Advance 3

Marketing Excellence Microsoft

Microsoft is the world’s most successful software company. Bill Gates and Paul Allen founded it in 1975 with the original mission of having “a computer on every desk and in every home, running Microsoft software.” Today, Microsoft is the fifth most valuable company in the world and has a brand value of $61.2 billion.

In the early 1980s, Microsoft developed the DOS operating system for IBM computers. The company leveraged this initial success to sell software to other manufacturers, quickly becoming a major player in the industry. Initial advertising efforts communicated the company’s range of products, from DOS to Excel and Windows, and unified them under the Microsoft brand.

Microsoft went public in 1986 and grew tremendously over the next decade as the Windows operating system and Microsoft Office took off. In 1990, Microsoft launched Windows 3.0, a completely revamped version of its operating system, including applications like File Manager and Program Manager that are still used today. It was an instant success; Microsoft sold more than 10 million copies of the software within two years, a phenomenal accomplishment in those days. In addition, Windows 3.0 became the first operating system to be preinstalled on certain PCs, marking another major milestone for the industry and for Microsoft.

Throughout the 1990s, Microsoft’s communication efforts convinced businesses not only that its software was the best choice but also that it should be upgraded frequently. Microsoft spent millions in magazine advertising and received endorsements from the top computer magazines in the industry, making Microsoft Windows and Office the must-have software of its time. The 1998 slogan “Where Do You Want to Go Today?” promoted not individual Microsoft products like Windows 98 but rather the company itself, communicating that Microsoft could help empower companies and consumers alike.

During the mid-1990s, Microsoft entered the notorious “browser wars” as companies struggled to find their place during the Internet boom. Realizing what a good product Netscape had in its 1995 Navigator browser, Microsoft launched its own, Internet Explorer later the same year. By 1997, Explorer had grabbed 18 percent of the market.

Over the next five years, Microsoft took three major steps to overtake Netscape. First, it bundled Internet Explorer with its Office product, which included Excel, Word, and PowerPoint. This meant that consumers who wanted MS Office automatically became Internet Explorer users as well. Second, Microsoft partnered with AOL, which opened the doors to 5 million new consumers almost overnight. Third, Microsoft used its deep pockets to ensure that Internet Explorer was available free, essentially “cutting off Netscape’s air supply.” By 2002, Netscape’s market share had fallen to a meek 4 percent.

Microsoft’s fight to become the browser leader was not without controversy; some perceived that the company was monopolizing the industry. As a result, Microsoft faced antitrust charges in 1998 and numerous lawsuits based on its marketing tactics. Charges aside, the company’s stock took off, peaking in 1999 at $60 per share. Microsoft continued to release new products, including Windows 2000 in 2000 and Windows XP in 2001. It also launched Xbox in 2001, marking its entrance into the multibillion-dollar gaming industry.

Over the next several years, Microsoft’s stock price tumbled by more than $40 a share as consumers waited for the next operating system to be released. During this time, Apple made a strong comeback with consumer-friendly products like Mac computers, iPods, iPhones, and iTunes. Apple also launched a successful marketing campaign titled “Get a Mac” that featured a smart, creative, easygoing Mac character alongside a geeky, virus-prone, uptight PC character. Apple’s campaign successfully converted many consumers and tarnished Microsoft’s brand image.

In 2007, Microsoft launched the Vista operating system to great expectations; however, it was plagued by bugs and problems and the company’s stock and image continued to slide, helped by the worldwide recession of 2008–2009. In response, Microsoft created a campaign titled “Windows. Life Without Walls” to help turn its image around. Its new message—that computers with Microsoft software were more cost-effective than the competition—resonated well in the recession. Microsoft also launched a series of commercials that boasted, “I’m a PC” and featured a wide variety of individuals who prided themselves on being PC owners, hoping to improve employee morale and customer loyalty.

In 2009, Microsoft launched Windows 7, an improved operating system, with the campaign “Windows 7 was my idea.” Four years later, it was operating more than 30 stores like Apple’s across the United States and Canada. Jonathan Adashek, general manager of Communications Strategy, explained, “We’ve welcomed more than 15 million customers and counting so far, and have learned a lot from them. Having this direct connection to our customers has really helped us better understand their tech needs.” Travis Walter, general manager of Microsoft’s International and New Store Formats, agreed, “In person, you get a very different experience and it’s one we’ve been very delighted to provide. When you see our technology in person—when you can touch and feel it—a light goes off.”

After the recession came to an end, Microsoft’s image and stock started to recover, thanks to the success of its retail stores, effective marketing, and a wide range of new product launches. Microsoft went after Google’s dominant position in the search marketplace, for instance, with a search engine called Bing, and it entered the growing mobile industry with its Windows Phone mobile operating system. The company’s 2011 expansion into smart phones surprised many analysts, but Microsoft hoped the smart phone and Windows Phone mobile OS would forge a strong connection with its consumers around the world. It continued its innovation momentum in 2012 with the launch of Windows 8, Windows 8 Phone, and a computer called Surface Tablet. The tablet impressed consumers with a detachable keyboard that also served as its protective cover.

Today, Microsoft offers a wide range of software, mobile, and home entertainment products. Its most profitable products continue to be Microsoft Windows and Microsoft Office, which bring in approximately 80 percent of its $86 billion in annual revenue.

Marketing Excellence Nordstrom

In 1901, John W. Nordstrom founded a small shoe store in Seattle that eventually grew into a fashion specialty chain store called Nordstrom. Nordstrom has remained in the family for four generations and now sells top-quality brand-name clothing, accessories, jewelry, cosmetics, and fragrances.

John W. Nordstrom built his company on the belief that it should always provide the highest possible level of customer service, along with top-of-the-line, high-quality merchandise to fit almost everyone’s needs and budget. When he retired, his sons Everett, Elmer, and Lloyd continued to run the business with the same customer-focused attitude their father shared. As the company expanded into fashion, stores were stocked with a wide range of high-quality clothes at various price points. Nordstrom believed it was better to carry too many sizes in each style than not enough so a customer didn’t get frustrated if his or her size wasn’t available. The brothers also instituted a policy titled “decision by consensus,” which helped move the company along even when disagreements arose.

Nordstrom grew into the billion-dollar retailer it is today under the leadership of the family’s third generation: Bruce, John, and Jim Nordstrom and Jack McMillan. Their philosophy focused on empowering the managers and sales force to make decisions that favored the customer, not the company. The company rewarded energetic individuals who attained an entrepreneurial spirit, preferring to hire “nice” people who could be trained to sell rather than seasoned “salespeople” who weren’t seen as nice.

During this time the company also decentralized its purchasing process, giving regional managers the freedom to purchase styles that fit the needs and tastes of their particular area. That is, managers in Minnesota could, and did, buy very differently from managers in southern California. To cater to each region, the company encouraged its sales force to continuously ask customers what products and styles they would like to see in the store. Jim Nordstrom explained, “When we go into a market, our first buy is the worst.”

Today, Nordstrom is run by the fourth Nordstrom generation and continues to set the standard in customer service and loyalty. In fact, the company is so well known for its customer service that true tales of “heroics” still circulate today. Perhaps the best-known tells how in 1975 a customer came into the store after Nordstrom had purchased an Alaska-based company called Northern Commercial. The customer wanted to return a set of tires originally bought at Northern Commercial. Although Nordstrom had never carried or sold tires, it happily accepted the return and instantly provided the customer cash for his purchase. In another example, a saleswoman noticed that a customer had left her plane ticket on the store’s counter. She called the airport and asked the airline to issue the customer another ticket, but the airline refused. The saleswomen immediately jumped into a cab and hand-delivered the ticket to the customer at the airport.

There are many other examples of its exceptional customer service, and Nordstrom’s “no questions asked” return policy remains intact today. Its sales representatives send thank-you cards to customers who shop there, warm up their customers’ cars on cold days, and have hand-delivered special orders to customers’ homes. Nordstrom installed a tool called Personal Book at its registers that allows salespeople to enter and recall customers’ specific preferences in order to better personalize their shopping experiences. Sales associates are also allowed to sell merchandise in any department, giving them even more opportunities to develop relationships with customers. Nordstrom also provides multiple channels for shopping, allowing customers to buy something online and pick it up at a store within an hour.

Nordstrom believes it has 15 seconds to capture the excitement of a customer with “a memorable experience” when he or she walks in the door. Aisles are neat and uncluttered, big display windows create a bright and open atmosphere, and the layout is efficient and easily navigated. Dressing rooms are large and illuminated to imitate natural light, escalators are wide to allow couples or parents with children to stand next to each other, and each fixture is chosen to create a homelike feeling. When a new store opens, Nordstrom connects with the surrounding community by hosting an opening night gala complete with live entertainment, a runway fashion show, and the ultimate shopping experience to help raise money for local charities.

Nordstrom’s Fashion Rewards Program repays loyal customers on four levels based on their annual spending. Customers who spend $10,000 annually receive complimentary alterations, a 24-hour fashion emergency hotline, and access to a personal concierge service. Customers at the highest level ($20,000 annually) also receive private shopping trips complete with dressing rooms pre-stocked in their size, champagne, live piano music, tickets to Nordstrom’s runway fashion shows, and access to exclusive travel and fashion packages, including red carpet events.

The company’s long-term and often costly customer-focus approach has reaped great benefits. Not only has Nordstrom emerged as a luxury brand known for quality, trust, and service, but its customers remain loyal even in hard times. During the economic crisis in 2008 and 2009, many customers chose Nordstrom over its competitors due to their existing relationship and its hassle-free return policy.

Nordstrom continues to stay strategically focused on customer service and look for new ways to help deepen and develop its customer-salesperson relationship. The company currently operates in 44 countries and 31 states with 117 full-line stores, 119 Nordstrom Rack clearance stores, two Jeffrey Boutiques, and one clearance store. Sales reached $12.2 billion in 2013.

Marketing Excellence IKEA

IKEA was founded in 1943 by a 17-year-old Swede named Ingvar Kamprad who sold pens, Christmas cards, and seeds out of a shed on his family’s farm. The name IKEA was derived from Kamprad’s initials (IK) and the first letters of the Elmtaryd farm and the village of Agunnaryd where he grew up (EA). Over the years, the company grew into a retail titan in home furnishings and a global cultural phenomenon, inspiring BusinessWeek to call it a “one-stop sanctuary for coolness” and “the quintessential cult brand.”

IKEA inspires remarkable levels of interest and devotion from its customers. Each year more than 650 million visitors walk through its stores all over the world. Most need to drive 50 miles round-trip but happily make the effort in order to experience IKEA’s unique value proposition: leading-edge design and functional home furnishings at extremely low prices.

IKEA’s Scandinavian-designed products are well made and appeal to the masses. To stay relevant and fashionable, the company replaces approximately one-third of its product lines each year. Most have Swedish names, such as HEKTAR lamps, BILLY bookcases, and LACK side tables. Kamprad, who was dyslexic, believed it was easier to remember product names rather than codes or numbers.

Besides featuring fashionable and good-quality products, IKEA stands out in the industry because of its bargain prices. The company’s vision is and always has been “to create a better everyday life for the many people.” As Kamprad said, “People have very thin wallets. We should take care of their interests.” A high percentage of its customers are college students and families with children.

IKEA continuously seeks out new ways to run its businesses more efficiently and pass those cost savings on to the customer. In fact, it reduces prices across its products by 1 percent to 3 percent annually. How can it do so? For starters, IKEA engages the consumer on many levels, including having the customer do all the shopping, shipping, and assembly.

IKEA’s floor plan is designed in a winding, one-way format featuring different inspirational room settings, so consumers experience the entire store. Next, they can grab a shopping cart, pay for the items, visit the warehouse, and pick up their purchases in flat boxes. Consumers load the items in their car, take them home, and completely assemble the products themselves. This strategy makes storage and transportation easier and cheaper for the store.

IKEA has also implemented several company-wide strategies to keep operational costs low. The company buys in bulk, controls the supply chain, uses lighter packaging materials, and saves on electricity through solar panels, low-wattage light bulbs, and energy from its own wind farms in six different countries. Its stores are located a good distance from most city centers, which helps keep land costs down and taxes low.

When IKEA develops new products, its designers and product developers start with a low price tag first and then work with one of their 1,350 suppliers around the world to develop the product within that price range. Designs are efficient, and waste is kept to a minimum. Most stores resemble a large box with few windows and doors and are painted bright yellow and blue—Sweden’s national colors.

Many of IKEA’s products are sold uniformly throughout the world, but the company also caters to local and regional tastes. For example, stores in China stock specific items for each New Year. During the Chinese Year of the Rooster, IKEA stocked 250,000 plastic placemats with rooster themes, which quickly sold out. When employees realized U.S. shoppers were buying vases as drinking glasses because they considered IKEA’s regular glasses too small, the company developed larger glasses for the U.S. market. After IKEA managers visited European and U.S. consumers in their homes, they learned that Europeans generally hang their clothes, whereas U.S. shoppers prefer to store them folded. As a result, IKEA designed wardrobes for the U.S. market with deeper drawers.

Showrooms in each country or region vary as well. For example, managers learned that many U.S. consumers thought IKEA sold only European-size beds. Beds are very important to U.S. consumers, so IKEA quickly changed its U.S. showrooms to feature king beds and a wide range of styles. After visiting Hispanic households in California, IKEA added more seating and dining space to its California stores, as well as brighter color palettes and more picture frames on the showroom walls. In China, IKEA set up its showrooms in small spaces to accurately reflect the small size of apartments in that country.

As the company expands globally, it is learning that attitudes towards its core DIY (do it yourself) delivery and assembly business model vary. In China, for example, consumers do not want to assemble products themselves and will pay a significant amount for home delivery and assembly. As a result, IKEA has added these services, and sales in Asia have taken off. The company plans to implement the same strategy in India, where DIY is also less common.

IKEA is known for its quirky marketing campaigns, which help generate excitement and awareness of its stores and brand. It ran a campaign inviting customers to be the “Ambassador of Kul” (Swedish for “fun”), but in order to collect the prize, the contestants had to live in an IKEA store for three full days before it opened, which they happily did.

Thousands of people will line up for a chance to win prizes and IKEA furniture. In Sweden, IKEA launched a Facebook page for the manager of a new store. Anyone who could tag his or her name to an IKEA product on the profile page won that item. The promotion generated thousands of tags.

IKEA has evolved into the largest furniture retailer in the world, with approximately 350 stores in 43 countries and revenues topping €27.9 billion, or $36 billion, in 2013. The majority of sales still come from Europe, but the company has aggressive plans to expand the $11 billion brand further into Asia, India, and the United States.