Steve Ballmer Mike Maples MICROSOFT REBOOTS FUTURE MARKETING

Scaffolding around new buildings on Microsoft's lush, ever-active campus in Redmond, Wash., is not the only construction under way at the world's biggest software company. Inside the 22 buildings that comprise headquarters, senior executives have set in motion a "re-engineering for opportunity" that will profoundly affect Microsoft Corp.'s marketing. This dominating force in software for personal computers is also taking a hard look at a corporate ad campaign to push Microsoft as a brand. That could strengthen efforts to penetrate the home market as well as move into new areas such as online services and interactive TV. "Our sales will not grow at historic rates, but they have the potential to grow at rates that are extremely rare for companies our size," Microsoft's three top executives-Chairman Bill Gates, Exec VP-Sales & Support Steve Ballmer and Exec VP-Products Mike Maples-wrote in an employee memo last month. "The reorganization will allow us to grow without increasing our head count as much as our current organization would require." Unlike many companies that restructure, Microsoft is neither losing money nor cutting its payroll. Its latest quarterly earnings report, which exceeded stock analysts' expectations, lends no sense of urgency to the changes. Operating profits for the quarter ending March 31 jumped 38% from the previous year to $256 million, on 30% higher revenue of $1.24 billion. But the company took a $120 million charge to pay damages in a patent infringement case it lost to Stac Electronics. Instead, Microsoft is retooling its marketing organization to simplify messages and decisions in a push to double annual revenues over the next four years to $7 billion. The marketing makeover will barely touch two areas, indicating forethought in recent moves and the wisdom not to tamper with what's working. Microsoft Home, the consumer division and brand launched last fall, was set up as a prototype of new-product divisions, which will replace the old autonomous product marketing groups. Microsoft may also develop more than one brand. Microsoft Home already has its own logo and branding effort, and the company will unveil a new Microsoft Office Compatible logo this week. The logo will go on software that works well with Microsoft Office, the company's best-selling "suite," a package that includes word processing, spreadsheet, presentation and database software. Products that compete with Microsoft's won't get the logo, however. Hank Vigil, director of marketing-desktop applications division, would like to market all Microsoft's office-oriented software as Microsoft Office. "My goal is to expand Microsoft Office to the whole division," he said. "The goal of the reorganization is to make it happen in a direct way." "The biggest single change is not moving people" within Microsoft, said Liz Welch, general manager-corporate communications. "The biggest is taking 75 products and putting them into five divisions. That says we are not going to execute independent marketing activities for [each product]. We are going to consolidate that before it comes to market." Plans to introduce 100 Microsoft Home CD-ROM and software products each year underscore the importance of coordinating the company's efforts to reach consumers who own PCs. Also untouched in Microsoft's reorganization is its hugely successful sales effort to PC manufacturers. "This has been and will remain our most profitable customer segment," wrote Messrs. Gates, Ballmer and Maples. That effort, called OEM for original equipment manufacturers, has become the model for other units that concentrate on particular customer segments. For so successful a company, top Microsoft executives paint a surprisingly bleak picture. "Competitors like Lotus [Development Corp.], Novell and Electronic Arts are more focused. We need to innovate not only in our products but also in our sales, marketing and operations." As marketers, they add, "We are overloading the market with lots of complex messages. We need to develop clear themes that pull together what we say about our products." One prescription is efficiency. "Basic customer needs and competitors are largely the same around the world. Instead of reinventing strategies and market positioning, the product divisions and customer units will be required to develop global strategies and programs." Action is also encouraged. "It must be clear that it is better to take action, make mistakes and be forgiven than to wait and ask for permission." Microsoft's ad agency of record- Ogilvy & Mather, Los Angeles, handling an estimated $50 million in product advertising-and its longtime public relations agency Waggener Edstrom expect little impact from the reorganization. "We view it very positively," said Claire Lematta, VP at Waggener Edstrom. "From the Microsoft end, it empowers the product mission." While corporate communications sets standards for advertising, product divisions will execute ads. Internationally, product messages and position will be executed by ad agencies around the world. "The position and messages will be consistent-Microsoft Office will have the same tagline, `Software that works for you'-but ads will still be executed locally," said Charles V.G. Stevens, Microsoft general manager-worldwide business strategy. With product messages coordinated through seven product divisions and the sales force organized around three customer segments, Microsoft's central corporate communications unit has been slimmed to eight people from 25. "They will focus on the enormous challenge and opportunity involved in making Microsoft a household name recognized as the leading software company in the world," the reorganization memo said. "We will use our product messages to enhance the meaning of Microsoft, and the name Microsoft will make our products a more valuable and logical purchase." That provides the context for Microsoft's exploration of a corporate branding ad campaign. The company has invited more than 10 ad agencies, including O&M, to pitch a campaign via questionnaire. Four agencies, including O&M, are expected to be named finalists this week. "We need to be systematic about what elements of our brand are relevant to all our products, from Microsoft Flight Simulator to Windows NT," Ms. Welch said. "The Microsoft brand means a lot of different things to a lot of different people," she added. Richard Skews coordinates Technology News.

Steve Ballmer Mike Maples MICROSOFT REBOOTS FUTURE MARKETING

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