IBM's flawed advertising strategy to get an overhaul

Dennis Kneale, Staff Reporter
The Wall Street Journal

October 22, 1993

New York -- For four months, International Business Machines Corp. has waged an extraordinary, intercontinental search for a new ad agency to help it rebound in the personal-computer market. The company that coupled the Little Tramp with its first PC more than a decade ago seeks a new way to advertise the computer.

Yesterday, IBM's quest brought it to this: a tiny, barely known boutique formed just six months ago called Merkley Newman Harty. The agency's annual billings are a mere $65 million for accounts including WordPerfect and wool. In hiring the shop for the U.S. portion of its $100 million PC account, IBM fired Lintas, a $1.6 billion behemoth. It also passed over hot shop Goodby Berlin & Silverstein and Chiat/Day, the agency that captivated the market a decade ago with the "1984" spot for Apple.

Now comes the hard part. Merkley Newman and IBM must wipe away three years of flawed strategy and sometimes hokey advertising for the IBM PC business. The low point was Lintas's embarrassing stab at jingle rap: "How you gonna do it? PS/2 it!"

Most PC ads aim at high-tech motorheads, but they leave millions of no-tech consumers cold. Many people haven't bought a desktop computer for their home or small business. Others dread replacing aging machines, fearing that their new PCs will be outdated in six months or the supplier will go belly up.

IBM, more than its rivals, had the technology, customer service and long track record to offer comfort to the wary -- but didn't.

Merkley Newman also must change the perceptions of legions of customers who have come to see IBM as a corporate dinosaur lumbering toward extinction.

Lintas's ad work did little to alter that view. Its advertising was a series of pithy print pitches laced with catchy headlines and heavy techno-speak. IBM executives lament that it played into the hands of smaller rivals. Their similar ads targeted Big Blue on techno-nerd terms of power and price, and megabits, megabytes and megahertz.

"Almost all of the advertising in the PC field today has really missed the mark. It's all technical specs -- my machine's faster than yours -- and price," says C. Ray Freeman, the IBM PC Co. vice president who ran the agency search. IBM's PC ads lacked a personality and didn't promise a clear benefit, he concedes.

That will be Merkley Newman's job. Its hiring yesterday culminated a blitzkrieg, three-month review, one of the most closely watched in the ad business. IBM shunned the typical approach of asking finalists to gin up mock ad campaigns, which can let an agency hide behind flashy creative work. Instead, IBM exhorted the agencies to provide views on the fuzzy and broad strategic issues.

That is more complex than it seems. Things were far simpler when IBM entered the PC market with a single product in 1981. The former Lord, Geller, Federico, Einstein parlayed a Chaplinesque character into the first human, and humorous, face for the monolithic company. In 1987, Lord Geller dumped the Little Tramp for the cast of "M*A*S*H" to emphasize work groups and computer networks; one snag: Networking wouldn't catch on for four years.

The "M*A*S*H" effort died quickly when top executives of Lord Geller splintered off to form a rival shop. The two sides locked in a bitter court fight, and IBM ultimately declared a pox on both houses, turning to Lintas, a unit of Interpublic Group of Cos., in 1989.

Lintas took over as IBM's PC business slid into dark days. Now, it is on a major rebound. The IBM Personal Computer Co. was formed 13 months ago in an attempt to reverse marketing miscues, slow response and shrinking share. It has boosted PC unit sales by 40% this year, broadened a one-note product line into four brands aimed at a wide array of customers and produced a huge hit: the Thinkpad notebook.

Yet this turnaround has been all but invisible. By June, IBM had begun the hunt for new blood. IBM's Mr. Freeman had worked at the old Lord Geller and turned to founding partner Arthur Einstein as a key consultant in the search. An IBM team reviewed reels of work from 50 agencies, narrowed the list to a dozen and visited them nationwide. By August, five U.S. shops were left, including Lintas. (Also yesterday, IBM tapped DDB Needham -- like Merkley, a unit of Omnicom Group -- for its PC advertising in Europe.)

The final shootout came two weeks ago. Messrs. Freeman and Einstein and IBM brass played host to the final five over three days of dining and divining. "With these two guys having come from the ad business, all the classic ways to dazzle a client or pull the wool over their eyes wouldn't work," says Parry Merkley, Merkley Newman's president and creative director.

And by banning mock campaigns, IBM pushed strategy to center stage. That played to the strength of Jane Newman, the tiny shop's top strategist. The problem with most PC advertising, she says, is that "it's horrible. It isn't dealing with the humanity aspect of computers."

She riveted the IBMers by trotting out six-foot-tall collages of clipped magazine photos that consumers had put together in focus groups. One collage represented the "old IBM" -- photos of a dinosaur, a shark, a sumo wrestler and of pot-bellied, blue-suited businessmen.

"When I looked at that first collage, I said `Boy, are those people facing extinction,'" says Anthony Santelli, president of IBM PC Co. Products, who attended the sessions. He had feared a similar fate for IBM's personal-computer business a year ago. "That was a very clever, vivid way for Merkley Newman to communicate that we were on the same frequency."

A second collage showed consumers' perceptions of IBM now: headlines beckoning "Welcome Back!" and "The Dawn of a New Age," but also shots of people looking upset and troubled. Six months ago, Ms. Newman says, customers wouldn't have felt such forgiveness for IBM. "But now, there's really a feeling that IBM has been humbled enough, and a tremendous amount of people want it to turn around."

IBM PC Co. seems intent on using that unlikely status to an advertising advantage. "We now have the image of the underdog, which I thought was great," IBM's Mr. Santelli says. The kinder consumer sentiment, Ms. Newman adds, also "owes much to the fact that the whole PC category is chaotic right now," and users might look to IBM to lead them out of it.

A more upbeat glimpse of where IBM ads are headed emerged in a third collage. It pictured consumers' image of the ideal company of the future: active people in sunny settings, a mountaintop vista, tranquil space shots of the Earth, images of calm and simplicity.

"That's pure Jane Newman at her best," Mr. Freeman of IBM says. "We were quite spellbound." Ms. Newman made the ultimate sacrifice the night before the big pitch. The IBM team took her and her partners to dinner at a venerable steakhouse. Ms. Newman almost never eats meat, but to fit in, she ordered a steak. "I ate a whole lot of it," she says. "It was rare. It was terrible."