Dell, Microsoft See (PRODUCT) RED

Both companies have become (PRODUCT) RED corporate sponsors. Tomorrow, Dell will start direct-selling two XPS M notebooks, the XPS One PC and 948 printer with the distinct (RED) appearance and logo. From the weekend, the products will be available in Best Buy stores.

The computers will come with Windows Vista Ultimate (RED) Edition, which includes a special (RED) desktop theme, six wallpapers, DreamScene background, screensaver and two sidebar gadgets.

During the Super Bowl, Dell and Microsoft will run a commercial for the new (RED) products.

The (RED) Business Model
(PRODUCT) RED, or (RED), is the brainchild of U2 lead singer Bono and DATA (Debt, AIDS, Trade, Africa) Chairman Bobby Shriver, who want to raise AIDS awareness and funds to fight a disease devastating huge portions of Africa's population. (PRODUCT) RED launched in the United Kingdom in March 2006 and worldwide that October.

Dell and Microsoft join American Express, Apple, Converse, Emporio Armani, Gap, Hallmark and Motorola as corporate partners, which sell special (RED) products and donate profits to The Global Fund to fight AIDs, tuberculosis and malaria.

I've closely watched (RED) since its launch, because of personal interest in the intersection between business and charity.

But "(RED) is not a charity," said Susan Smith-Ellis, chief executive of (RED). "It's a business model. Before there was a (RED), private sector contribution to the Fund was $6 million." This week, contributions reached $54 million, largely because of (PRODUCT) RED.

"Dell and Microsoft give us exposure in 30 countries on five continents," Smith-Ellis said. Dell and, particularly, Microsoft add tremendous reach, visibility and potential contributions to The Global Fund.

Dell and Microsoft will donate $80 from each (RED) PC sold, $50 from either of the two notebooks and five bucks from the printer. Corporate partners set the level of contribution, which, based on my 18 months watching the organization, is significantly more per product from Dell-Microsoft than from the other sponsors.

During our phone call this afternoon, Smith-Ellis diplomatically handled my question about contribution levels. "The people who buy Converse sneakers, we're bringing them in at a different price point than, say, someone who buys a computer," she said. But she also acknowledged the important "coming together of two big technology titans for this issue."

Dell and Microsoft spokespeople wouldn't discuss the contribution breakdown, as in who gives more. Dell spokeswoman Anne Camden described the donations as a "joint contribution between Dell and Microsoft," but nothing beyond that.

I pressed, because the contributions are significant, and not just compared to other sponsors' products. PC margins are razor thin, so a $50 or $80 contribution is substantial. Sponsors don't charge more for their (RED) products, so Dell and Microsoft won't recover the profits elsewhere.

"They're the same price points," Smith-Ellis said about (RED) and comparable products. "The companies themselves donate their profits."

The (RED) Lifestyle
The donation model hearkens back to Smith-Ellis' assertion that (PRODUCT) RED is a business model rather than a charity. Before I ran this Weblog, I wrote about the organization on my personal Weblog. I concluded then and believe more firmly now that (RED) can succeed if its supporters can sell it as a lifestyle.

The most successful products share strong lifestyle marketing in common. Starbucks isn't about coffee, but a kind of mobile lifestyle. It's the modern version of the watering hole or frontier saloon, where people gather and socialize. Otherwise, why pay two bucks for a plain cup o' joe—or $4-$5 for a fancy coffee, which, by the way, denotes hipness. Apple and Harley-Davidson are among the other companies successfully selling their products as lifestyle choices. Charity—doing good for other human beings—is another kind of lifestyle marketers can appeal to.

The corporations selling (RED) products convey that they are part of the solution rather than the problem. People buying (RED) products can see themselves as solving a worldwide problem. Personally, I've got qualms with consumerism as a means making for donations to The Global Fund. But the approach has merit, nevertheless. Corporate branding is everywhere—on clothes and lots of other products. (PRODUCT) RED stands out as a brand associated with a lifestyle of giving—and the distinctive look of the products draws attention to the caring brand.

People must buy into the lifestyle to get products with the distinctive (RED) appearance and logo. For people that want Windows Vista Ultimate (RED) Edition, the Dell computers are "the only way to get it," said Craig Cincotta, a Windows senior product marketing manager.

So much about what makes (PRODUCT) RED work is about marketing, and it's much more than the logos or specialty products. There, Dell and Microsoft are making some surprising contributions, something both companies need for themselves right now. Dell is looking for a rebound after a tough 2007, and Microsoft needs something to make Windows Vista more appealing. Besides, Microsoft has done little Vista marketing since early 2007.

The companies have jointly worked on a (PRODUCT) RED commercial that will air during next month's Super Bowl. Smith-Ellis praised the companies' "ability to put an ad on the Super Bowl." It's that kind of reach, from which all parties benefit, that makes Dell and, particularly, Microsoft important new (PRODUCT) RED partners.

What's the (RED) Idea?
Dell is a surprising partner for Microsoft here. After all, Dell is the great Vista traitor that aggressively offers Windows XP alongside its successor as an option on new PCs. Now, Dell is unexpected distributor of an exclusive Vista Ultimate edition. But, again, both companies benefit by offering products that fit into the giving lifestyle.

Something else: Dell's (RED) computers are what NPD categorizes as "premium" SKUs, because the prices are above $1,000. The two XPS M notebooks start at $1,149, with final price determined by configuration. The XPS One desktop is $1,599.

Apple dominates the premium category, with about 60 percent retail market share, according to NPD. More OEMs are looking for premium sales, "but retailers don't want to carry the products," said Chris Swenson, NPD's director of software industry analysis.

(RED) is tough to resist. Surely Best Buy would want in on giving lifestyle marketing, too. One of the sidebar gadgets goes to (RED) informational Web sites, so I asked if Dell or Microsoft planned on using the computers in Best Buy to better promote (PRODUCT) RED. Smith-Ellis jumped and said that she had seen the Best Buy marketing materials. "There will be signage and other materials there that explain the model," she said.

Best Buy gets (RED) benefits without major commitment. Dell gets premium SKUs on store shelves, indicating that it cares and so can its customers. But I don't mean to denigrate Dell. After all, its margins on the hardware will be tighter than Microsoft's on software, so the contribution is meaningful.

Camden said Dell is proud that "part of that purchase is going to help save lives." She also explained that Dell looked at (PRODUCT) RED participation because of a suggestion made on the company's IdeaStorm Web site.

What about Microsoft? I asked if Microsoft Chairman Bill Gates was involved in Microsoft's (RED) participation. Referring to the broader organization, Smith-Ellis said that "he did help get it off the ground." But Gates had nothing to do with with the Dell and Microsoft partnerships. The relationship started through an MSN speaking invitation, from which more Microsoft contacts followed.

"This was strictly done on the Windows side," Cincotta affirmed in response to the Gates question. "We're proud to follow the lead that he's done."

Uh-Oh, (RED) Faced
What surprises me is how long Microsoft took joining (PRODUCT) RED. I can understand Dell taking so long. But Microsoft should want its major brands associated with the giving lifestyle. Apple has been on board for a long time now, with (RED) iPods. I've already stated the potential marketing benefits.

I also wonder why Microsoft has limited (RED) to Windows, when there are several other very sensible tie-ins. The company already sells some (RED)-colored products that could switched over.

Dell is doing some product conversion as it goes (RED). "The XPS notebooks were already (RED) [in color], but they're converting to (PRODUCT) RED," Camden said. "The products are actually being rebranded to the (RED) brand."

Microsoft has (RED) Zune 4, 8 and 80 models of the same color and a different (RED) for Zune 30. Surely there is a giving lifestyle that some Zune users would want to participate in. Microsoft could rebrand, recolor the user interface and engrave a (RED) logo on the back of the product. Surely, a (RED) Zune would sell.

What about Xbox 360? Microsoft already has done several specialty editions. Why not (PRODUCT) RED? Then there is Windows Mobile. Motorola is another (RED) sponsor that just happens to ship Windows Mobile on some cell phones. I think a (RED) Moto phone with customized Windows Mobile theme would be a great fit.

Couldn't Windows Live go (RED), too? Microsoft already has the "i'm" project for charitable donations through instant messaging. Why not include (PRODUCT) RED, and let people pay? For five bucks charged to a cellular account, Microsoft could give people a (RED) theme, emoticons, avatar and other goodies. How about Microsoft keeps $2 and gives away three?

Lots of people talk about green computing. But I think Microsoft should be a little more (RED).