Be Like Intel: Sandisk’s Journey From Commodity to Recognized Consumer Brand
Writen by Rod Whitson
Technology companies often want to emulate Intel’s success in moving from a hidden ingredient inside personal computers to a brand that consumers recognize, value, prefer and pay a premium for. For most, however, that journey represents a task much easier said than done.
On the surface, the Intel Inside campaign looks like a simple stroke of genius. Shell out a few million bucks for some well-placed television commercials, and in no time consumers will be insisting that your customers put your name on the outside of their product, right? If only it were that easy. What most people fail to realize is that the remarkable success of the Intel Inside campaign — or any campaign that seeks to turn a commodity into a recognizable consumer brand — rests on two very important principles.
First, it requires the financial resources to support a lengthy consumer-oriented campaign. You don’t create a brand name overnight. Second, and more important, it requires a dimension of value that end-user consumers actually perceive as important. Without both of these elements, branding campaigns won’t have enough muscle to convince consumers to demand your product above all others.
Let’s address the money issue first. At last count, Intel spends about a $1 billion a year in cooperative advertising with their major customers, such as Dell and HP. Add to that the $1 billion Intel’s customers spend and the total financial outlay to support the Intel Inside brand comes close to $2 billion a year. Or, as we say in the business, serious money.
In general, Intel matches every dollar its customers spend on advertising that mentions the Intel Inside brand. For example, those hundreds of millions of advertising circulars that Dell sends out each year? Intel absorbs about half their cost. In fact, every time you see the Intel Inside logo or hear the Intel Inside sonic brand, you know that Intel paid for about half of the marketing costs. This enormous financial commitment is one reason why the Intel brand stands out from the crowd and why technologists easily point to it as one of their favorite brands.
On the end-user benefit side, the key word here is “perception.” In this case, Intel has successfully convinced enough consumers that a computer with the Intel chip inside is the fastest available and therefore can handle any application they can throw at it. As a result, consumers perceive real value in the Intel brand, which is why the vast majority of PCs rolling of the assembly lines carry that well-known sticker on the outside: Intel Inside.
Likewise, any commodity product or ingredient technology that hopes to develop a powerful consumer brand must similarly convince the buying public that their product is so superior that consumers won’t accept anything less. And that’s exactly what a little-known company called SanDisk is trying to accomplish.
Will SanDisk Be the Next Intel?
A leading provider of flash memory — the tiny wafers that store digital music, photos and videos — SanDisk is one of the primary beneficiaries of the soaring demand for cell phones, digital music players, digital cameras and game consoles. Over the past three years, revenues for the Sunnyvale (CA)-based firm have surged an average of 70 percent a year. This year, they’re tracking an increase of 19 percent, for a total of $2.1 billion in sales. Not surprisingly, SanDisk’s stock has shot up 40 percent over the past 12 months.
Despite these glowing numbers, SanDisk faces a huge challenge. For the most part, memory is a commodity business, and prices can be harshly cyclical. Pricing wars frequently erupt overnight, and prices can take a nosedive almost as fast. During the summer of 2004, for example, flash memory prices plunged precipitously, causing SanDisk’s stock to drop 40 percent in four days.
To avoid ongoing pricing hiccups, SanDisk is striving to develop a strong brand that consumers will recognize and value. At the most basic level, this means convincing consumers to ask for a “SanDisk one-gigabyte card” for their digital camera rather than just any one-gigabyte card. Just as Intel has convinced personal computer buyers to insist on Intel as the “chip of choice.”
From where I sit, it seems like SanDisk has the first part of the consumer technology branding formula right. They’re spending millions on a worldwide advertising campaign that targets retail stores, magazines and even prime-time TV shows like The Simpsons and Survivor. In terms of sheer dollars, SanDisk isn’t shelling out as much hard cash as Intel, but it probably doesn’t have to. If fact, most companies don’t need to spend nearly that much. They just have to commit enough financial resources to garner the attention of consumers.
SanDisk also seems to have the second part of the formula well underway by working hard to distinguish itself through technology that delivers real consumer benefits. Last year alone, SanDisk increased R&D spending by a hefty 48 percent to $125 million. The result has been a string of innovations — waterproof memory cards, titanium cards, and secure memory cards with embedded fingerprint readers — that have captured the attention of consumers because they offer compelling value.
SanDisk is also working with wireless carriers to help protect consumers from fraud and identity theft. When faced with a lost or stolen cell phone, consumers can contact the carrier to remotely disable the card and keep sensitive personal data safe. SanDisk has even successfully offered new products in the gadget business. Last August, for example, the company introduced an MP3 player that quickly raced to first place in the category, only to be knocked off by Apple when it introduced the iPod Shuffle.
Does SanDisk have what it takes to make the leap from anonymous commodity provider to a recognized consumer brand like Intel? Only time will tell. In the meantime, I plan to follow them closely to see how their branding campaign continues to unfold and, more important, how the market responds. As someone who lives and breathes technology branding, I believe we can all learn a great deal from SanDisk’s ongoing branding efforts.
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Rod Whitson serves Townsend as President and Chief Brand Strategist. Townsend is expert at helping organizations with innovative products and services develop differentiated, compelling value propositions. Townsend is the largest integrated marketing agency in Southern California. Rod has personally led recent branding engagements with Intel, BAE Systems, Merck, DowPharma, Marsh & McLennan, and the University of California system. He has also worked with a host of successful and not so successful early stage technology and life sciences companies. Since Townsend’s founding in 1993, it has helped clients create market valuation in excess of $80 billion.
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© 2006 Rod Whitson – All Rights Reserved Worldwide