TECHNOLOGY MARKETING;AS NICHE PLAYERS FIGURE PLACE IN MARKET, CONVERGENCE PRODUCTS WILL ABOUND

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We're creating a whole new category with Destination, a true convergence product.

Destination is a convergence of a traditional TV set and a traditional computer, with a 31-inch screen so viewers can watch it and interact with it as a group. We consider it a breakthrough entertainment and communications platform to serve a family's TV and computing needs.

You're going to see a plethora of convergence products coming out in the next one or two years, then a continual evolution as people try to figure out their place in the market. It's going to start as a niche, but I think it's going to move toward the mainstream as the PC gets easier to use and continues to add functionality.

ROOM PC

Destination is a room PC, whether for the living room, the conference room or the classroom. With its big-screen monitor and Internet capability, it can be used as a presentation system for groups in a business setting or as an interactive instructional tool in schools. Initially, we're targeting the PC enthusiast. After that come the general consumer, the corporate market and the educational market.

It's such a diverse platform, there really is no typical use. For example, for people with small children, it becomes a platform to spend a lot of time with educational software, because they can do it in a very comfortable environment-their own living room or family room. It gets the family involved; pulls them together rather than pushing people to separate parts of house to do their own things. They may play educational games as a family group; do home finance in a comfortable setting; access Internet and surf the Web.

And they can tie in with broadcast media and watch TV with a very intuitive and powerful front end that allows you to select programming based on what you want to watch, when you want to watch it. In some cases they may use a split screen, for example, to watch a news show on CNN or CNBC, then access the provider's Web site at the same time to get more information on stories that interest them.

To market the product, we use a multi-pronged approach. First, we have an overall umbrella of general awareness and branding created through public relations and television advertising. Our PR campaign created an incredible amount of interest and press when we launched the product in April. Recently we again used PR when we began retail distribution through CompUSA and Nobody Beats the Wiz stores.

TRENDS FROM S.D.

We've also created a TV campaign with the theme: "All the big trends start in South Dakota." We're running 60-second spots on broadcast TV as well as some cable TV. And we have a fulfillment package tied to the TV advertising: Anyone who calls in gets a videotape and is referred to a retailer.

Next we focus on the PC enthusiast segment through print ads in computer magazines. In addition, we're leveraging the retailers' marketing campaigns. This really is the most efficient mechanism because it gives people the opportunity to see the product in stores. We provide the overall branding and awareness umbrella; the retailers are responsible for creating the demand and the foot traffic in the store.

Finally, there are our new media efforts, focused on our Web site.

We have a very popular and successful Web site. The number of people accessing it has been growing dramatically and constantly since its conception, and we just passed a milestone: 1 million hits in a single day.

And, because we're a direct marketer, we actually can take orders online for all our products. For us, the Internet is not only a living, breathing advertisement, but also an interactive sales tool. We've prepared software so customers can go online and configure the product they want, immediately get a price, then convert it to an order right there on the spot. We're selling a substantial number of PCs that way now. This is a great sales tool for us. In fact, we will sell more PCs over the Internet this year than our total sales volume in 1989.

INTERACTIVE AD

For traditional marketers, the Internet today primarily is an interactive advertisement or interactive brochure. For us, as a direct marketer, we're doing quite well selling product. And these are high-ticket items-$3,000 computers. So the Internet now produces only a small percentage of our unit sales but a significant portion of our revenue.

The Internet doesn't replace any marketing medium; it's a whole new vehicle. It combines the best of some advertising media, videotapes, brochures and more, in one controlled environment.

As for Destination, we feel strongly the category will grow, and we have the advantage of being there first. End users will have the call on how it develops.

Ted Waitt, a 33-year-old native of Sioux City, Iowa, created Gateway 2000 as a two-person operation in a farmhouse in 1985, and is its chairman-CEO. Today, Gateway, based in North Sioux City, S.D., is a $3.6 billion multinational direct marketer of computer systems that employs 9,000.

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