. Otellini, who calls himself a product guy and was once VP-sales and marketing, is emblematic of the new generation taking over at Intel eager for the company to move forward while maintaining its tech-leader status.

CHEMISTRY LESSON

Mr. Kim joined Intel in November, after serving for five years as Samsung Electronics global marketing chief, where he was credited with helping to push the giant consumer-electronics company to be highly competitive with rivals like Sony, Panasonic and Sharp.

The pitch team from McCann was led by Mr. Dooner and North American regional director Eric Keshin, along with Worldgroup's creative director Jonathan Cranin. McCann and Intel planned to meet late last week to begin setting up staffing and organization, but Mr. Dooner said, "It's very logical that we would organize against their brand platform system." McCann Erickson will take the lead on creative, with Universal McCann handling media, and other Interpublic agencies including MRM Partners and R/GA tapped for duties such as Internet marketing.

Mr. Kim said the decision was difficult among the high-quality finalists, but in the end, it was the compatibility with McCann that won Interpublic the business.

"It boiled down to chemistry. We thought McCann would be our best fit," Mr. Kim said. "They showed a visceral understanding of us as a company. First and foremost we will define together a next chapter in our overall brand strategy."

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