This case was written by Professor Michele Greenwald, Visiting Professor of Marketing at HEC Paris, for use with Advertising and Promotion: An Integrated Marketing Communications Perspective – 7th edition by George E. Belch and Michael A. Belch. It is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.

The case was compiled from published sources and interviews with executives at IBM and Ogilvy & Mather.

Introduction

During the 1970s and ‘80s, IBM was one of the most successful companies in the world. The company had experienced strong growth in both revenue and profits and had a virtual stranglehold on the market for mainframe computers. In fact the company was often referred to as “Big Blue,” a nickname derived from its massive blue mainframe computers. For four consecutive years in the 1980s, IBM held the top spot in Fortune magazine’s annual list of the most admired companies in the United States. However, by 1993 the quintessential “Blue Chip” company had reached its nadir. Over the three previous years, IBM had lost a total of $15 billion and its stock price was at an 18-year low. The brand had fallen below number 250 in Interbrand’s annual survey of the most valued brands with a brand value, estimated at a negative $50 million

 1

 dollars. The explosive growth of personal computer networks threatened IBM’s lucrative mainframe and minicomputer business and the company was struggling to turn the situation around.

In the late 1980’s and early 90’s, the drivers of innovation and change in information technology were smaller, nimble companies like Microsoft, Compaq, Dell, Oracle and others who offered less expensive systems than IBM that could basically accomplish the same tasks. IBM had fallen behind in technology as its top management stubbornly clung to the notion that traditional mainframes, which had been the company’s primary strength, would maintain their dominant position in the marketplace. Compounding the problem was the fact that IBM had become a bloated and inefficient bureaucracy that had lost touch with its customers and had a risk-averse culture relative to its competitors. An image on the cover of Fortune magazine in the early 1990’s depicted IBM as a dinosaur. The situation had become so serious that the board of directors considered breaking up IBM into several companies that would be better able to compete in emerging technology markets against the smaller, more nimble players that were gaining ground at IBM’s expense.

In April 1993, Lou Gerstner became the new Chief Executive Officer (CEO) of IBM and was given the task of turning around the company. Gerstner was a former McKinsey consultant who had built his reputation through senior assignments at American Express and RJR Nabisco. Although not known as a technophile, he started by speaking with customers, large and small, around the world to gain an understanding of their needs and how they perceived IBM. Based on their feedback, Gerstner came to the conclusion that IBM was worth more in the long run as a whole, rather than as disparate pieces. He envisioned a three-legged company that, with offerings of software, hardware and consulting services, could synergistically leverage its strengths to solve specific problems that would improve their customers’ performance and business results.

Gerstner brought on board Abby Kohnstamm who had worked well with him at American Express. Together, they made a radical move by consolidating all IBM advertising creative work worldwide with one agency – Oglivy & Mather. Prior to the consolidation, IBM’s advertising was handled by a network of approximately 40 different agencies around the globe. However, IBM’s top management felt the company was projecting too many images with its advertising divided among so many agencies. They decided that by consolidating all of its advertising with one agency, IBM would be able to present a single brand identity around the world. Chris Wall, worldwide creative head of the IBM account for Ogilvy & Mather, noted that: “It was a massive consolidation job of a very complex brand in a very complex category. The challenge for Ogilvy was to take a brand with heritage from the past and bring it to the

2 Ppresent: taking what was good and truthful, and infusing it with a modern voice. We have taken a very complex topic in an environment of constant change, in which the products evolve but are not quite "new" - products you can't show and often can't demonstrate. Our challenge has been to keep the IBM brand fresh, interesting and topical - because at the end of the day what you're selling is trust.”

The consolidation followed a reorganization and change in IBM’s business and communications strategy that was initiated by Gerstner. Prior to the reorganization, IBM had at its core 13 semiautonomous business units, each of which could develop its own independent business strategy with a concomitant marketing communications strategy. These businesses overlapped and inherent in the mix were potential communications conflicts. Under Gerstner, the 13 units were reintegrated into a more cohesive whole. The strategy emphasized the integration of the units and the key role IBM played in technology around the world, while reinforcing the heritage of the company. Central to the implementation of the new worldwide strategy was the global articulation of this vision in a single voice.

“Solutions for a Small Planet”

The first step taken by IBM to project a single brand identity around the world was the launching of a new advertising campaign in January 1995 with a contemporary tone known as “Subtitles.” The goal of the campaign was to communicate the message that IBM delivers solutions that are simple and powerful enough to manage information anywhere, anytime, and for anyone. The tagline for the campaign was “Solutions for a Small Planet.” It originated from a focus group in Paris where a participant made the observation that: “It’s as if technology is making the world smaller and bringing everyone closer together because we all share the same problems.” The commercials developed for the campaign used the same imagery but were varied for each country by the use of subtitles in the local language.

The campaign targeted “C-level” executives, such as CEOs, CIOs, and CFOs, rather than the previous target audience of procurement and information technology executives. The goal of the advertising was to convey that IBM was capable of solving business problems, not just hardware and software issues. The campaign was effective in communicating that technology affects even average people around the world and IBM is there with solutions for smaller as well as larger, more complex technology needs. This new campaign was in line with Lou Gerstner’s strategic vision for the company which was for IBM to be recognized as “a provider of solutions.” The campaign also communicated an important message that IBM remained vigorous, innovative, and a purveyor of technology and solutions while retaining its latent strengths of global scope, leadership, and reliability. Several of the print ads from the “Solutions for a Small

3 Planet” campaign as well as a photo board of the “Nuns” TV commercial are shown in the power point file that accompanies the case.

While the “Subtitles” campaign was a step in the right direction, IBM needed to go further creatively by showing prospective customers that the company was hip to new technologies, understood their needs and issues, and had the solutions to make a difference. Key to developing this kind of advertising was the need to build a creative group that had a deep understanding of business and technology issues. In 1997, IBM published a 3,000-word manifesto in The Wall Street Journal and The New York Times, using copy written in business terms a CEO or CIO would use, rather than tech-heavy terminology. It illustrated to potential customers that IBM understood their business, spoke their language and had the expertise to help them solve their problems so they could perform better. The photography was very “street level,” providing the perspective that IBM was out of the ivory tower and in the trenches working with its clients to help them solve their business problems.

The “E-business” Campaign

The “Subtitles” campaign had one of the most successful runs of any image-oriented advertising campaign ever done by IBM. However, by the late ‘90s, the Internet was growing as more companies were using it to conduct business and IBM was working with them to support their electronic business processes such as advertising, merchandising, inventory management, order fulfillment and customer service. Thus, IBM decided to position itself as the most comprehensive provider of end-to-end solutions for e-business. This led to the introduction of the “e-business campaign,” which had several sub-campaigns to support different pieces of IBM’s business. These included “e-culture” which focused on helping companies adapt to doing business on the web, “e-business people” which focused on IBM’s global consulting services and “e-business tools” which included IBM’s products such as the ThinkPad personal computer and servers. The umbrella campaign recast all IBM communications in relation to doing business online and helped the company come to own the “e-business” label.

The campaign was give a contemporary look by producing television spots in black and white with a horizontal, oblong frame that created a screen with movie-type dimensions. The visual was framed in IBM’s blue logo color, which evoked the brand’s longtime equity, but at the same time, portrayed IBM in a fresh, new way. The spots were “slice of business” scenes in which business people experienced technology problems that IBM was able to solve. The commercials were witty and displayed a sense of humor (traits that were not previously associated with IBM), thereby projecting a much hipper, “with it”, and in-tune image onto the brand. A female voice-over was used, which was another symbolic departure from its previous

4 staid imagery, and different from most other business technology advertising. The print ads were also done in black and white with only the @ appearing in color (red).

As part of the E-business campaign, IBM utilized testimonials around the theme of “XYZ Company is an IBM e-business.” Large, well-known firms such as Mercedes Benz and Motorola, as well as others that were smaller and less known, were featured in the testimonials. A pool of print ads, illustrating the diversity of e-business customers, appeared in magazines, wild postings, outdoor billboards, and at airports. The campaign communicated the message that IBM worked with companies of all sizes across a wide range of industries and its broad expertise made them the most knowledgeable advisers for almost any business. Companies started approaching IBM asking to be included in the campaign as being portrayed as an “e-business” enhanced the way they were perceived by their customers. Great synergy accrued to IBM from putting all their communications behind a unified and relevant message. At the end of 1998, IBM did something formerly unheard of in newspaper advertising. Ogilvy & Mather created a 32-page color insert on heavy stock paper with a compilation of the e-business print executions. It included some surprising new content sprinkled throughout to create interest, a specific explanation of what e-business was all about, and a call to action for those interested in finding out more about IBM solutions for e-business.

The timing for the campaign was right, as e-commerce and all things “e” were starting to explode. Moreover, IBM’s association of e-business with their brand in a big way at the outset of this explosion resulted in the company pre-emptively owning the term. Chris Wall of Ogilvy & Mather noted that: “The effect of this simple decision was that IBM became one of the definers of how the world would talk about internet-based business, and this became a competitive advantage. By association, IBM became known as being at the forefront of developing ideas and recognizing technology trends: in short, it became a brand that “got it”. Prior to this campaign, IBM was constantly in the position of living down their “stodgy” past, making it harder to compete against Microsoft and other hot, young tech brands. But after e-business, IBM became one of the leaders of the pack. The crash of the dot-coms made everyone skeptical of 20 something change-architects.” IBM’s combination of steadfastness, depth, and its new, hipper, more cutting edge, and more “in the trenches,” image helped the company once again be viewed as a stalwart, in contrast to so many other fly-by-night high tech operations.

Within 18 months of running the e-business campaign, the IBM brand had turned the corner and was on its way back up. In 1998 IBM’s sales topped $80 billion for the first time ever and earnings were $6.3 billion. Even more impressive was the growth in IBM’s stock price which had risen from a low of $41 in the dark days of early 1993 to nearly $125 by the summer

5 of 1999. Fortune ran another cover story on IBM in 1999. However, this time the headline read “From Dinosaur to e-business animal.”

The “ON Demand” Campaign

The “e-business” campaign ran for several years and was followed by “ON Demand,” which was the first advertising campaign under Samuel Palmisano, IBM’s new Chief Executive who took over the leadership of the company when Lou Gerstner retired in 2002. Palmisano’s vision was to transform IBM by dramatically increasing its focus on the fast-growing Business Services market. Palmisano accelerated the shift in focus from “component value” (PCs and machines) to business value which involved providing end-to-end integrated solutions. This expanded vision of “ON Demand” business was based on the idea of how the world would work when businesses were fully wired with broadband, all systems were integrated, consumers had infinite choice, trends happened faster, companies provided better service and were more responsive to customer needs and business opportunities on a global scale.

Richard Ryan, of Ogilvy & Mather, noted that: “At its simplest level, ON is about getting your company to run better. ON means your company runs like clockwork. Business is smoother. Life is good. But people have heard all that before, so our first step was to create customer testimonials – China is ON, Napster is ON- to let people know that ON Demand is real and making a difference right now. Other executions-Fighting cancer is ON. Flying Phones are ON-speak to innovation and strategic expertise. Long copy executions let us get to the meat and potatoes of specific business issues. ON works across all of IBM’s product divisions. It’s a rallying cry for IBM’s 300,000 employees. It’s the marketing spearhead for Sam Palmisano’s vision.” Being ON means you’re responsive and flexible. It means being on your game: on budget, on track, on schedule. We wanted people to associate IBM with that new, ON Demand way of doing business.” Deirdre Bigley, Vice President, Worldwide Advertising & Interactive at IBM noted that “while ‘e-business’ was all about e-commerce and the Internet, ON Demand was all about the technology and movements such as supply chain optimization.”

The red ON button used in the ads, combined with the words DEMAND BUSINESS became the brand signature in all marketing materials. The slogan also became the rallying cry for all company divisions that cross-sell various IBM’s products and services in an attempt to improve their customers’ business performance. All of IBM’s sales representatives - from its server division, to software, to outsourcing – were selling the on-demand concept along with their own products. ON Demand’s task was to drive the development of all of IBM’s software and hardware, to make them capable of mixing with and managing applications from other vendors.

6 Over time, IBM began to define themselves less and less through their specific hardware and software products, and more as a total business solutions company in which consulting services was the key part of the “3-legged stool” and a means to sell the company’s hardware and software. E-business was all about the Internet and became too limiting for IBM as the they needed to broaden their positioning. An IBM executive noted: “Business automation has blurred the customary demarcation between business and information technology, put IT at the heart of corporate strategy, and elevated the understanding of the possibilities. As a result, companies increasingly look for partners who can skillfully combine business insight with technology expertise.”

IBM purchased the consulting firm Price Waterhouse Coopers in 2002 to enhance their expertise in consulting services, their credibility, and to increase their client base. IBM felt it was now uniquely positioned to provide the combination of IT and business consulting expertise that firms of nearly every size and in virtually every industry need in order to grow market share and revenue. They believed that no other firm in the world could deliver better on the combination of IT and business consulting to companies all over the world. As Wall Street analyst, David Cearley described it: “IBM is morphing from a computer company into a business expert, selling well-connected experts. IBM is changing its definition from International Business Machines, to international business models.”

A major challenge for Ogilvy & Mather in evolving the advertising for IBM was communicating the expanding scope of what the IBM brand stands for and the breadth of its business. The creative group had been given the task of describing IBM’s offerings in a way that sounds proprietary, but at the same time was understandable, to an ever-larger group of business professionals. With the acquisition of Price Waterhouse Coopers and the increased focus on business services consulting, IBM no longer was targeting primarily IT users. Rather it was marketing a broad line of products and services to top-level decision makers at companies and organizations of all sizes.

“The Other IBM” and “Help Desk” Campaigns

Since its inception, the name IBM has signified technology. However as the information technology consulting industry matured and web services were being built on open standards, organizations were shifting their definition of business value to include processes and enterprise optimization. In analyzing this new trend, IBM found itself faced with one of the biggest opportunities in its history: the $1.2 trillion Business Process Transformation Services (BPTS) market. Demand for BPTS had escalated as companies increasingly realized the value of teaming with a strategic partner to help redesign their functions and processes to become more profitable,

7 efficient and competitive. In 2005, IBM set upon a mission to position itself as the leader of the BPTS market by increasing awareness of and consideration for its capabilities in this area to senior business executives. IBM looked to Ogilvy & Mather to develop an integrated marketing communications campaign to help establish awareness, credibility, and ultimately preference for IBM as a provider of business consulting services.

Achieving this objective was not an easy task as it required maintaining IBM’s equity of superior technology and adding to it an equally strong perception that IBM offers superior business consulting services as well. Chris Wall noted that “IBM has a strong heritage as a technology company. A lot of people don’t realize they also do business consulting and not just technology consulting.” Thus, a major challenge for the IMC campaign was to get C-level executives to recognize that there is another “side” to IBM that provides business transformation services. In April 2005 a campaign was launched using the tagline “The Other IBM” which was designed to position the company as a provider of business consulting services and communicate its expertise in areas not typically associated with IBM. The creative used in the television commercials for the new campaign used imagery that alternated between scenes of King Arthur’s Knights of the Round Table wrangling with age-old business problems with counterparts at a contemporary business conference table doing the same. The metaphor of Sir Arthur’s Business Roundtable allowed for real issues to be discussed in a manner that was both informative and entertaining and to show how IBM Business Consulting could help businesses solve problems in specific areas. “The Other IBM” campaign was unveiled during television coverage of the Masters Golf Tournament on CBS. The Masters was the ideal platform for the launch due to the large number of senior business executives tuning in for the event. Also, since the Masters only allowed advertising from three sponsors, IBM was able to deliver its message with high frequency and without the clutter that typically hinders breakthrough during normal programming.

The TV launch was followed by an eight-page manifesto in The Wall Street Journal which was used to set the premise of “The Other IBM” and define it in the context of business consulting services. Additional print executions were used to elaborate on the King Arthur metaphor as well as to focus on specific areas in the BPTS such as human resources, finance and accounting, supply chain and procurement, sales and marketing, and strategy and change management. All of the advertising directed prospects to a micro web site where users could explore content in areas such as leadership and innovation, learn more about IBM’s specific capabilities in functional areas, read case studies and locate additional contact information.

8 In addition to advertising promoting “The Other IBM”, another integrated campaign called “Help Desk” was run concurrently to show how IBM’s on demand computing solves real problems and touches real people. The first phase of the integrated campaign focused on how IBM helps the world at large, while the second phase focused on more industry and customer- specific solutions. To underscore IBM’s ability to deliver value-added services to a customer, the advertising used the quick-problem solution metaphor of a “help desk” across television, print and online executions. For example, in the TV spots, the “help desk” appears in improbable places such as a golf course where a group of scientists needs help after its solar-powered golf cart runs amok or in the middle of a busy freeway where a motorcycle policeman stops to learn how IBM can assist with traffic control. The print ads featured beautiful photographs of landscapes with stylized help desk stickers attached to show a problem-solution scenario. The online execution used an interactive component featuring a large white room with classical columns where visitors would encounter a number of industry-specific scenarios for which the IBM help desk representative devised a solution. The “Help Desk” campaign received a “BtoB Best Award” from BtoB magazine, a leading trade publication, as the outstanding integrated business-to-business campaign of 2005.

The “Innovation That Matters” Campaign

IBM was pleased with the results from “The Other IBM” and “Help Desk” campaigns as they demonstrated the company’s expertise in the area of Business Consulting Services and gained credibility for IBM among business executives without negatively impacting its strong technology heritage. However, in March 2006 the advertising moved in a new direction with the launch of the “Innovation That Matters” campaign that is designed to position IBM as a means for companies to significantly change how they do business when seeking ways to grow. The campaign was developed in response to a major research study IBM had conducted which showed that after years of retrenchment, corporations were embracing change and planned to radically transform themselves over the next several years.

The new campaign uses the tagline “What makes you special?” and its objective is to start a business conversation and to open the door to exploring how IBM can help individual companies innovate, capitalize on their inherent strengths and redefine their business processes to differentiate themselves versus their competitors. The value proposition is that IBM can help companies innovate by changing their processes and technology. The advertising features companies that have developed new ways of doing business with IBM’s help and how this has given them a competitive advantage. The “What makes you special?” message also

9 communicates customization and that there is no one size fits all prescription, as solutions are based on each firm’s unique capabilities and possibilities.

The creative used for the campaign is very different from previous IBM ads and from other high tech, business-to-business advertising. It uses bold, saturated colors and simple images from everyday life (a radish, a pill, a car, a house) in a two-page print spread. The layout shows an item by itself on the left page of the spread and a “special” item on the right so that readers are drawn in to find out what’s special about it. Rather than using “high-tech” language, the copy describes business applications in terms that are relatively easy to understand. The choice of lower case letters in the headlines and tagline conveys a lack of pretension and shows that IBM wants to communicate that discussions with clients will be “down-to-earth” and not intimidating. Above all, the campaign speaks to customizing business solutions and improving processes based on the uniqueness of each individual firm. The message is that with the combination of IBM’s unparalleled consulting and technology expertise, customers can leverage their capabilities and strengths to gain a competitive advantage in their industries.

IBM launched the new campaign, as they did with others by running a multi-page manifesto in The Wall Street Journal, the print media vehicle with the highest reach among C- level executives. The newspaper advertising broke a few days before the TV ads, which began airing the following weekend, and magazine ads appeared two to three weeks later. Additional eight page manifestos were run to allow IBM to explain the new campaign more completely and also provide examples of how their products and services apply to a range of different size companies and different industries. The television commercials for the new campaign include a spot called “Anthem” in which flower petals seem to inspire groups of men and women to sing along with an obscure song by the Kinks, “I’m not like everybody else,” that speaks to the new positioning. The spot ends with a series of questions that appear on the screen in white type such as “What makes you different? What makes you unique? What makes you special?” Another spot takes a fairy tale approach by showing a stream of office plants fleeing commoditized companies after realizing that they will only be watered at companies that are growing. In addition to television and print advertising, the global campaign includes 15 out-of-home executions, a dedicated web site (www.ibm.com/innovation), Internet banner ads and huge decals placed on the tarmacs of two Manhattan helipads which Chris Wall describes as “metaphorical illustrations” designed to target corporate decision makers. The goal for the integrated campaign is to convey a sense of imagination and possibility as well as to communicate IBM’s ability to help companies do special things.

Internet Marketing

10 As with most high tech marketers of business-to-business products and services, the Internet is an ideal, cost-effective, targeted marketing tool used by IBM to help identify prospects and provide information about its products and services. IBM’s website is designed to move prospects through the buying cycle from generating awareness and initial interest, to providing information such as case studies and testimonials, to converting interest into a purchase decision. Some of the online tools IBM uses include webcasts, podcasts, virtual meetings, and sending customized e- mails, as well as e-catalogs, and e-newsletters. Interested customers opt-in to receive relevant information. IBM’s website includes in-depth articles, reports written by technology experts, blogs from people inside and outside the company and press releases. Topics covered include the range of IBM products, services and business processes that can be improved or transformed, such as innovation, growth, operations, customer loyalty, team performance, and corporate governance. The products and services IBM provides that relate to each topic are elaborated on in the site. Great care has gone into developing a site that is easy to navigate so customers can focus on areas of interest or where they are most likely to be seeking help. Prospects answer questions online to provide IBM’s salespeople with data and information that can be used to address each customer’s specific needs. IBM’s internet marketing also includes paid search for keywords that relate to specific topics and issues of relevance to their customers on search engines such as Google, Yahoo! and MSN. IBM also has developed web sites to support its integrated marketing communications campaigns which have included making commercials available for viewing by visitors to the site as well as relevant case studies and testimonials. For example the web site created to support the “Innovation That Matters” campaign included a section where visitors could view commercials, a Global CEO Study that could be downloaded, and a report on IBM’s Global Innovation Outlook.

Moving Forward

The transformation of IBM from a computer hardware company to a services and business solutions provider is one of the great comeback stories in the history of corporate America. In 2005 IBM had more than $91 billion in sales and a profit of nearly $8 billion. In the 2006 Interbrand Study, IBM ranked was ranked as the third most valuable brand in the world with an estimated brand value of over $56 billion. CEO Palmisano notes that IBM is not defending the past anymore as the company is off and running into a new world of business, beyond computers. In January 2005 IBM announced that was selling its personal computer business, best known for its ThinkPad lap tops, to Lenovo which is the leading computer company in China. The sale of its

11 personal computer business was part of IBM’s strategy to move away from the confines of the slow-growing and highly competitive computer industry and to continue to transform itself into a company that helps other firms run their business in areas such as accounting, human resources, procurement and customer service. In the process of doing so, however, IBM and Ogilvy & Mather have successfully balanced the company’s brand heritage as it has undergone changes in its business strategy. IBM is not saying good bye to its image as “Big Blue.” However the image of IBM has evolved and the brand clearly stands for much more than mainframe computers.

Examples of IBM’s advertising from the campaigns are available in the Power Point file that accompanies the case.

 

Discussion Questions 1. What is the primary objective of IBM's advertising? How have the objectives of its advertising changed over the years? 2. Evaluate each of the campaigns described in the case and the accompanying ads shown in the Power Point file. Are the intended branding messages being communicated clearly and do the ads speak equally well to users, as well as non-users, of IBM products and services? 3. What were the pros and cons of staying with the "e-business" campaign? Could it have been updated and retained or did it lose it relevance? 4. How was the "ON Demand" campaign adapted to keep the umbrella tagline while providing the specifies needed to communicate the "sub-business" component details? 5. Do you think IBM's adventising campaigns changed too often over the past 11 years? Were the changes made because the campaigns were not working well or was it an intentional evolution in the advertising and branding message IBM wanted to communicate? 6. Is there value to business-to-business marketers such as IBM in advertising through mass media that also reach the general consumer market? Evaluate the media choices used by IBM such as advertising on golf tournaments, on Sunday morning news shows, in airports, and even on the Super Bowl. Since IBM divested its personnel computer business, should they continue to advertise in mass media, such as on the Super Bowl? 7. How has the target audience for IBM's products and services evolved over time? How have the type of business problems that IBM addresses in their advertising changed? 8. What were the advantages and disadvantages of using a creative tactic such as the metaphorical King Arthur's Round Table commercial and print ads that were part of "The Other IBM" campaign? 9. What is the value of using testimonials or mini-case studies across a variety of business and industries in IBM's integrated marketing communications campaigns? 10. Does IBM's advertising provide enough information to decision makers and does it matter that no reference to the prices of its products and'or services are made in the ads? 11. Evaluate the decision by IBM to consolidate all of its worldwide advertising with the Ogilvy & Mather agency. What are the pros and cons of using one agency to handle all of its advertising?