AMD Learns To Piggyback Off Intel's Marketing Expense

Faced several years ago with trying to figure out the best marketing and advertising strategy to compete with rival Intel, Stephen DiFranco, vice president/worldwide sales and marketing at Advanced Micro Devices (AMD), had an aha moment.

He realized the funny little sound at the end of Intel's TV and radio ads beckons consumers to buy a PC online and at retail stores, many more of which now offer AMD-based processors.

Intel spends marketing dollars that AMD indirectly capitalizes on, and according to DiFranco, the behemoth rival has become AMD's best marketing partner.

"I get 30% of their marketing spend back," DiFranco told more than 100 CMOs and marketing executives attending the Red Herring CMO 2008: The Crossroads of Technology and Marketing this week in San Diego, Calif. "I wish they would advertise more. I beg them publicly, please advertise more. Create more demand. ... Some weeks in the United States there are more AMD desktops and notebooks sold than Intel."



The marketing strategy did not come easy. AMD stopped marketing to consumers. Executives left egos at the door and found ways to help partners grow their businesses, relying more on rival Intel's dominance in the market, and original equipment manufacturers (OEMs), retail stores and distributors.

Not a simple feat for a company that manufactures between 80 million and 100 million CPUs annually built into desktops and laptops from Dell, Hewlett-Packard, Lenovo and Toshiba. Many are sold to consumers through Best Buy, Circuit City and Fry's Electronics. They also sell through distributors Avnet and Ingram Micro, which sell PCs to system builders and to Gary down the street, who builds PCs and drives around in a van supporting small businesses like doctors' offices.

"Do you know who really decides whether you get an AMD- or Intel-based laptop or desktop?" DiFranco asks. "It has more to do with whether it's on the shelf at Best Buy. We can't sell it if the [retailer] doesn't put the HP desktop with the AMD processor on the shelf."

DiFranco says it's not about sharing costs or spending less. It's about changing an industry strategy. It became less important that consumers knew the AMD brand than ensuring that AMD processors were built into at least one-third of all available desktop and laptop models on retail store shelves, and that sales people know how to sell them. "We went from 5% to 50% market share in retail and didn't spend $1 dollar advertising to consumers," DiFranco says. "We also leveraged partners to gain access to channels, not customers."

The strategy makes it more important for consumers to know that Microsoft wrote the operating system Vista on AMD processors based on 64-bit architecture, and Oracle launched a new product on AMD, rather than Intel products. In 2006, DreamWorks Animation SKG began using HP xw9400, a dual-core AMD Opteron Rev F processor workstation, because it had faster processing speeds to create advanced special effects in movies.

The strategy to populate partner Web sites with information and retail store shelves with AMD-based products puts manufacturers like Hewlett-Packard and Lenovo--and retail stores Best Buy and Circuit City--first when making decisions on marketing plans. That's because if Lenovo only builds products with AMD processes for consumers in China, and they own 40% of the desktop market, so does AMD.

The awakening that made AMD executives change the company's marketing strategy also prompted them to take market conditions into consideration. They now consider manufacturers' road maps for product development, and whether they will build-in motherboard slots compatible with Intel or AMD. PCs typically can't accommodate both brands.

Another point to consider--the urban myth about being small and nimble does not always provide fodder for competition. Smaller companies typically have tighter budgets and less staff, who rely on instinct rather than research to compete. It doesn't work long-term. DiFranco says managing a marketplace where partners participate creates a better strategy.

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