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PENTIUM BROUHAHA A MARKETIG LESSON BETTER COMMUNICATIONS WOULD HAVE HELPED

By Published on .

Technology companies rushing headlong into the consumer market in search of profits and glory can learn a lot from the experience of Intel in mismanaging its Pentium chip problem.

But there's an equally valuable lesson for every marketing executive: A powerful consumer advertising budget does not make you a consumer marketing company.

Intel had a stroke of genius in successfully transforming a microprocessor into a branded product. But in the process of communicating that the engine inside is more important than the automobile as a whole, it took on some heavy and unfamiliar responsibilities. Aside from monumental miscalculations on several communication fronts, Intel's fatal flaw was adopting a "father knows best" attitude-in essence deciding for the consumer what wasbest for him or her. The company never recovered from that misread of the consumer mind-set.

Consumers of technology products can be a skeptical bunch, particularly when your brand proposition is gold standard, the user has come to expect flawless performance and you don't take forceful ownership of the problem when the product comes up short. Intel was hurt by the credibility gap that emerged when their assessment of the potential incidence of a Pentium flaw (once in 27,000 years) was challenged by IBM, which said it could occur as often as every 24 days.

Lesson 1: The very nature of a crisis situation is that early on you almost always operate without sufficient information on the scope and severity of your problem, and yet the first 24 to 48 hours after public disclosure set the tone for the whole roller coaster ride. Intel squandered the opportunity to take decisive action during the critical two-week period between receiving bona fide user complaints of processing flaws and IBM's preemptive announcement of its decision to withhold shipments.

Intel is known to have an insular (some might say paranoid) culture that's a product of the humbling experience of being driven from the memory chip business in the 1980s by Japanese rivals, only to be rescued by a cash infusion from IBM. This defining event shaped the corporate culture that has made Intel such a success story, and at the same time was a key contributor to the company's mismanagement of the Pentium crisis. A culture driven by an engineer's world view broke the problem down into its smallest component parts in an effort to solve it, and in the process lost sight of the big picture.

Lesson 2: Look yourself in the mirror, recognize that the culture and mind-set don't change just because it's crisis time, and install checks and balances to make sure you override your natural instincts when they will serve you badly.

The lack of an effective communications link between customer service and external communications was likewise a key. There were published reports of frustrated users being rebuffed by Intel's customer reps when they called in to report processing flaws. This forced a cadre of sophisticated users to seek another way to express their concerns. And they had a ready vehicle in the Internet, which soon abounded with rumor and supposition about the source of the problem and the approach Intel would take in solving it.

Intel was wise to monitor the Net and use it to respond to untruths and identify outspoken critics who might be assuaged. But despite its technological savvy, the company seemed not to appreciate the "real time" dynamics of the Net and on-line chat groups, and the communications problems that are created when there is a disconnect between your posture in the media and on-line, and what customers are being told one-on-one.

In some cases, concerned users who were being promised replacement chips in a matter of days ended up waiting many weeks, and took comfort by surfing the Net to report their experiences and get the latest information from others. This disconnect only added to the impression that Intel had a bigger problem than the company was willing to admit.

Lesson 3: Make good use of the emerging vehicles for direct, on-line communication with consumers, but coordinate the strategy and timing with your outreach via more traditional media and customer service. Establish a party line delivered with one voice and correct misimpressions quickly and convincingly.

Published reports suggest that Intel executives may have been lulled into a false sense of security by supportive phone calls from retailers and computer manufacturers encouraging them to stay the course. This could indeed have helped convince an insular company like Intel that it could manage through the problem without a recall. But the fact that IBM's decision came as a shock to Intel management (and was delivered after a weekend in which IBM reportedly tried in vain to reach Intel executives) suggests that the cardinal rule-"Stay close to your customers"-was violated.

Lesson 4: It's always nice to hear from friends (and even sometime friends) in a time of crisis, but you must discount what they tell you. Their motives are usually honorable, but they are much more likely to tell you what you want to hear than what you need to hear.

There's much to be learned from the Pentium problem, but most important of all is that the consumer is boss, like it or not. Perception rules.M

Mr. Stanton is president-CEO of Stanton & Co., a marketing consulting and communications company in New York.

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