The CMO Interview

HP's Gerstein Talks Frankly About Consumers, Competition and Compensating Agencies

Post-Palm Acquisition, the New Marketing Senior VP Details Bold Ambitions for Traditionally Cautious PC Maker

By Published on .

YORK, Pa. ( -- By this time next year, Hewlett-Packard expects to have at least one tablet device on the market, several of its own branded phones, and a brand-new marketing campaign and message in line with its master plan of creating and connecting a range of personal devices.

Richard Gerstein
Richard Gerstein
Bold ambitions for the world's largest PC maker, which is sometimes accused of being too cautious. However, its recent acquisition of Palm and its webOS mobile platform, and its plans for both, seem to debunk that stereotype, especially as explained to Ad Age recently by Richard Gerstein, the new senior VP-strategy and worldwide marketing for the Personal Systems Group division. He joined in mid-May.

Mr. Gerstein, a confident marketer with years of experience -- most recently as the CMO of Sears, and prior to that, two decades in personal-care products and consumer packaged goods marketing for Alberto Culver and Procter & Gamble -- has a unique perspective on the current consumer electronics and mobile technology industries.

And he's betting big that HP will emerge as one of the few hardware, software and content players with a formidable interconnected device strategy. And he just might be right. While Apple is already there with its proprietary mobile iOS, Mac computer strengths, iTunes and App Stores, as well as content deals with partners and developers, HP -- unlike BlackBerry, Microsoft and Google -- might be the only other player that will be able to challenge them on the same scale.

While he declined to talk about HP's recent CEO change and the lawsuits and the social-media onslaught those wrought, or reveal the exact launch dates for HP's pad and HP/Palm phones next year, or the marketing campaign, he was happy to chat with us about his varied career, HP's challenges, and the role marketing and advertising will play moving forward.

Ad Age: You have a long career in marketing, but HP, a tech company, is a first for you. What does your experience in retail and consumer packaged goods bring to HP?

Mr. Gerstein: I focus a lot on strategy in how we differentiate ourselves in marketing, the product and how we go to market. All those principles apply whether you're selling a laptop or a lipstick. In my view, understanding your consumer, who your consumer target is, and how you meet their needs are all extremely relevant.

How we continue to differentiate ourselves goes back to the new vision we've rolled out, which is to transform how people think, feel and connect. Palm is obviously going to play a huge role in creating an ecosystem of devices, applications, content and software all seamlessly connected across the huge platform we have in PCs today, with a Palm pad product [and] with Palm phones, and we will create that as a unique proposition.

Ad Age: So it's not Windows Mobile, not Android, but Palm's webOS that will be HP's consumer mobile operating system going forward?

Mr. Gerstein: We're placing our bets on webOS and what that will bring on a Palm pad and Palm phone. It is a big undertaking. But Palm has great brand recognition, they have a great operating system that frankly needed the scale that we can bring.

Ad Age: What happens to the Palm smartphones?

Mr. Gerstein: The Palm phone is a great phone today and we have road map of new phones coming out next year, although we haven't announced those specifically. The brand going forward is HP: It will be an HP phone, and an HP pad.

But it's important not to think about the individual devices, but the connectivity of the devices. What is really going to differentiate the webOS and HP experience is how all those devices interact together and what you can do across them. Obviously, TV is clearly the next big box that everybody is trying to connect to, so that will play an important role.

Ad Age: You talked about the focus on the consumer. Who is that consumer for HP?

Mr. Gerstein: In the consumer space, a couple of things are happening. When you look around the globe, there's clearly this younger segment where the machine has become as much about entertainment as it has about computing. Then at the opposite end of the spectrum we have a segment called "first computer in the home," where people are just getting used to a computer -- and that can be somebody like my 70-year-old grandmother or it could be in India where people have experienced cellphones, but haven't had a computer in the house.

Ad Age: So a student might have a social-media computer vs. a grandma who might have an email computer?

Mr. Gerstein: In a sense, yes. The reality is software and content are becoming the differentiators in this space. The boxes have gotten to be pretty darn good boxes. It feels like you could launch the space shuttle with one of these things, right? So not very many people need a lot more computing power.

When I worked at Procter & Gamble, they sold off the Duncan Hines business. And the reason they sold that business off was that they had now made a box cake better than homemade. Their benchmark for 50 years was making a cake as good as homemade. And they finally got to where people said they preferred the Duncan Hines mix over homemade. So at that point, where do you go?

Ad Age: Where does marketing fit in at HP?

Mr. Gerstein: One of the things we're working on is a new product-development process to really make sure that marketing is really ingrained. My team will work with R&D folks to bring marketing more into that upfront conversation, so that we really are defining the benefit to the customer.

Ad Age: What about the pad market? Who do you think the iPad buyers are? Who is Apple snatching up that you're not going to get next year?

Mr. Gerstein: It is early adopter today, in some ways. You're seeing a lot of early high-end business, and you're seeing a lot of early-adopter consumer, and a lot of it is just the badge factor. Why have a diamond watch when you can walk around with an iPad? It screams "I'm hip, I'm cool."

You ask why technology is doing well right now? It used to be that when people came over to your house and you wanted to impress them, you'd show them your big bathroom or your four-car garage, right? Now you show them your 60-inch television. Computing devices have become an extension of myself, no different than my Chanel handbag or my designer eyeglasses.

Ad Age: So how do you become that bag that everyone wants to carry?

Mr. Gerstein: You have to have devices and software and an experience that wows. And you have to go build your brand in a way that does that. Satjiv [Chahil, Mr. Gerstein's predecessor] did a lot of that work to really connect us with pop culture and what's relevant, and that's part of the reason we've seen the success we've seen. ... HP was really a big corporate brand, much more seen as an enterprise brand. Todd and Satjiv took a business that frankly five years ago, when they took over, people were thinking was dying and that HP should sell off, and turned it into the No. 1 brand globally, growing faster than the market.

[When we launch the HP pad, it will be with] a very robust apps store. We're working with all the media companies and with the gamers. We clearly understand the need.

We bought a company called Melodeo and they are all about how to share your content across multiple devices across the cloud. We see all that seamless interaction -- all your content, when you want it, where you want it, and on what device you want it on -- is the future. And we're going to be one of two to three people who do that really well.

There are very few things I can say that I know to be true. But I know it to be true that if you are not a multi-device seamlessly connected with the ability for your user to access the robust content that they want, it will be very difficult to succeed in the future.

Ad Age: Who is your competition now?

Mr. Gerstein: Apple is a competitor who's clearly gotten stronger and somebody that we make sure we're always competing against. Then if you go over to the Microsoft-based world of PCs, I frankly don't see anybody else in that space who has the ability to go do what we're going to go do. I don't see Dell getting to an ecosystem of connected devices. [Competition is] more likely to come from the phone business, or you'll see some acquisition consolidation.

Ad Age: What about your agency relationships? The old industry thinking is that every time a new marketing guy comes in, all the current agencies get nervous.

Mr. Gerstein: They shouldn't be. I'm not as interested in the name on the door as the people who are working on my business. Because within any agency you can get their best or you can get their worst. If you're not a good client and you don't bring consumer insights and really great strategy and have a good creative discipline with your agencies, you don't get good work in the end. If you're one who beats up on the creatives all the time and you don't treat them with respect, you're not going to get good creatives on your business. The agencies aren't going to put their best people on the clients who don't help them retain their best people.

It used to be the media owned the eyeballs, they owned the pipe to the consumers. Now there's a free pipe called the internet. When I was at Sears we had a pipe bigger than a lot of media companies. I had 50 million people in my database. You could argue I was one of the largest media companies in America.

It really changes how you think about your marketing organization. It also changes the agency model because they have to get much more comfortable producing content for $30,000 as opposed to $500,000. We have a lot of conversations with agencies about that.

This whole content creation on the web should be the most enabling thing ever for the agencies. Social media and the web is like a renaissance for young creative people who should be going out and saying, "I want to shoot it myself with my digital camera. I don't want to hire an expensive director; why would I do that? I'm the visionary behind this." I don't think people get it. I think people are still stuck in an old model in the agency world of shooting million-dollar commercials. I had this experience where we wanted five three-minute webisodes, and I said, "Great, go do it." And they came back and said it's going to cost me half a million dollars. I'm not paying that kind of money for 15 minutes on the web. So I said, "You have $40,000; may the Force be with you." And they went off and hired this young documentary guy and used the great digital cameras you can get these days, and they got some inexpensive actors from, like, Second City. It was awesome.

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