Sales Not Keeping Up With Digital Equipment’s Products
Tata Sato knows the troubles Digital Equipment Corp. faces selling computers.
A senior vice president at advertising firm Young & Rubicam, Sato did her homework for a new marketing campaign that started last month by asking executives why they don’t buy more from her client. Their answers made it clear how far Digital had to go.
“If people start thinking about Digital when they start thinking about buying, that alone would be an achievement,” she said.
Don’t blame Digital’s well-regarded products for that. The fault lies with its sales and marketing, investors, customers and analysts say.
The company once had 70 ad agencies, sending a jumble of messages. Now it has two agencies and critics say its new ad campaign misses the mark. Digital’s sales force was reorganized twice in the past year, yet potential customers are still passed over. And, with little regard to customer demand, Digital keeps making premium products that not enough people want to buy.
“They need marketing visionaries,” said John Rutledge, an analyst at Loomis, Sayles & Co., owner of 2 million Digital shares at the end of June.
The Maynard, Mass. company, the No. 3 U.S. computer maker after International Business Machines Corp. and Hewlett-Packard Co., doesn’t have time to waste. Since 1991, Digital has reported losses of $5.81 billion and sales that rose an average of just 1% a year. To check losses, it slashed the payroll to 59,000, or about half the level of the 1980s. So far this year, its stock is down 46% to about $35.
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Digital knows it needs better marketing.
“I’m not telling you Digital does great marketing,” said Harry Copperman, head of the company’s sales force. “But we do good marketing. We just don’t get credit for it.”
In a move to focus its advertising, Digital turned over its business to the agencies Young & Rubicam and DDB Needham Worldwide. But its new and costly “Monkey on Your Back” ad campaign--an estimated $30 million just for ad space--is already drawing fire.
Designed by Young & Rubicam, the ads began running Sept. 9 in trade and business publications. They show a chimpanzee mimicking the moods of an executive deciding what computers to buy and how to get management to pay for them.
While the chimp draws attention, the ads appeal to the general public rather than likely buyers of Digital’s equipment--corporations, said David Yakir, president of Blue Marble ACG, a New York marketing and ad firm. Missing from the seven-page ads are facts to support performance claims, said Yakir, a former information systems executive.
“I.S. people look for information,” he said.
And readers are more likely to think of chimps than Digital, said Tom Simons, president of Boston-based ad agency Partners & Simons Inc. “The message has been obscured by the monkey,” he said.
Digital said the ad is a success: Calls to its toll-free telephone number for information jumped 40% in the two days after the ads began.
“Good advertising has some risk in it,” said Jean Manasian, the Digital executive in charge of the campaign.
Digital’s stop-and-go sales effort also misses the target. In 1993, Digital started cutting the 10,000 customer accounts it directly serviced in a bid to trim costs. By 1995, it was covering just the 1,000 customers it believed were most profitable.
While 10,000 accounts were too many, 1,000 weren’t enough, Copperman says, because it “didn’t allow us to grow the business the way we’d like.” Last July, the company decided its sales force would cover about 2,500 accounts.
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With all this reshuffling, potential customers fall through the cracks.
Take Textron Inc., one of the nation’s 500 biggest companies with defense, aerospace and financial operations and a huge user of computers. Just an hour’s drive south of Digital in Providence, R.I., Textron said it hasn’t received sales calls from Digital and Textron’s computer specialists don’t bother ordering Digital products.
“They just haven’t surfaced,” said Textron Chief Information Officer William Gauld.
Digital also misjudges other customers.
Late last year, the company pushed too many personal computers onto the market just as competitors slashed prices amid a glut of machines. That contributed to Digital’s $111.8-million loss on record sales of $14.6 billion in the fiscal year ended last June.
Under founder Ken Olsen, who resigned in 1992 as CEO, Digital ignored PCs and other consumer products while rivals like Hewlett-Packard embraced them. That goes a long way toward explaining why Digital never mastered the retail side of pricing and distributing computers.
“They’re still trying to figure it out,” said Peter Hayden, a Digital software designer who left the company in May.
Digital’s technology can’t be faulted. Its flagship Alpha microprocessor is among the world’s fastest and its HiNote laptop computers are hailed as among the best designed.
Yet, according to International Data Corp., Digital’s laptops rank 20th in market share. That means it has relatively few customers to spread high fixed costs over.
The same is true for Digital’s printers and PCs--products some say Digital should drop.
“Digital is not a strong enough company to be all things to all people,” said Loomis Sayles analyst Rutledge.
Digital disagrees, saying it plans to be a one-stop provider of computers and services. That’s why it still sells PCs.
“If we got rid of that business, it would keep us from achieving our other goals,” said Digital Chief Financial Officer Vincent Mullarkey.
Some Digital customers say they don’t care about buying everything in one place.
“I’m not looking to them to be my business partner,” said Robert Cowie, chief information officer at Genzyme Corp., a Cambridge, Mass. biotechnology company that uses Alpha machines and HiNote laptops.
But not Digital PCs or printers. Cowie buys from rivals that make better products cheaper.
To Cowie, Digital’s mistake is trying to support products the market itself doesn’t support. “I don’t see the point,” he said.
Listening to customers may be just what Digital needs to stop the bleeding.
