Seagate ‘humanizes’ PC drives in retail push
It pulled in more than $9 billion in revenue last fiscal year and supplies the hard drives that sit inside one-third of the world’s personal computers. But Seagate Technology Inc. longs for a little recognition.
Tired of being a faceless supplier of parts for PCs and other electronic devices, Seagate is trying to worm its way into the consumer consciousness with a new attitude and fresh line of retail products.
For years, the company prided itself on not spending a dime on industrial design. But now, in search of revenue opportunities, it’s hiring executives away from retail-oriented companies such as guitar maker Gibson USA and Eastman Kodak Co. and enlisting teams of designers to make Seagate’s external hard drives stand out on store shelves.
Seagate is trying to do what Intel Corp. did with its “Intel Inside” campaign -- become a name that shoppers look for when they walk into Fry’s Electronics or Best Buy stores. Today the semiconductor giant says its brand is valued at $38 billion, thanks in large part to the campaign it started in 1991.
“There’s a lot of Intel envy,” said Stephen Baker, vice president of industry analysis with NPD Group Inc., a market research company in Port Washington, N.Y. “If you just make widgets and doohickeys that go into a PC or TV, no one knows who you really are.”
Seagate, whose offices are on Disc Drive in this mountain town near Santa Cruz, isn’t the only technology company trying to recast itself as a consumer company.
Cisco Systems Inc., the networking company, is aiming for the home market with its acquisitions of Scientific-Atlanta, the TV set-top box maker, and Linksys, a manufacturer of home networking gear. SanDisk Corp., which primarily makes flash memory for electronics, is selling its own branded digital music and video players.
For Seagate, competitive pressure has sent it looking for new markets. Prices for hard drives continue to drop even as the storage space on each device increases.
“What they are trying to do is create a solution they can control, and retail has pretty good margins,” said David Reinsel, director of storage hardware research for IDC, a research firm. “It’s a strategy to offset the pricing aggressiveness from their customers who are buying their components.”
Companies such as Seagate risk being ignored by retail customers. But even worse, they risk treading on the toes of their biggest customers -- computer and electronics makers that don’t appreciate the extra competition.
Seagate Chief Executive William Watkins said that in the past, companies like Seagate were content making the crucial parts inside products. They were fine avoiding the need to advertise and other hassles of the consumer market. But now that many home users want to store and back up their digital photos, music and video, Watkins sees a business opportunity.
“Why can’t hardware guys like us help move the content around the home?” he asked.
Yet as Seagate is learning, appealing to consumers takes more than throwing the same old products onto store shelves. The company has had to rethink just about everything.
By its own admission, Seagate’s first attempt to sell to consumers fell short. In 2003, the company came late to the retail space, following competitor Maxtor Corp., which it bought last year for $1.9 billion. And once on store shelves, Seagate’s external drives and portable storage devices had little charisma.
“The package had a picture of the device,” said Rob Klingensmith, director of strategy for ad agency TBWA/Chiat/Day, which Seagate hired to help with its retail campaign. “People think, ‘I don’t know what it is, but I know I don’t need it.’ ”
In one case, Seagate’s hard drives had the opposite problem: They were too cute. Consumers returned the company’s Pocket Drive, a small, rounded hard drive that plugged into a PC, because they had thought it was a digital music player.
Despite those missteps, the company says it is on track to reach $700 million in retail sales revenue this fiscal year, which ends June 30. That represents only 6% of Seagate’s total projected revenue, but the company expects its consumer market to grow significantly.
Seagate decided it needed to reposition its product line for that to happen.
Watkins hired outsiders, such as those from Kodak and Gibson. In 2005, he brought Frank Biondi, the former chief executive of media giant Viacom Inc., onto Seagate’s board to help with the transition and keep an eye open for opportunities in the entertainment business.
Last year, Seagate ramped up a tiny branded solutions division to focus on retail and figure out how to talk to the consumer.
The division had separate engineering and sales and marketing teams, and they were housed in a different building to protect them from Seagate’s hard-driving, detail-focused culture.
Since joining the company from Gibson more than a year ago, James Druckrey has led the effort to create a distinctive Seagate brand.
He hired Frog Design, a Palo Alto-based creative consultancy. Howard Nuk, Frog’s associate creative director, said his team quickly surmised that Seagate’s brand “resonated as a business -- but no one knew what it made.”
Frog’s researchers visited people’s homes to see how they used their digital photos, music and documents, then sketched out a profile of the target Seagate consumer -- more Audi than Subaru.
“It’s important to understand the consumer before you design the product,” Nuk said. “People want a product that resonates with their life.”
Staff meetings at Seagate were known for their no-nonsense, hold-no-punches approach. But with Druckrey as general manager of branded solutions, the meetings soon took on a touchy-feely vibe. Executives held a two-day retreat in a San Francisco art gallery and sought to better understand the “Seagate soul.”
Drawing from their research, Druckrey and his team came up with a plan to “humanize” the hard drive. They wanted to make it thinner and feel more natural in the hand so people would want to carry it with them. They also jettisoned Seagate’s teal-colored logo on the hard drive and suggested embedding an amber light that pulsates like a beating heart on future devices to give them a “warm-blooded core.”
“We kept saying, ‘How much is the light, Jim?’ ” Watkins recalled. Spending money “drives us totally nuts. It’s easier for us to approve hundreds of millions of dollars in researching and developing technology than for us to agree to spend $10 to $20 million on a marketing campaign.”
The light cost $1.20 per unit -- and Watkins approved it.
The new product line, called FreeAgent, hit store shelves this month. It’s the color of cappuccino, features curved corners designed to evoke Modernist furniture and retails for $130 to $390.
Oh, and don’t call it an external hard drive. The FreeAgent, Seagate says, is a “data mover.”
