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Be Like Intel: Sandisk’s Journey From Commodity to Recognized Consumer Brand
Technology companies often want to emulate Intel’s success in moving from content hidden in personal computers to a brand that consumers recognize, value, prefer and pay a premium for. For most, however, that journey represents a task much easier said than done.
On the surface, the Intel Inside campaign seems like a simple stroke of genius. Spend a few million dollars on a few well-placed television commercials, and in no time consumers will be clamoring to put your name on the outside of your product, right? If only it were easy. What most people fail to realize is that the remarkable success of the Intel Inside campaign—or any campaign that seeks to turn a commodity into a recognizable consumer brand—is based on two very important principles.
First, it requires financial resources to support a long consumer-oriented campaign. You don’t create a brand name overnight. Second, and more important, it requires a dimension of value that end-user consumers actually perceive as important. Without both of these elements, branding campaigns won’t have enough muscle to convince consumers to demand your product above all others.
Let’s address the money issue first. At last count, Intel spends about $1 billion per year on cooperative advertising with its major customers, such as Dell and HP. Add to that the $1 billion spent by Intel customers and the total financial outlay to support the Intel Inside brand comes close to $2 billion per year. Or, as we say in the business, serious money.
Typically, Intel matches every dollar spent by its customers on advertising that mentions the Intel Inside brand. For example, those millions of advertising circulars that Dell sends out each year? Intel absorbs about half the cost. In fact, every time you see the Intel Inside logo or hear the Intel Inside Sonic brand, you know that Intel paid for almost half of the marketing costs. This huge financial commitment is one of the reasons why the Intel brand stands out from the crowd and why techies easily point to it as one of their favorite brands.
On the end-user benefit side, the key word here is “perception”. In this case, Intel has successfully convinced enough consumers that a computer with an Intel chip inside is the fastest available and therefore can handle any application they can throw at it. As a result, consumers perceive real value in the Intel brand, so the vast majority of PCs rolling off assembly lines carry the famous sticker on the outside: Intel Inside.
Likewise, any product or content technology that hopes to develop a powerful consumer brand must convince the buying public that their product is so superior that consumers will not accept anything less. And that’s exactly what the little-known company SanDisk is trying to accomplish.
Will SanDisk be the next Intel?
A leading provider of flash memory — the tiny wafers that store digital music, photos and videos — SanDisk is one of the primary beneficiaries of the growing demand for cell phones, digital music players, digital cameras and game consoles. Over the past three years, the Sunnyvale (CA)-based firm’s revenue has grown by an average of 70 percent annually. This year, they are tracking growth of 19 percent, for a total of $2.1 billion in sales. Not surprisingly, SanDisk’s stock is up 40 percent over the past 12 months.
Despite these glowing numbers, SanDisk faces a big challenge. For the most part, memory is a commodity business, and prices can be wildly cyclical. Pricing wars often rage overnight, and prices can get ugly almost as quickly. In the summer of 2004, for example, flash memory prices plummeted, causing SanDisk’s stock to drop 40 percent in four days.
To avoid ongoing pricing hiccups, SanDisk is striving to develop a strong brand that consumers will recognize and value. At the most basic level, this means convincing consumers to ask for a “SanDisk one-gigabyte card” for their digital camera instead of any other one-gigabyte card. As Intel has convinced personal computer buyers to insist on Intel as the “chip of choice.”
From where I sit, it looks like SanDisk has the first part of the consumer technology branding formula right. They are spending millions on a global advertising campaign that targets retail stores, magazines and prime-time TV shows like The Simpsons and Survivor. In sheer dollar terms, SanDisk isn’t shelling out as much cash as Intel, but it’s unlikely. If fact, most companies don’t need to spend nearly that much. They just have to commit enough financial resources to attract the attention of consumers.
The second part of the formula seems to be going well as well, with SanDisk working hard to differentiate itself through technology that delivers real consumer benefits. Last year alone, SanDisk increased R&D spending by 48 percent to $125 million. The result has been a string of innovations—waterproof memory cards, titanium cards, and secure memory cards with embedded fingerprint readers—that have captured the attention of consumers because they offer attractive value.
SanDisk is also working with wireless carriers to help protect consumers from fraud and identity theft. When faced with a lost or stolen cell phone, consumers can contact the carrier to remotely disable the card and protect sensitive personal data. SanDisk has also successfully offered new products in the gadget business. Last August, for example, the company introduced an MP3 player that quickly shot to first place in the category, only to be shut down when Apple introduced the iPod Shuffle.
Does SanDisk have what it takes to make the leap from an unknown commodity provider to a recognized consumer brand like Intel? Only time will tell. In the meantime, I plan to follow them closely to see how their branding campaign continues and, more importantly, how the market responds. As someone who lives and breathes technology branding, I believe we can all learn a lot from SanDisk’s ongoing branding efforts.
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