Win or lose, Gates’ way will mould marketing

It’s an indication of the sort of paranoia that Bill Gates and Microsoft engender that even a recent Institute of Grocery Distribution conference on Efficient Consumer Response ended with the keynote speaker warning: “Beware of Bill”. What the current anti-trust action shows is just how powerful some key trends in modern marketing are in the hands of a player like Microsoft. Ironically, however, for most marketers the outcome matters little either way.

The court battle hinges on two of today’s most powerful marketing strategies: bundling and platform branding. Microsoft is an arch-exponent of both. First, it knows only too well that nowadays, competition between brands doesn’t only take place at the level of product quality and value for money, but around ease of purchase. If I can get key feature B while buying A I will almost certainly take advantage of the offer. That is why car manufacturers also sell car finance, and why the packaged holiday industry and sell-everything-superstores have swept everything before them. Consumers want convenient bundles and marketers are only too happy to oblige them.

Second, Microsoft understands the power that platform brands and products wield. A platform brand reaches beyond choice by making the product indispensable, because the customer’s day-to-day life literally rests upon it. Format and standards wars are struggles to win platform status. Visa and Mastercard are platform branders. Once you have them, they become embedded in your everyday transaction. And Microsoft is the classic. You don’t start your computer without it.

Most brands are happy to be a bundler or platform operator. But Microsoft does both. With a vengeance. Gates is absolutely right to say consumers want its Internet Explorer with Windows. Why not? But he’s laughing up his sleeve when he says they’re free to choose Netscape if they want to – the whole idea of a platform strategy is to make choice redundant.

He cleverly confuses the two in his propaganda. But regulators rightly see danger when a monopoly platform operator uses one platform to create a bundle of other platforms – especially when you think about what these platforms are about.

In formal terms, the battle may be between geek versus geek: Netscape versus Microsoft. But what’s really fuelling Gates-phobia is the enormity of his ambition. All right, Some companies, like Coca-Cola or Pepsico, want to “own” huge categories, such soft drinks or salty snacks. But what Microsoft wants to own is information processing itself: what Gates calls the “digital nervous system” upon which every office, school, shop and home will depend in the future.

He already has many of the products to do it. They include Windows itself; Microsoft NT, which embeds itself at the heart of business by connecting PCs into networks; Back Office, which provides the software platforms for e-mail and e-commerce; Internet Explorer, a direction system for Internet travel; and Windows CE, a stripped down operating system for use in the next generation of electronically linked consumer electronics devices, from the wallet PCs to the intelligent home and car.

In addition, there is WebTV, which anticipates the fusing of telephony, telecoms and broadcasting, bundling them together to offer everything from interactive TV, to Internet connection, to online shopping to video-mail (just stand in front of your camcorder and blab on).

Gates calls this the Web lifestyle. Over the next decade Web-linked intelligent devices will be able to speak, listen, recognise handwriting, and”most adults will be using the Web many times a day, without even thinking about it,” he says. This will “change the world – first the world of business, and then the way that people operate in their home,” he says.

But what’s driving other businesses to increasing paranoia, is the uncanny way that Microsoft platforms grow into bundles of services and content. Among the initiatives currently putting the cat among the pigeons in the US are CarPoint (“research and buy your next car at Microsoft’s automotive supersite”), Expedia (“take control of your travel planning and arranging”), MSFDC (which offers online banking), Sidewalk (a city-by-city entertainment guide which is competing with local papers for classified ads) and online news service MSNBC.

There is also online shopping through the Microsoft Plaza which offers everything from Gap clothing to cars to wedding gifts. And groceries. The NetGrocer is “the first nationwide online supermarket offering thousands of name brand items up to 20 per cent less than supermarket prices. By shipping directly from our warehouse we cut out the middleman and pass the savings to you”.

Gates has a deliciously coy word to describe these incursions into huge mainstream businesses. He calls it “overlap”. What’s even more worrying for these businesses is that his overlap experiments often trump them on price and service. For example, one of the “nice things” about CarPoint, says Gates, is that you can use it to find out what the dealer paid to buy the car. “So, when you go in to do that negotiation, you’re a little smarter than you used to be in that discussion.”

Another example: the MSNBC “interactive news site” allows users to type in their post code, then “drill down” into a news story to find out local information, for example how their Congressman voted on an issue and, as Gates recently boasted, to an audience of aghast newspapermen, “You can click on that and send e-mail telling [them] whether you’re with them or against them”.

The current anti-trust case impinges on all these initiatives in a subtle way. As Gates told a US banking conference in March, the building blocks of his digital nervous system “are very simple. It’s the PC connected up to the Internet”. Without those building blocks his strategy lies in tatters. No wonder he’s fighting so hard.

For marketers, however, the issue is different. Goodie or baddie, Microsoft is forewarning us of changes to come – changes which are already transforming most major industries business structures, revenue streams, balances of power and brand pecking orders. But these changes will come whether Microsoft wins or loses. So start preparing for them now.


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