In 2005, Lenovo, China’s largest PC maker, acquired IBM’s worldwide PC business. The company inherited nearly $10 billion in annual sales, but faced the challenge of introducing itself to millions of consumers.
Ravi Dhar: Can you briefly tell us the story of the Lenovo brand? What was the brand like pre-IBM? How was the transition to being a global brand?
Deepak Advani: I was the head of strategy and marketing for IBM’s PC division from 2003 to 2005, and I was one of the people who helped make the Lenovo deal happen. I’m now returning to IBM after four years at Lenovo.
When IBM and Lenovo started talking, Lenovo sold PCs primarily in China. It had become the number one PC maker in China. Today one out of three PCs sold in China is a Lenovo. At the time of the acquisition, the Lenovo brand was very well known; it was like IBM or GE within China. The company was really known or innovation in products as well as business processes. Lenovo did a lot of different things on the technology side: the first Chinese-character keyboard, one-button internet access. It was known as a leadership company that set the pace for other companies, whether in financial transparency or promoting female executives. Lenovo was also known for customer service. The top reason that people repurchased Lenovo PCs was their ownership experience and service and support.
We felt it would be a very good fit because the ThinkPad franchise that IBM had built up was known for innovation and quality, backed up by IBM service and support.
Lenovo was doing about $3.5 billion of revenue in China. IBM’s PC business was $10 billion globally. As Lenovo, now that you’ve inherited $10 billion worth of business, how do you want the Lenovo master brand to be known worldwide? We looked at a lot of different cases of brands coming from Asia, but we couldn’t think of a single instance where there was a well-known brand in the local market that all of a sudden inherited a very strong sub-brand like the ThinkPad, which had a very strong relationship with a different master brand, IBM.
So how do you deal with that situation? If a company that no one has heard of from Sri Lanka buys the iPod franchise from Apple, say, then will that cachet disappear overnight? The iPod is what it is because Apple introduced it and did so many things right with the product and the overall value proposition. What we wanted to do was look at how to take all the value of the IBM ThinkPad and use it as a springboard for the young Lenovo master brand, instead of having a relatively unknown Lenovo brand bring down that ThinkPad brand equity and cachet.
We talked to over 4,000 customers in countries around the world. We found — and this was consistent globally — three reasons why people were buying the ThinkPad from IBM. One was quality. Second was innovation. Third was service and support. Over 90% of the customers said, “Hey, as long as you don’t mess up the quality or the innovation or the service and support, we’ll keep buying from you. In fact, we like the Chinese acquisition of the PC business because we think you will be more efficient.”
We decided then to launch our branding strategy in three phases. In the first phase we really focused on a message of continuity: “The same people, same locations, same processes — we will not mess up the quality, innovation, and support.” We also relied on the IBM logo that we had the right to use on our product for up to five years.
In the second phase, we said, “Let’s amp up the ThinkPad sub-brand and introduce Lenovo as the company that’s making ThinkPad even better than before.” In that subtle approach, people do find out about Lenovo, but they find out about it in the right context. “Hey, this is a really great ThinkPad. By the way, Lenovo is the company that’s making this product now.”
In the third phase, we launched the Lenovo master brand.
I often say branding needs to follow the business strategy, and you can see that here. Our business strategy was that the first order of business was to take care of the $10 billion worth of revenue that we were getting for the IBM PC business.
Dhar: I like what you said about the brand strategy having to follow the business strategy. This is something that I often teach. To give you an example, should a company like Intel, whose business problem centers around getting people to repurchase, be investing a lot in emotional branding? Emotional branding makes more sense for a Coke or a Pepsi, as they try to gain market share.
So, how does the brand strategy help you with your business strategy? How did you fine-tune your target and the message itself?
Advani: Our business strategy was, initially, let’s take care of our large customers — because about 57% of that $10 billion of revenue was coming from the large customers globally — and then go after the small business customers, and then launch consumer in strategic emerging markets. So we adopted a brand strategy to follow that. We’re going to give a message of continuity to earn the trust of the large enterprise customers, and then we’ll become even more relevant to the small business segment. In other words, in most countries around the world, we focused on the B2B customer and in select markets, like India, we went big time on B2B and B2C.
From a messaging point of view, we took a step back. The reason ThinkPad became such an enduring brand was because of total clarity on the essence of the ThinkPad. IBM knew from the beginning that ThinkPad is the ultimate business tool. All actions that we take, from marketing to product to sales, we’re going to position this as the ultimate business tool. That gives a level of consistency across all the touch points and over time that builds trust.
A great brand essence is not something that you go make up in the marketing labs. It’s not something you invent. It is something you uncover.
As we thought about it, we said, “We want to be known as the company that really innovates in the PC space, and we want to bring that innovation to the masses.” In fact, the rallying cry for us initially was saying that we want to put more innovation in the hands of more people, so they can do more amazing things. The phrase that we coined was “Lenovo builds exceptionally engineered PCs.” We wanted “engineering” to be the one word that we communicate in all our media.
For B2B folks “engineering” is interesting. It differentiates. But what’s the business benefit of that engineering? The messaging that we conveyed for the business customers was of rock-solid quality and security. In the B2C space, on the other hand, we emphasized Dolby surround sound, face recognition, and features like that.
We really believe global consistency is very important when it comes to that brand essence, because we sell the same products in all countries around the world. There’s also so much activity on the web, and anything you do on the web goes global very fast.
In the way we communicate our message, that’s where local relevance becomes really important, particularly as you target consumers. In fact, when we launched our brand in India for the consumer space two years ago, we went to the very, very local approach with very good success.
K. Sudhir: You had a strong local brand in China. In the other countries that you were entering that perhaps had not heard of Lenovo but probably had heard of IBM, how did you think about the process of bringing over the new Lenovo master brand, particularly in the consumer space?
Advani: We went after the consumer space first in India. We said, what if we were the Dell and HP of emerging markets? Let’s take our strength in China and adapt it in India.
We did the launch in Delhi, and there were about 30 reporters and TV cameras, and they were asking me, “Are you going to be coming out with a low-cost PC? Because we’re a very price-sensitive market. You’re talking about innovation. We don’t care. We really want to have very low prices in India.”
What I tried to convey in response was, I spent 16 years of my life in India growing up, and I disagree that price is the only thing that matters. In fact, in India, people are even more brand-conscious than they are in the U.S., particularly in the PC space. If someone buys a PC, all the neighbors come and ask not only which brand you bought, but what type of processor it has in it. So, don’t tell me brands don’t matter. Price is important, but value for the money is even more important.
If Lenovo got positioned in the consumer space as the company that’s providing low-priced products from China, then when Lenovo was associated with ThinkPad, the margins would vaporize, and that ThinkPad cachet would go away. It was critical for us to position Lenovo as the company that is a worthy parent of ThinkPad. It’s going to bring a lot of engineering even on the consumer side.
Then we decided that in the consumer space, you do need emotional branding because we want to differentiate from others. To do that emotional branding, what is the Indian consumer really passionate about? It’s cricket. It’s movies, the Bollywood scene. We were the first IT company to embark upon a branding strategy using Bollywood stars as our brand ambassadors. We positioned the brand as a young, playful, hip kind of a brand, though we didn’t go to an extreme because the same brand also had to be carried over to the B2B side.
Awareness for Lenovo went from pretty much 1% to over 70% in 11 months in India. We won numerous brand-building awards and recognition. That worked really well for us.
Dhar: On the brand-building aspect, Lenovo was one of the sponsors at the Olympics. Given the costs involved in this event, what are some of the lessons learned that you think are useful to a CMO in general?
Advani: The key question is, what are you trying to get out of it? How are you going to measure the return on that investment? One of the big reasons for Lenovo stepping up to be the Olympic top sponsor globally was because the games were going to be held in China. Had we not become the PC provider for the games, that would have left the door open for one of the other players. But it also enabled us to put our brand out there and move it from a local brand to very much a global brand.
Our primary objective at the Olympics was to broaden the top of the funnel: We want more people to know what Lenovo is and see us as a company that builds the best-engineered PCs. Our secondary objective was to drive business during the Games through promotional plays around the Olympics.
From an ROI point of view, I looked at targets that we set in countries around the world on improving our aided and unaided awareness. We also looked at transactional business that we had in key markets like the U.S. and Australia and India. Did we see a spike in sales?
Sudhir: You’ve mentioned some of your efforts in India. What are your strategies to localize in various markets, just as you went very global with your Olympics-type mass advertising strategy?
Advani: We decided to go heavy on the localization front in India because, one, it is a strategic market, and, two, we were launching at the consumers, where you need to do more of that than B2B. The media expense and cost of marketing was relatively modest compared to markets like the U.S., Japan, and even Brazil. India and China were very localized. We did quite a bit of localization in the ASEAN markets in Southeast Asia, Turkey, and then in Brazil.
We really ended up having a dual strategy, where in mature markets we do relatively less localization and run more global campaigns, because they are primarily targeting B2B customers and there are properties like the Olympics and F1 that cut across these markets pretty well. Since the cost of media is very expensive, we also relied very heavily on web and interactive, because everyone is online in mature markets.
Dhar: One of the questions I get asked when I visit China and India is how firms in these countries can enter the U.S. and other developed markets. Based on your experience working for a Chinese company, working for IBM, looking at emerging markets and developed markets, is there a playbook for building a brand as these companies enter developed markets?
Advani: If you look at brands from Japan in the ’70s before Sony and Toyota changed the game and brands from Korea before Samsung came along in the late ’90s, people had stereotypical images of brands coming from these countries — that they’re lower quality and lower price. Over time, certain companies and certain brands came and changed the whole perception. For brands coming from China and India today, they need to learn from that. What Samsung and Sony and Toyota did was shift the focus away from where they came from to what they did. And what they did was really exceptional.
If you look at trust surveys, they show that brands that have roots in India and China have the lowest trust level in countries around the world. That’s the state of the business today. I have no doubt that things are going to change. China’s known for manufacturing prowess and operational efficiency, but there’s a big shift occurring in China from manufacturing to design. India is known for call centers and BPO. What’s happening now is some of the low-value elements of the value chain are coming closer to the customers. Call centers are moving back to the U.S. But the high-value elements are moving to India, whether it’s research in pharmaceuticals or, in Lenovo’s case, a global marketing hub.
Brands from India and China need to focus on what they do. But don’t try to hide your country of origin. We went through that initially at Lenovo. “Let’s just go easy on the China angle.” But in this Web 2.0 world, authenticity is the winning formula. You’ve got to be who you are. So, don’t shy away from where you’re from, but put all your marketing emphasis on the product or service that you’re bringing to market. The way we looked at brand-building inside of Lenovo is that advertising was an important component, but so was product reviews, so was social networking, so was philanthropy. You have to look at brand-building in a holistic way.
Sudhir: In certain kinds of products, like technology products, the consumer is fairly global. What has been the effect of the internet on a global scale, and the fact that you have all these new Web 2.0 tools — the word of mouth, the product reviews?
Advani: The marketing fundamentals and principles are still relevant. You’ve got to have the segmentation, targeting, positioning — none of those things changes. Your value proposition has to be compelling.
But all the tactics that you use, the web turns everything on its head. Whatever you do online becomes visible globally now. You can’t do certain things on the web in one particular market and not expect it to go global, which makes it all the more important that you have discipline and global consistency on your overall positioning and messaging.
We’ve done a lot of different things. We did a viral marketing play that we called the “Lenovo Tapes” that had over six million downloads over a couple of months. We had a spoof of Apple MacBook Air versus a ThinkPad X300 that got really, really good pickup. With properties like the Olympics, we did a lot of work online. For instance, we wanted to let everybody know that Lenovo is not only an Olympic sponsor, but we also designed the Olympic torch. We ran an American Idol-like contest on the web in partnership with YouTube, where we said, “Lenovo wants to take three people to Beijing to run with the torch; tell us why we should pick you.” We let people vote on the top 18 finalists.
One thing we learned with the Winter Games two years ago is that people during the Olympics really care about athletes. We said, well, what makes the web special? It’s the long tail. So, why don’t we run a long-tail play for athletes? So, we went out and found 100 different athletes, and we equipped them with Lenovo PCs and webcams and we got them to blog. We wanted to go after athletes with relatively strong fan following, but not the huge stars like Michael Phelps. In other words, lots and lots of these pockets of fans around the world. When India won its first gold medal in an individual event in shooting, he was one of our 100 athletes and we saw a huge pickup of people reading about him.
Web 2.0 and just the internet overall are accelerating this whole process of brand-building and destruction, and you have to make that an element of your brand strategy.
Dhar: Can you talk a little bit about the role of the CMO? One of the things I hear is that, more and more, there’s a lot of pressure from the CFO in terms of bringing in financial accountability, and that makes CMOs focus more on the financial metrics. But not everything can be measured precisely and that leads to interesting issues about how you allocate resources. What do you focus on? What makes for a successful CMO in today’s climate?
Advani: I think marketers realize the importance of unaided awareness and image and preference when it comes to revenue and, more importantly, margin. But it’s very hard to demonstrate that, if you ran a tactic in January, it really drove somebody to buy in April.
We know that that is an important thing that we need to do, but the more we talk about that and we’re seen as a brand-awareness-type CMO, the more people are going to come back and say, “Brand awareness is not going to pay the bills.” At the end of the day, I think one of the things that CMOs need to do is not major on that.
What the CMOs need to do is to focus a lot on lead generation. How much of the current quarter sales is marketing driving?
There’s so much innovation that is being done on things like direct marketing, on web marketing — not just paid search, but also organic search. Also, with display, there’s innovation taking place where you can take a one-to-many medium like the internet and make it one-to-one. We are partnering with companies that enable us to present the right message to the right person at the right time through a lot of behavioral targeting.
There are a lot of things that CMOs can do that can demonstrate an immediate return on investment and that’s what they should major in. In parallel, what they should do is construct a very simple framework. What I had inside of Lenovo was what I called the “four two one model.” We have historical data that says if four people know about our brand, two are going to consider us, and one actually buys. If market share is 5% roughly, then if I don’t have at least 20% unaided awareness, then I’m not going to grow any more because I’ve hit the limit.
When it comes to the brand and the top-of-the-funnel metrics, I think CMOs need to simplify it so the common person can understand the importance. Then put 80% of the focus on how marketing is driving leads in the current quarter and the direct marketing and web marketing.