Compaq Computer will attempt to reposition its brand name from a PC powerhouse to an IT consulting specialist through a $338 million media campaign aimed at lifting its professional services profile.
According to the man leading the local corporate strategy, Bill Merrick, marketing director of Compaq Australia, the public has a misconstrued perception of Compaq's product strength. While Compaq specialises in PCs and servers, "not too many people knew" it also provided IT and professional services consulting, Merrick said.
PCs comprise 40 cent of Compaq's total revenue, while IT and professional services (performed through acquired US companies Digital Technology and Tandem) generate 60 per cent of global earnings, according to Merrick.
"We didn't have any value left in the brand," he said. "It got lost from 1997 to 1998. We didn't tell (people) what else we did. We did a poor job," he conceded.
Merrick, former marketing head of Compaq Asia Pacific, had an overseas stint cut short early last year when Ian Penman, CEO of Compaq South Pacific, asked him to "come to Australia to fix the brand", Merrick said.
"Margins were diminishing and share prices were stagnant. The biggest shock to the organisation was strong sales performance but poor image," he said.
In Merrick's eyes, the challenge for Compaq now is not to claim it dominates the hardware market, but "prove" it has diversified into IT and business consulting -- asking the customer: "Do you realise we do this already everyday?" he said.
"We've built up a strong practice in Microsoft's Windows 2000 global rollout and redefined consulting areas in the financial services and telecommunications sector, providing non-stop systems architecture for Intel and Hewlett-Packard," said Merrick.
However, IT alliances aside, Compaq will have some harsh global customer satisfaction findings to reckon with over the next few years.
"There's been an erosion of brand values and customer satisfaction scores in the last three years," said Merrick. Compaq's global brand image has declined by 10 per cent since 1998, he said. "Our customer focus was in the wrong areas. We probably confused customers."
Merrick will attempt to reposition the brand this year not merely through advertising, but by testing an "image confusion hypothesis" on the enterprise. "People think of branding as this warm and fluffy notion. It's not. Brand is the commercial decision to invest in all your pulling power to lead the market," he said.
"Image is the major driver for sales and market share," he added.
How well Compaq executes the strategy -- embodied in the release of the Internet Security Healthcheck Service, the wireless pocket PC, iPAQ, and the high-end business server, NeoServer -- and its flexibility towards market change "whenever needed", are some "major constraints" ahead of the company, Merrick believes.
"(Considering) factors like supply, growth in the industry, emerging technologies and competitors . . . we operate in a volatile environment," he said.