HP Opens Curtains on New Consumer Strategy

NEW YORK — Taking a page out of its enterprise IT playbook,
Hewlett-Packard is aiming to provide consumers with
full-scale solutions-based “experiences” in order to simplify the shopping
and buying of high-tech gadgetry, and will spend $300 million in its
largest-ever consumer marketing campaign, Carly Fiorina, HP chairman and
chief executive officer, announced on Monday.

“Today is about the experience. This is about digital technology where
you want it work, how you want it to work, when you want it to work,”
Fiorina told analysts and the media at the company’s launch event in a loft
on the West Side of Manhattan.

Standing in front of a wall with 158 new printers, cameras, PCs, scanners
and handhelds on display, HP’s top official explained the latest marketing
initiative was a follow-up to last year’s product push, dubbed “the Big
Bang,” in which HP introduced a revamped enterprise computing strategy and 50 new products designed for consumers and small- to medium-sized businesses.

Monday’s launch event, internally dubbed “Big Bang 2” by HP, comes at a
crucial time for the Palo Alto, Calif.-based computer maker, which has
ranked as the nation’s largest home PC vendor for the past three years
according to IDC. Dell is fast on its heels on the consumer side of its
business and IBM and
others continue to eat away on the enterprise side.

“The challenge with HP is they want to be so many different things. They want to be competitive with Dell but they also want to keep up with IBM. It’s a challenge for HP because they are playing on so many different fields,” said Charles King, research director at Sageza Group.

In fact, HP’s previous branding campaigns have been primarily focused on
the enterprise side of the business. HP has tried remain in step with IBM’s
on-demand initiative with strategic initiatives of its own like the Adaptive
strategy unveiled last spring. At the time, the Palo Alto,
Calif.-based computing giant even followed up its “Everything is
campaign with a similar “On

But, the company that decades ago helped revolutionize printing, and as a
start-up transformed the entire Silicon Valley region into a hotbed of
innovation, hasn’t been impervious to the high-tech recession that
gripped the industry three years ago. For example, while digital cameras for
the first time outsold traditional cameras during the last holiday season,
overall holiday sales were the worst in a decade.

So, like other high tech giants that have tried to expand into other markets, HP sees the consumer market as a chance to re-energize sales and reverse its recent fortunes. “Consumers represent the frontier and other companies have spotted this trend. HP can build on a bedrock of PCs and printers,” said Roger Kay, vice president of client computing at research firm IDC.

But as Fiorina explained, one of the biggest challenges for high-tech
vendors was the addressing the complexity that consumers face when shopping or purchasing a camera, scanner or printer.

“For most of us, the digital experience is anything but empowering,” she
said. “People have been talking about the digital revolution for some time.
The truth is the revolution won’t happen in the home until technology
becomes a simple, rewarding experience.”

Is it any surprise that 45 percent of U.S. households still don’t have a
DVD player? Or that 45 percent of the people who own a PC say they are
intimidated by technology, said Fiorina, citing research performed by Parks

But with new products like the ScanJet 4670 (a scanner in the shape of a
simple window pane so you can scan 3D objects as well as 2D pieces of paper)
and an 8-ink printing system (which HP claims can develop photos with
resolution better than silver halide), HP said it has the engineering
prowess (HP claims an average of 5 patents a day) and marketplace
understanding (HP products are on more than 10 percent of the world’s retail
shelf space) to transform the complex of buying IT gadgets into a seemless,
simple and rewarding experience.

“This means we can innovate, engineer and invent along the entire
continuum of the customer experience,” she said.

As such, HP plans to spend $300 million to launch its largest-ever
consumer campaign starting this fall. With the central message of “You + HP”
serving as an extension to the “Everything is
campaign launched last year by Goodby, Silverstein & Partners,
HP plans to kick off its campaign with a focus on digital photography in
hopes of capitalizing on the holiday selling season.

Fiorina explained that over the course of 18 months, HP research has
helped simplify the process of taking and developing digital photos from a
convoluted 57-steps down to 3. Today, it is launching an 8-ink printing
system that can prints photos that will last 75 years — more than 3 times
as long as silver halide photos.

Analysts are generally optimistic about HP’s prospects although no one has declared it brilliant just yet.

“All that depends on things beyond their control,” Kay told internetnews.com. Still, the IDC analyst does give HP credit for timing the market properly. For example, the upcoming push on digital photography comes at a time when more and more web users connect to the Internet via broadband connections and hard drives have excess capacity.

“The file sizes fit today’s pipeline and buckets,” he said.

In a research report, DB Securities analyst George Elling noted “Big Bang 2” positions the company well during the upcoming back-to-school and holiday selling seasons.

“We are optimistic that Big Bang II will spur increased hardware sales. Following last year’s Big Bang I, HP grew imaging and printing hardware revenue approximately 22 percent in a market that declined roughly 20 percent,” Elling wrote.

Other new products unveiled today here include: a camera attachment for
iPAQs that has 1.3 megapixel resolution and 4x zoom; the ZD7000 notebook
featuring a 17-inch screen and 802.11a, .11b and .11g compatibility; the HP
Photosmart PC, the first PC with digital camera docking integrated into its
form factor and features its new Image Zone photo management software; and a
DVD movie writer, though Fiorina acknowledged that “we have more work to do”
in the area of multimedia video services.

As for enhancements to its distribution channels, HP plans to open retail
“experience” centers developed with Microsoft in
key U.S. retailers including Circuit City, J&R ComputerWorld, Micro Center
and CompUSA.

“We share a common view that solutions are more important,” said Alan
McCollough, CEO of Circuit City who was also in attendance.

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