Analyst Opinion - We recently took a look at the new Dell XPS 730 H2C and spoke about an interesting notion on how this new system was invading Alienware’s territory. Given the proliferation of performance products, I think it is time to take a closer look at branding in this emotional market segment. Can you differentiate a mainstream gaming PC from a more boutique-like gaming PC?
Discussing this question is actually a fun exercise for me, because I’ve actually got a couple of degrees in marketing and have held a couple of branding jobs in the past. If you take everything you are taught in marketing and branding (and a few things that are not), the tech company that does the best job with product positioning and brand management is Apple, bar none. Even if I do talk about Apple a lot lately, I will be using them as a reference again, since it just makes sense here. Looking beyond PC technology, there may be a company that does an even better job in of brand management than Apple: That would be Ferrari, in terms of generation cash for its parent company (Fiat). That said, I generally believe that the car industry is much better at brand segmentation than the PC industry.
By definition, a "brand" is a trade name given to a product or service. Some folks like to suggest names and brands are different, but they aren’t. Why we call a brand a brand is because we invest in it and generally attach a collection of images to it. It is generally connected to a symbol, logo, slogan or design scheme.
We could drop into a mess of definitions surrounding products, lines, corporations, or parents, but for our purposes, we can just shortcut this and say that a brand is a name that someone attaches to products to help them sell something in this context.
Doing branding well
What differentiates companies that do branding well like Budweiser, GE, Apple, and Ferrari from those that do not is the clear messaging they attach to their brands and the clear distinction between the products that have brands associated with them. Let’s focus on Apple first.
Apple does product branding about as well as it can be done. Each offering has clear attributes that differentiate it. iPod Classic means it is a trusted design (kind of like Coke Classic). The iPod Touch, Shuffle, and Nano names identify the core marketed benefit and the "Pro" modifier on some of their products indicate professional use. If I were to name a product like Macbook Pro you know a great deal about the product because Apple has a designed a brand for it that is easy to remember and consistent with the parts of the product that differentiate it within a family. I don’t even have to tell you it is from Apple in most cases because the company has taken steps to make sure that you will make that connection.
Ferrari, which also has a very simple line of products, focuses more on the company brand and ensures that people always see that brand as a sign of exclusivity and performance. You will never see the Ferrari brand on a product that doesn’t have something unique about it. The related offering is always connected to some kind of performance message. Porsche, on the other hand, adds design to the mix so that if the name "Porsche" is attached to a product also indicates a visually pleasing appearance. Both companies take extreme care of these brands and license them out aggressively.
Dell, Gateway, HP
All three technology vendors have a nasty habit of using numbers to differentiate their products. This is done because it makes it easier for the vendor to manage a product, but it makes the product much harder to sell. Model numbers are also in place because these companies have vastly more complex lines of products. The bottom line is that the complexity of the product-mix would make the lines virtually impossible to sell if these companies used distinct names. That is the reason why they have line brands like Latitude or Presario. Even so, they have lots of these brands, making it much more difficult for a potential buyer to choose an certain product.
In HP’s case, let’s take one extreme example. For a consumer laptop you have the Macbook from Apple and from HP one product like the Compaq Presario V6700TX. Now turn away from the screen. Can you remember the Apple? Can you remember the HP product? Complex lines make effective branding nearly impossible.
Premium Brands: Alienware, Voodoo, FX, XPS
First, Dell bought Alienware. Then HP bought Voodoo. In response, Gateway brought out its FX premium line. Before Dell bought Alienware, the company had the XPS series, which was then positioned as a premium performance line and all of these systems were, at least initially, focused on performance and gaming.
The danger in having a premium brand is eroding it. The classic examples are the Lincoln Versailles and the Cadillac Cimarron. This was where GM and Ford got the brilliant idea of bringing out an aggressively priced car within their premium brands, which resulted in a significant drop in sales for Lincoln and Cadillac. People who bought Cadillac and Lincoln were buying exclusivity and those value moves nearly killed that aspect of the premium brands with a disastrous effect.
Currently there is a clear distinction between Alienware and Dell as well as Voodoo and HP. The first to blend the brands was HP with the Blackbird where the company referred to it as having "Voodoo DNA". In cars this is like a performance car being connected to the racing program that also bears the company’s name, like Ferrari and F1 racing. That is a good use of the performance brand without eroding it, however the Blackbird itself appears more advanced than anything Voodoo has right now and, should that continue, the performance brand’s value may erode.
While we in technology know the connection between Dell and Alienware, that connection isn’t widely marketed. This makes the erosion risk lower but it doesn’t create any synergy between the two companies either. The danger is that folks like us start creating the connection for Dell and the Alienware brand erodes as a result.
Gateway took a safer path of simply putting a performance designator on an existing line but their problem is they don’t have the equivalent of a racing line (Voodoo is to HP like an F1 car is to Ferrari), which means that Gateway does not get the pull for their products HP and Dell can.
There are ways to build a value performance product, but you still have to invest in making the product right. The Sunbeam Tiger was one of my favorites, but it has nowhere near the cache of the Cobra that it tried to emulate.
In the end, question for HP’s and Dell’s premium efforts will be how well they can pull some of the brand benefits from Alienware and Voodoo into more volume oriented products without destroying the premium benefit associated with the Voodoo and Alienware brands.
And that isn’t exactly an easy task.
Rob Enderle is one of the last Inquiry Analysts. Inquiry Analysts are paid to stay up to date on current events and identify trends and either explain the trends or make suggestions, tactical and strategic, on how to best take advantage of them. Currently he provides his services to most of the major technology and media companies.