Gateway: Moving Beyond the Box

Gateway: Moving beyond the Box

To begin with Gateway target consumers included mid-western folk with high regard to inter-personal relationships. What triggered as an idea to sell computers over the phone soon expanded as a 12 million enterprise within the first two years. The main aim was to provide built-to-order computers at a bargain, high end quality for low end prices. The ideology at gateway was that prospective customers needed to feel that they were purchasing a PC from a trustworthy source and that PC customers tended to

• Be price sensitive, looking for best deals

• Cared for technical specifications, quality and support

By 1999, gateway was second to Dell in direct distribution of PCs. Large corporates preferred Dell but home consumers were gateway’s primary target market. In order to create direct relationships with end users, Dell and Gateway exploited the telephone and internet based sales distribution model.

• There existed two sets of consumers:

• Tech savvy consumers who were comfortable buying computers over the phone.

As computers became more of a commodity, the new consumers needed more interface to better understand their needs.

A major change in its strategy was the public unveiling of its new hexagon strategy designs to augment sales by additional revenue streams: software and peripherals, service and training, internet access, financing and portal. Under this strategy the company would compete in the 240 billion PC solutions market. Gateway’s philosophy was that the buying experience, the ownership experience was important and the main goal was to develop long term relationships. To transform itself into a full scale solutions provider in just a few years would be challenging. The main concern was the leveraging of 3 distribution channels to market the new portfolio of applications most effectively. The 3 distribution channels included

1. Direct ( Telephone )

2. Internet ( Gateway.com )

3. Bricks and mortar ( Gateway country stores )

Gateway.com

In 1996, Gateway and Dell adopted the internet as a distribution channel where customers could learn about products, configure and purchase customized consumer systems. It employed 100 online support personnel.

In 1999, systems revenues accounted for almost 90% of total revenues. Gateways growth was significantly less as compared to Dell. Between ’96 and ’98 , Gateway’s sales increased from 5 billion to 7.5 billion while that of Dell’s rose to 12.3 billion. Also Gateway’s net margin fell.

Gateway faced hassles on multiple fronts in attracting bigger corporate