Searching For The Right Advertising Agency

Company Background

The story of Gateway is an inspiring one. The company, originally called Gateway 2000, was founded in 1985 in an Iowa farmhouse by Ted Waitt, the son of a fourth-generation Iowa cattleman. Armed with a rented computer, a three page business plan, and a $10,000 loan guaranteed by his grandmother, Waitt dropped out of the University of Iowa to pursue his dream. Gateway's early value proposition was similar to what it is today: offer products directly to the customer, build them to their specifications, provide them with the best value for the money, and offer unparalleled service and support. Waitt's start-up company had $100,000 in sales in its first year and by 1993 it became a Fortune 500 company with sales of nearly $3 billion. The company's rapid growth continued throughout the '90s, reaching a peak of more than $9.6 billion in 2000.

Over the past 18 years Gateway has been a technology and direct-marketing pioneer. It was the first company in the industry to sell computers online, the first to bundle its own branded internet service with a PC, and among the first direct retailers to sell its own branded consumer electronic products. In 1996 the company became one of the first "brick and click" retailers when it introduced a nationwide network of Gateway Country stores. Today, the company has nearly 200 stores where customers can try out Gateway products, get advice from technical experts, and learn more about technology in classes offered in high-tech classrooms. Underlying Gateway's growth has been Ted Waitt's vision that technology should be fun, easy to use and should enhance and improve the user's quality of life. Gateway uses all of its sales and distribution channels including its call centers, Gateway.com Web site, and its nationwide network of retail stores to sell its products to consumers, businesses, government, and educational institutions.

As its customers' desire for innovative computer technology and other electronic products has grown, Gateway has been searching for the best way to communicate its product offerings and value proposition to an increasingly tech savvy and demanding marketplace. In a business as competitive and fast evolving as the PC industry, Gateway recognizes that differentiation and brand image are very important in developing and sustaining a competitive advantage. However, in recent years Gateway has struggled to find an advertising theme that resonates with consumers and clearly differentiates the company from competitors such as Dell, Hewlett Packard (HP)/Compaq, Sony, and Apple. In the process Gateway changed advertising agencies five times over the past six years and three times in a 14 month period from early 2002 to 2003.

Gateway's Agency History 1993 to 1998

Until 1993, Gateway 2000 relied solely on print advertising that was produced in house. However, as the company grew rapidly, it decided to add television ads to the media mix and to retain the services of an outside agency to work with its in-house advertising department. The company's first outside agency was Carmichael Lynch, Minneapolis who was hired to handle its television advertising. The agency hired a New York commercial director and filmmaker, Henry Corra, to direct the first Gateway commercials. Ted Waitt liked the unscripted, folksy ads that Corra was shooting and his ability to capture the real people in Sioux City, South Dakota which was the home of Gateway at the time. The visionary entrepreneur and artist trusted one another and developed a strong personal relationship. In addition to Carmichael Lynch, Gateway had retained the services of the London-based Finex agency to handle its European and Japanese creative as the company's sales in these markets were increasing.

As Gateway 2000 grew rapidly and its international sales increased, the company decided it needed a global agency. In March 1997 the company moved its estimated $70 million worldwide account to D'Arcy Masius Benton & Bowles, a global agency that could help the company with its growing international business. DMB&B was selected over several other agencies which made finalist presentations including J. Walter Thompson and TBWA/Chiat Day. Gateway's senior VP of global marketing cited DMB&B's strategic thinking and chemistry as reasons for choosing the agency over the other finalists. The new agency began working with Gateway's in-house advertising department, focusing on the consumer market and handling most of the media buying outside of PC publications. Gateway's in-house group created ads and purchased media in PC enthusiast publications. DMB&B took over Gateway's advertising in the U.S. market immediately and then transitioned into handling creative as well as media buying in Europe and Asia.

The first ads from the new agency retained the "You've got a friend in the business" tagline that Gateway had been using for several years. A few months later the agency introduced a campaign theme saying Gateway goes "From South Dakota to the rescue." An agency executive explained the rationale behind the campaign by noting that "South Dakota is a state of mind, a way of doing business, and dealing with people." However, Gateway and DMB& B got off to a rocky start as both sides grappled with the precise roles of the agency and the in-house group and how to collaborate. Also, the agency's creative approach was geared more toward traditional advertising that used actors and scripted TV spots, such as one showing a family in a computer store where piped-in music segues into advice that the family can get what it really needs from Gateway.

These types of ads quickly fell short of the expectations of Ted Waitt, who was known for his dislike of traditional advertising. Waitt noted: "When you're just trying to capture reality, you don't need scripts, you don't need concepts, and you don't need agency overhead. You just shoot, pick the magic moments and put them on the air. Our customers and employees come up with better stuff than you could ever write. And better yet it's real." Waitt became dissatisfied with DMB&B's traditional campaigns and in early 1998 Gateway 2000 took its television creative back in-house leaving the agency to handle media buying and newspaper advertising. On March 19, 1998 Gateway fired DMB&B, dropping the agency after less than a year. Waitt brought back Henry Corra to work on Gateway's advertising along with another agency, DiMassimo Brand Advertising, a small creative boutique. Corra and the new agency produced a number of unscripted TV commercials for Gateway that were used for several months.