I’m fascinated by the recent flurry of activity of designer PCs.  Having worked at Sony during the early years of VAIO (perhaps the first fashionable PC line, launched with its distinctive violet color and sleek features and all), it’s pretty amazing to me to see how the category has developed.

Both HP and Dell have introduced lines of designer PCs in the last couple of years.  HP’s launch of the Vivienne Tam Mini in early 2008 was the product of the PC maker’s partnership with the popular clothing designer and its success spawned a series of other limited editions.  In December of last year Dell launched Design Studio, a customization program in which customers pick from custom colors and pieces of artwork from artists.

A study of the two companies’ entries makes for some interesting comparisons.

Different Starting Points

HP’s efforts are rooted in its desire to attract more female customers.  They reached out to Ms. Tam and eventually gave her complete control over the design of the Mini netbook.  Satjiv Chahil, SVP-global marketing at HP, is quoted in a recent Ad Age write-up saying, “No tech company has ever addressed this market with great authenticity…Other efforts have been about making products pink. … This is a total fashion design...”

Dell was inspired by its history of made-to-order PCs when it decided to launch its Design Studio.  In a Brandweek article, Dell’s VP of consumer experience design, Ed Boyd, is quoted as explaining the rationale behind the effort as:  “You can have it Steve Jobs’ way or you can have it your way.“  Their motivation is to deliver “the most personalized products in the world” – including the design.

Different Positionings

HP started off with a single Vivienne Tam product and has expanded the program slowly and selectively.  The line now includes another Tam Mini along with a couple of other designers’ products and my sense is they will continue to emphasize the exclusivity of the designs.  This is designer PC with the emphasis on design.

Dell launched with 100 choices of artwork and now there are more than 350 images available.  Artwork comes from artists as well as “branding partners” such as Major League Baseball, (RED), and OPI nail polish.  They change their offerings every quarter.  As such, Dell has positioned the program squarely on the benefits of personalization.

Different Channels

In their own ways, both brands have eschewed traditional PC channels like Best Buy.  In keeping with the fashion strategy, HP sells its designer PCs at fashion retailers such as Macy’s and Neiman Marcus.  And Dell’s customized products are naturally only available through Dell.com.

Different Objectives

Although the Vivienne Tam Mini’s sales were so high that HP abandoned its original plan to make it a limited edition, it’s clear the line will never be a sales leader at the company.  It is, however, believed to play a critical role in improving brand perceptions.  “It raises the tide for all HP boats. It’s very specific and unique activity that’s lifted the entire company. The halo effect has been great,” Mr. Chahil said in Ad Age.  As such, development costs for the line aren’t booked as an R&D expense but rather as a marketing one. “These are not products with a marketing program, these are in fact marketing tools,” said David Roman, VP-marketing communications, HP.

Dell has more grandiose plans for its designer PCs.  The Brandweek piece reports the company hopes to see this kind of customization grow across much of its portfolio. The program is currently available in most of the Americas, but Boyd said Dell will be able to expand it worldwide by next summer.  “What you’re seeing now is just the tip of the iceberg,” he declares.

Same Smarts

Both of these efforts are customer-centric developments in a category which is growing.  Both represent exciting innovations at a time when many categories and companies are struggling with dry new product pipelines.

And although both approaches provide ways for customers to express themselves through their PC designs, each company is doing it in a way that makes sense for their brand.   HP needed to boost its cool credentials and so launching an exclusive, high-fashion design line provides an appropriate brand perception boost.  Dell, on the other hand, needed to reinvigorate their existing brand equity in customization – adding design into the mix opens a new avenue to do so.

Perhaps most significant of all is that, while the last few years has seen Apple waging war with its Mac vs. PC ads and Microsoft trying to fight back with its “I’m a PC” campaign, Dell and HP have taken the high road and actually developed products that take the self-expressive power of PCs to a new level.

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Today my series on brand value creation comes to a close with a look at companies’ Learning and Growth.  Previous posts have examined how brands create value for companies from the Customer, Financial (2 posts) ,  and Internal Business Process perspectives.

The Learning and Growth quadrant of the Balanced Scorecard asks, “To achieve our vision, how will we sustain our ability to change and improve?”  The results produced by a strong brand relative to this quadrant may be the most difficult to quantify, but they are perhaps the most significant.   Here are 3 ways a brand creates value by impacting an organization’s Learning and Growth:

1.  When the “brand as business” management approach is engaged, the purpose and values of the organization are clarified.   Using the brand as the North Star for the business, your company not only adapts to outside changes appropriately but also create its own changes and use them to its advantage.

• Patagonia provides an example of a company which uses its brand — their “philosophies” — to be prepared for change. Yvon Chouinard, the company’s founder and owner, says, “What good does having a fixed set of written philosophies accomplish when everything else in the business world is so dynamic?…The answer is that our philosophies aren’t rules; they’re guidelines.  They’re the keystones of our approach to any project, and although they are ‘set in stone,’ their application to a situation isn’t…We have made many mistakes during the past decade, but at no point have we lost our way for very long.  We have the philosophies for a rough map, the only kind that’s useful in a business world whose contours, unlike those of the mountains, change constantly and without much warning.” (emphasis mine)

2.  Your brand can help you actually change the way business is done if you adopt a bold and differentiated brand platform.  Jim Collins, in his book Built to Last, describes how “Bill Hewlett and David Packard envisioned HP as a role-model corporation, known for progressive personnel practices, innovative and entrepreneurial culture, and an unbroken string of products that make a technical contribution.”  So they instituted many practices to manifest this bold vision – for example:

• HP introduced a profit-sharing plan which paid out the same percentage to the janitor as to the CEO and created a catastrophic medical insurance plan at a time when such actions were virtually unheard of.
• Beginning in the 1950’s, HP forsook the hiring of engineers from industry and recruited less experienced but more talented graduating seniors from respected engineering schools.
• Self-imposed rigorous standards led HP to bypass high-volume markets like IBM-compatible personal computers for a period of time because of its commitment to reject me-too or copycat new products in favor of those representing a technological contribution.

Clearly the “HP Way,” as the brand’s tenets became known, drove that organization’s learning and growth.

3.  Your brand can fuel the development of a robust organizational culture, by explaining why you do what you do in a way that gives more meaning to your relationships with customers and stakeholders alike.   After dissecting the factors that have driven the success of some of greatest organizations in recent history, including Apple and the Walt Disney studio, management author Warren Bennis concludes in his book Organizing Genius, “[They] think they are on a mission from God…they believe they are doing something vital, even holy…their clear, collective purpose makes everything they do seem meaningful and valuable.”  Your employee’s work can be transformed into more than churning out products; stakeholders can see themselves are more than functional cogs in the company wheel.  Rather, they can see themselves as contributing to something that has more substantive and lasting impact.

This motivates them embrace and execute change more effectively.  As the consultants who contributed to the late 1990’s turnaround of Best Buy explain, continuous improvement and growth flow naturally out of an emotionally satisfying culture:  “’Why is this important?   What’s in it for me?  Can I be successful?’ To be ready for change, people must develop a compelling conviction that there are positive answers to these questions,” they state.

So a strong brand increases an organization’s ability to change and improve — thus creating long-lasting and far-reaching value.

I hope this series on Brand Value Creation has been a good one for you.  By running it, my intent has been to make the case that brands produce substantial positive results for business.  And, perhaps more importantly, to present a different point of view on what a brand is:  what a company does and how it does it.

BusinessWeek’s analysis of “How HP Got Its Wow! Back” reports on a business metric the Company uses that gives me an idea about measuring marketing productivity.

Apparently the new-ish head of the technology company’s PC division, Todd Bradley, has orchestrated a turnaround for the business, increasing market share 4.3 ppts and producing profit margins of 5.5% (which is huge for PCs.)  One of the tactics Bradley has used is a metric called “R&D productivity.”  The article explains:  It measures R&D spending as a percentage of gross margin for each product line. A standard desktop computer with low margins may get one or two innovative features, while a high-end laptop with fat margins would get enough flash to make it stand out. To determine the appropriate R&D level, HP does three-year projections of expected gross margins.

This metric is credited with helping the division strike the right balance between innovation and price, with the success of HP’s new TouchSmart PC (the first touchscreen, all-in-one desktop) as an example.

So, my idea is a “marketing productivity” metric — that is, a way of determining the appropriate amount of marketing spend based on 3-year projections of expected gross margins.  This would mean those products that are likely to produce the most margin would be allocated the most marketing dollars; and low-margin products would get fewer dollars.

On the one hand this approach would limit the common marketing practice of heavily promoting “loss leaders” in order to attract people to your brand, with the hopes of eventually trading them up when it comes time for them to actually make a purchase.

And in some cases, budgeting your marketing dollars according to margin projections would be a self-fulfilling prophecy — after all, how much you spend on marketing should affect the margins you generate.  But your 3-year projections could be made based on normative data, thereby removing the effect of spend.

In doing so, applying a “marketing productivity” metric could be a worthwhile approach.  It would take some of the subjectivity out of marketing budget allocation process, thus assuaging the concerns controllers often have about what seem to be random marketing decisions.  And I would think it would improve marketing ROI (we spent more money and we made more money, assuming the projections were correct) — again something that’s sure to please company leaders.

But perhaps the biggest benefit of utilizing such a metric could be the integration of product development and marketing.  That is, product development decisions could be made simultaneously with marketing decisions — e.g., do we think we can promote these additional features well enough to produce the incremental margin we need in order to include them in the product?  or are they simply add-ons that don’t really make a difference to the customer?

In this way such integration would strengthen the company’s discipline of customer intimacy.  Products would be developed with their relevance to customer needs and wants in mind from the start — vs. the more common approach of engineers and designers creating products based on technological or operational capabilities and then throwing them “over the fence” to the marketing department to figure out how to make them meaningful to customers (cartoon compliments of Tom Fishburne — check out my post on his book!)

What do you think?  Do you think implementing a “marketing productivity” metric makes sense?  I’m eager to hear your thoughts on pros and cons.