Prepared By: Hari Pd. Adhikari Question No.

1 Analyze Gateways decisions to change advertising agencies so many times over the past six years. Identify and discuss specific factors that may have led to each decision to change agencies?

ANSWER Sometimes, although the cost incur its required to change the ad agency for a lots of hidden benefits Throughout the case of Gateway, there is a set of common reasons which forces the company owner Ted Waitt change the ad agencies from the past six years. The company promotes its product with some obvious reasons: i.e. Profit, sales volume, market share and consumer awareness/ brand image, same had been done by Gateway in its time. Profit Maximization: Profit maximizing with the increase in sales volume is one of the common goal of any company. Gateway also tried to maximize its profit with either way of changing the theme of the ad or enhance its sales. Turning its past, Gateways revenue took the highest peak in 2000 reaching $9.6 billion while the companys market share was 8.2 percent, being the third top PC maker in the U.S. behind Dell and Compaq. Gateway started running the ads showing Fox in January 2001. Side by side, Gateway was also discussing about the future of such ads with many agencies. After Jeff Weitzens resignation as CEO, Ted Waitt started to control the daily operations of the company and he showed a net loss of $94.3 in the fourth quarter of 2000 indicating Gateway's core PC business was not profitable. After some days of Waitts control, Gateway dismissed McCann-Erickson as its agency. Gateway management decided to dilute the unusual and crude aspects of its corporate image and create an identity for the company as a maker of sophisticated computer technology with the latest and advanced components. Then Gateway continued using advertising developed by Siltanen/ Keehn into the fall of 2002. However, S/Ks tenure as Gateways agency of record was short-lived as the company parted ways with the agency after 10 months and moved its advertising to the Arnell Group, New York in October 2002.

Differentiation and Brand Image: The consistent reviews in the Brand image and the communication with customer is very important element in modern business because the customers are becoming so tech savvy and value conscious. As competitive and highly growing PC industry, the differentiation and brand image are very important for the competitive advantage. However, Gateway has struggled to find an advertising theme that resonates with

consumers and clearly differentiates the company from competitors such as Hewlett Packard (HP)/Compaq, Dell, Sony, and Apple. In this process of differencing, Gateway changed advertising agencies five times over the past six years and three times in a 14 month period from early 2002 to 2003. A week after dismissing DMB&B, the new CEO announced the hiring of McCann-Erickson worldwide, one of the largest agencies in the world. The trend of changes at Gateway continued. In April 1998, the company dropped 2000 from its name, shortening it to Gateway as it felt that the 2000 autograph would become dated in the new millennium. The company also introduced a new logo featuring a handdrawn version of its signature cow-spot box. So it is very clear that gateway try to improve its Brand image and built strong relationship with customer through the advertising agencies that why Gateway change its advertising agencies so many time. Sales volume/ Market expansion: The Companys first outside agency was Carmichael Lynch, Minneapolis who was hired to handle its television advertising. In addition to Carmichael Lynch, Gateway had retained the services of the London-based Finex agency to handle its European and Japanese creative as the companys sales in these markets were increasing. As Gateway 2000 grew rapidly and its international sales increased, the company decided it needed a global agency. In March 1997 the company moved its estimated $70 million worldwide account to DArcy Masius Benton & Bowles, a global agency that could help the company with its growing international business. Apart of these reasons, there are some other general causes of changing the ad agency frequently by any companies. The reasons are:

Barrier to change agencies are low & getting lower: The Company can change the agencies whenever and wherever they like without breaching the contract. There are no any strict barriers to the choice of the agencies. Abundant choice/ easy to get into: To change the ad agency is very easy because, its the client (company) who can decide simply which firm to choose. To get the best wisdom from the crowded idea economy: Idea is a great source of product success these days. To get the best out of the alternative, the company goes for searching the right options. Full range of human emotion: The personal attachments, relationships, loss of trust, fear of change, pride, poor chemistry, misunderstanding, and neglecting behaviors are also the causes of changing the ad agencies by the companies. Thats why it is said that Companies never fire agencies, people do. Selecting the ad agencies is a contract game which is highly influenced by the personal pressures like: friends, associates etc.

Sometimes, the change in agencies is also made for quickly reaping a tangible return from the new agency partners than its competitors.

Question No. 2 Discuss how Gateways frequent agency switching has affected the companys branding and positioning efforts. What recommendations would you make to Gateway management regarding its agency switching and its impact on the company? ANSWER So far the Gateway is involved in changing the shift of the ad agencies from in-house to outhouse for many times, its all for the creation of brand image and differentiation of the product than its competitors. Until 1993, Gateway 2000 relied solely on in-house print advertising. As the company grew rapidly, it decided to add television ads to the media mix and simultaneously used the out- house and in- house advertising department. The first ads from the new agency retained the Youve got a friend in the business tagline that Gateway had been using for several years. A few months later the agency introduced a campaign theme saying Gateway goes From South Dakota to the rescue. An agency executive explained the rationale behind the campaign by noting that South Dakota is a state of mind, a way of doing business, and dealing with people. However, Gateway and DMB& B got off to a rocky start as both sides grappled with the precise roles of the agency and the in-house group and thought of how to collaborate with each other. The agencys creative approach was geared more toward traditional advertising that used actors and scripted TV spots, such as one showing a family in a computer store where piped-in music segues into advice that the family can get what it really needs from Gateway. The company also introduced a new logo featuring a hand-drawn version of its signature cow-spot box. Gateway also began changing the process of transforming itself from a manufacturer of personal computers into a company that would derive its revenue from a variety of sources. The beyond the box strategy was designed to diversify Gateways offerings to include PC financing, Internet access, and various other computer-related accessories and services. New advertising from Leo Burnett broke in May 2003 using yet another new tagline, The Comforts of Gateway. The goal of the new advertising is to underscore Gateways unsophisticated charm while positioning the company as a solutions provider for an increasingly complex technological world. The first commercials from Leo Burnett depicted a small town Americanas main street coming to life as people use their computers and other personal electronic items. So, with all these ups and downs in the ad agencies, promotional campaigns, mixing of in-house

and out-house advertisings, the branding and positioning have been affected. To get a clear figure of brand image, the company must be concerned more on the effective concept which can make customers feel that the product is theirs. Sometimes, there might be debate behind a good advertisement regarding who should be awarded: a Brand manager or an Ad agency. Switching the ad agencies can have both the negative as well as positive impact on the overall performance of the company in terms of promotional effects. The recommendations as well as the effects of agency switching are as follows: Perceived life span and the reality of the relationship with advertising agencies are different. The relationship between the company and ad agency is perceived to be short term but the impact of such relationship can be clearly seen in the message of the advertisements with long term impacts. Ad agencies actually try their best to win the business for the company. Their works and creativity are reflected in the advertisements they prepare. If the clients keep on switching the agencies then the actual delivery of the efforts will be lower by the agencies which affect the promotional performance of the business. Ad agencies are one of the source of innovative and transformative ideas which works properly when it get regular social supports which is also reflected by the terms of the relationship with company. If the company keep on changing ad agencies, the strategy of the company can be leaked-up to its competitors by the agencies because its not the agency that speaks, its the people working there. And we know that people are the social being. Regular relationship with a single agency can be more of value attachments which can also build the trust among each other. But if the promotional effects are less effective then the relationship should be separated from the business and should think wearing the glass of business, profit and sales. So, the effects of switching ad agencies is branding depends on when, why and how conditions.

Question No 3 If you were an executive at an advertising agency and Gateways decided to switch agencies again, would you advise your account development team to pursue the companys business? Why or why not?

ANSWER I would recommend my account development team to accept that offer and pursue the companys business for the major reason: i.e. the OPPORTUNITY that I get. The history of Gateway shows it followed various in-house and out house advertising agencies but could not get success in tracking the business in right direction which can be capitalized by our company. In the process Gateway changed advertising agencies five times over the past six years and three times in a 14 month period from early 2002 to 2003 but the most of the time agencies could not reverse its declining sales in the stagnant personal computer industry.

The company knows that the personal computer, as well as other segments of the consumer electronics industry, have become extremely competitive and having a strong brand image is critical for companies who want to continue to compete in these markets.

Virtually every business organization uses some form of marketing communications. However the way a company organizes for these efforts depends on several factors, including its size, the number of products it markets, the role of advertising and promotion in its marketing mix, the advertising and promotion in its marketing organization structure. Many companies have all those structures as needed to boost their promotional effects in the market. Gateway might be search of that sort of ad agencies which can fulfill its needs of reversing its declining sales and build strong brands image to help its market. At an executive of advertising agency, I want to take those kinds of challenges related to advertising and promotional campaigns maintaining the image of my agency too. Finally, I want to take this challenge of accepting Gateways proposal to create a long term value based relationship with the company by creating the attractive promotional campaigns as per its needs and the customers desire according to the advancement level of consumers. For creating long term relationship with the company, I would guide my account team to focus more of Value to the client, not on profit to the agency. Because, I know the fact that the value to the company is ultimately converted into the profit to the agency. I would direct my team to become the Value creator/ contributor to the Gateway company rather become Order taker and simply adapt their needs only.

Prepared By: Hari Pd. Adhikari MBA, PHOENIX Submitted on: 26th September, 2011