IBM Corp.

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IBM was incorporated in 1911 as the Computing-Tabulating-Recording Co. It was created by the merger of the Tabulating Machine Co., Computing Scale Co. of America and International Time Recording Co. C-T-R, with 1,300 employees, made and sold a wide range of machinery, including commercial scales, industrial time recorders, tabulators and punch cards.

In 1914, Thomas J. Watson, a tenacious salesman from the National Cash Register Co., New York, joined the company as general manager and was promoted to president within 11 months. Mr. Watson expanded the company globally and divested all nontabulating business. In February 1924, the company's name was changed to International Business Machines Corp. to reflect its growth.

IBM's sales messages and overall philosophy were deeply impressed on its salesmen, who were the first to sport the white-collared, blue-suited professional image that would be associated with the company until the early 1990s. The company's first slogans and jingles were created in-house to foster a strong company image among its employees.

Although Mr. Watson believed that investing in his sales force was far more important than traditional advertising spending, the company did retain an agency, Frank Presbrey Advertising, New York, in 1924, to promote a strong national image of IBM performing its industrial duty to the U.S. and the world. During World War II, Mr. Watson joined other U.S. industrial leaders to promote the sale of war bonds in several print campaigns and turned over all IBM facilities to the U.S. government for military manufacturing.

Changing direction

By 1950, IBM was again marketing typewriters, which it had introduced in 1933, and its massive punch card machines, such as the Mark I and the IBM 701, primarily to government and research projects. But in the 1940s, the first computer, ENIAC (Electronic Numeral Integrator & Computer), was created for the U.S. military and soon was put into development in the private sector; in 1951, Remington Rand delivered the first Univac computer to the U.S. Census Bureau and eventually sold 46 Univacs for $1 million each. Seeing this as a threat, IBM began work in this new area, developing advanced calculating machines.

In December 1954, when agency Cecil & Presbrey, successor to Frank Presbrey Advertising, closed its doors, IBM was forced to consider a new agency and strategy for the first time in 30 years. It moved its $1 million-plus advertising budget to Benton & Bowles, New York. The money was spent primarily to advertise IBM's new electric typewriters in consumer, business and women's publications (the last targeting the secretarial market), helping IBM become the global leader in typewriter sales despite its lack of broadcast advertising.

By 1960, Benton & Bowles had become IBM's agency of record for office products; World Trade Corp., IBM's subsidiary responsible for business operations outside the U.S.; Service Bureau Corp., IBM's computer subsidiary; and IBM's recruitment advertising. IBM hired Marsteller, Rickard, Gebhardt & Reed, New York, in 1960 as the new agency for its data processing division as well as some corporate work. In March 1963, it named Ogilvy, Benson & Mather, New York, to handle $600,000 in corporate billings that had been at Benton & Bowles; Ogilvy was responsible for introducing IBM to network TV in 1965.

By the late 1960s, IBM had also created a strong identity for itself internationally. Working with Marsteller Inc., it hired agencies in each of its foreign markets to tailor its advertising efforts for the local audience while making sure its advertising carried a unified look worldwide.

Market dominance

By 1971, IBM had captured almost 70% of the computer market. IBM's dominance drew the attention of the U.S. Justice Department, which filed an antitrust lawsuit against the company in 1969; the suit against IBM and its "monopolistic practices" stood for 13 years until it was finally found to be "without merit." But by the late 1970s, the Justice Department and its still-pending trial began to take its toll, as a wary IBM proceeded cautiously in new markets; its market share was slipping toward 40%.

At the same time, other companies were working to develop minicomputers that would soon make IBM's massive machines and market dominance almost obsolete. In April 1977, Apple Computer introduced its Apple II at a West Coast computer fair. The small but complete computing unit was a hit, and Apple began an all-out industry sprint to produce and advertise its most powerful and marketable minicomputer. In response, IBM mobilized a secret task force to create a minicomputer. The result, the IBM Personal Computer, was ready for shipping in August 1981.

PC wars

Apple Computer welcomed IBM to the market in an ad that ran in major U.S. daily newspapers the day after the PC's unveiling. "Welcome, IBM. Seriously," the ad read. "Welcome to the most exciting and important marketplace since the computer revolution began 35 years ago."

Although some IBM loyalists may have seen the ad as a dig at the company's lateness to market, Apple was serious; the company welcomed IBM to the market because IBM's solid image gave the so-called PC revolution the legitimacy it needed. The slap in the face would come a few years later in another ad introducing Apple's new Macintosh: the "1984" spot that ran during the January 1984 Super Bowl and implied that IBM was the equivalent of George Orwell's fictional Big Brother.

The image of a drab, monolithic giant is precisely the image IBM sought to counter in advertising for its new personal computer in 1981. For the first time, the company had to rely completely on a national campaign to sell its product rather than using its vast army of salesmen. IBM enlisted one of its roster agencies, Lord, Geller, Federico, Einstein, New York, to design a campaign for the new desktop machine that would dispel new users' fear of computers while changing the perception that the company was as heartless as the technology it sold.

IBM's new spokesman emerged in August 1981 as the Charlie Chaplin "little tramp" character in an effort to personify the qualities of a new computer that was uncomplicated and fun. "A tool for modern times"—alluding to Mr. Chaplin's 1936 film "Modern Times"—was the tagline. The campaign was such a success that IBM PCs practically flew out of dealer stores. In the first year of the IBM PC, it went from a zero market share to 28% and grew from there.

IBM's entry into the home computer market increased its advertising expenditures, which it sustained throughout the 1980s, but critics saw IBM's efforts of the mid- to late 1980s as generally ineffective. The company unleashed aggressive advertising to market its new business of computer printers and to battle PC clones that were taking over the market with claims that the products were equal to IBM's.

In June 1988, executives from Lord, Geller left the agency to form their own shop—Lord, Einstein, O'Neill & Partners—and attempted to take IBM with them. A lawsuit ensued, and IBM began searching elsewhere to place its $135 million corporate account. By September 1988, IBM had settled on two new agencies, Lintas, New York, to handle the PS/2 personal computer line domestically and assist overseas, and Wells, Rich, Greene, New York, to oversee global corporate brand strategy.

In 1990, IBM sold off its typewriter, keyboard and printer business to focus on the computer industry. But due to a recession and the declining market for mainframe computers, IBM ended 1992 with 40,000 fewer employees and plans to lay off another 25,000. IBM, facing a loss in profits of $16 billion over three years, was losing the battle of creating an image for itself as a technology leader to more narrowly focused competitors.

Salvaging the brand

In 1993, IBM hired a new CEO, Louis Gerstner, who had been CEO at RJR Nabisco for four years and, before that, chairman-CEO of American Express Travel Related Services Co. Mr. Gerstner did not know as much about computers as he did about branding, but his management style and trust in advertising would go far to salvage IBM's brand and the company.

In 1993, Mr. Gerstner recruited a veteran American Express marketing executive, Abby Kohnstamm, to head IBM corporate advertising and help plan a new marketing strategy. During this period, IBM's advertising remained much the same, with aggressive, expensive product campaigns and a growing agency roster. Lintas was handling IBM PS/2 PC campaigns, including an April 1993 print campaign in partnership with IBM's European lead agency, GGK, Paris, that touted IBM's service capabilities using the image of the Pink Panther. Overall, IBM had built a roster of more than 40 domestic and international advertising agencies, including Merkley Newman Harty, DDB Needham, D'Arcy Masius Benton & Bowles and J. Walter Thompson Co.

On May 25, 1994, IBM unexpectedly moved its entire $500 million advertising account to Ogilvy & Mather. The agency's North American division head, Shelley Lazarus, had worked on Mr. Gerstner's American Express brand years before. Ms. Lazarus' pitch to the IBM executives was based on the notion that years of disjointed advertising by multiple agencies had crippled the impact of the IBM brand. The move was the largest account switch in advertising history at that point, and the largest global advertising strategy ever taken on by a single agency.

A new face

Early efforts from Ogilvy attempted to put a new face on IBM's products. Particularly successful was a huge U.S. and international print and TV campaign for IBM's OS/2 Warp software, launched in October 1994. Particularly notable was a commercial that showed Czechoslovakian nuns in traditional habits discussing, in translated subtitles, the advantages of IBM's new operating system. The idea that the computer revolution could reach such an obscure corner of the Earth got audiences' attention, but in 1996, after some repositioning, IBM surrendered the consumer market to Microsoft Corp.'s Windows.

In 1996, after the company had begun receiving accolades for successful product launches such as its ThinkPad notebook computer, its strategy took a new turn. IBM focused its advertising solely on what it termed "e-business," at a time when e-commerce—selling products and services on the Internet—was all the rage. Over the next two years, IBM continued its "e-business" focus, profiling actual IBM employees in edgy, ethnically diverse commercials with the tagline, "Are you ready for e-business?" These were not the blue-suited IBM employees of yesteryear.

In April 1998, Ogilvy began tying IBM products, or "e-business tools," into the corporate brand campaign, defining IBM as a solutions and services provider. The results: "e-business" became a part of the business lexicon, and the IBM brand name helped legitimize the Internet as a tool to enhance business.

As it entered the 21st century, the world's leading computer company had redefined itself as a major force in the Internet and computer services industry, thanks in large part to its radical change in advertising strategy. In 2001, about 40% of IBM revenue still stemmed from hardware, according to the company, but IBM had become a $32.2 billion information technologies services company.

IBM further shifted its image to position itself as the leading provider of "on demand" computing in 2002. With "e-business on demand," IBM touted its services and software products as the core of its business. In 2004, corporate advertising created by Ogilvy dropped ebusiness from all but specific product lines, and moved to an on-demand logo—a red button with a white lettered "on"—to tout its on-demand ability to connect customers any time or place using almost any device or software platform.

In 2003, IBM was the 38th largest U.S. advertiser, spending $862 million, up 3.6% from 2002, according to Advertising Age.

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