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Retailing Home Furnishings, Feb 7, 1983 v57 pC3(3)

T.I.'s Bill Turner. (Texas Instruments) Lisa Braden.

Full Text: COPYRIGHT Fairchild Publications Inc. 1983

TI.'s Bill Turner
In the short history of the home computer market, august 4, 1982, stands out as a
red letter date. On that day, Texas Instruments announced a $100 rebate on its
TI 99/4A console, underdcutting the competition and touching off a repricing
extravaganza that changed the face of the market. At that time, Texas Instruments, a
$4.2 billion company in 1981, was looking askance at its $300 million consumer
products division. TI had bailed out of digital watches, and was seen by many as
ready to bail out of personal computers as well if it wasn't soon given a good,
strong reason not to. The rebate did much to focus the attention of the business,
media and retail communities on the unfamiliar little boxes that ended up being named
"machine of the year' by Time magazine. And the marketing sharpshooter behind the TI
move was one William Turner, then marketing manager of consumer products. TI ended
the year tied with Commodore for first place in sales. Turner is now president of the
division. And that division has earned from the corporation what one analyst calls
"a major, longterm commitment, still critically dependent on Turner himself.'

Turner, a softspoken Easterner, seems to have adapted his business strategy, if not
his personal sytle, to Texas standards: Bill Turner is thinking big. Determined to
have his product on the shelves of 7,000 outlets by fourth quarter 1982, he ended the
year with the TI 99/4A in closer to 10,000 stores nationwide. And for 1983, his
10-gallon goal is "an effective distribution of 25,000 outlets' for TI's growing
family of home computer products. Turner uprooted his wife and two children to make
the move from Digital Equipment Corp. to TI in 1980. Born in Maine, Turner graduated
from the University of Maine and got an MBA from Northeastern University in Boston.

His first job was with Sylvania, as a systems engineer for military simulation
equipment. He has achieved a balance that seems rare in the home computer field as an
engineer who is also a successful marketing man. Others with an engineering
background did not fare so well in the highstakes marketing whirlwind that blew up
around the home units last year. When Turner talks about the future of home
computers, retailers tend to listen. His track record as an industry prophet has so
far been impressive, perhaps because he himself is one of the key figures in a
position to make those prophecies come true.

Back in August, under a storm of criticism about the profit-busting implications of
the rebate, Turner said, "It's just a matter of time before we see the traditional
retailer sell professional and small business computers.' Later that same month, he
told HFD "Next year everyone will broaden their line to include several points that
will sweep upward.' Winter CES has borne him out, with Commodore, Atari and Timex
each adding a higher end console to their lines, and TI itself bringing out a
compact computer aimed at the professional market. TI also launched its 99/2,
designed to compete against the T/S 1000 and costing $99 at retail.

So it could prove worthwhile to take heed of Turner's assessment of things to come
in the 1983 market. He begins his forecast with a fast summation of what drove the
market in '82: price break-throughs, pent-up demand, and momory capacity. "Beyond
that,' he says, "there was limited understanding on the part of the average
consumer.' "I think 1983 is going to be a different marketplace in that there will
be multiple positions of use, each of which has a price point, and the competitors
in this market will compete on how "feature-rich' they are at each use point for
each price.'

What, you may ask, is a "use point?' "For example,' Turner explains, "there is a
student/hobbyist/learn-to-program market which is represented by the TI 99/2 and
Timex entries. The 99/4A will continue to be a family position; something for
everyone from education to entertainment to database access. The Commodore 64 and
the Atari 1200 represent an in-home office position. A computer in that position
will generally do what the literacy and family machines do except it will be more
expensive and there will be more features bundled in.'

And what lies behind Turner's new buzz-word, "feature-rich'? He points to TI's new
99/2 and how it stacks up against the Timex T/S 1000. "We're talking about comparing
a $100 suggested-retail-price product to what is now an $85 suggested-retail-price
product. It is our belief that under-$100 is where you need to be, and feature-rich
is how you want to compete. For example, instead of having 2K memory, we will have
4K in our basic machine. Rather than expanding to 16K, we can expand to 36. Rather
than having most of your software require extended memory, two-thirds of our
software packages work on the basic machine. We have a 16-bit instead of an 8-bit
processor. Our machine is 25 to 40 times faster than the Timex. We have a larger
housing, and a full keyboard versus mylar. That's what we mean by feature-rich.'

That meaning will be different, says Turner, at each of the three major use points.
"In the family position it will mean arcade memory and price--those two things will
still be there--but most important is the amount of quality software available in
solid-state cartridge form.' This multiple use-point market will create both "an
opportunity and a problem' for retailers, he believes. "1982 was an endcap year.
Everyone thought they'd get into the business with an end-cap and 25 to 40 SKUs in
software. 1983 has got to be a wall-treatment position, where all three segments are
displayed, and probably an average of 25 running feet will be committed to the
category. We're estimating an average of 80 to 100 SKUs per console on software.'

And those packages, Turner forecasts, will have a new look as well. "Even TI,'
he concedes, "had a lot of "one of' packages last year; one math package, one game
package --it was the year of the "one of' package. '83 will be the year of the
series; for example, the Milton Bradley game series and the Scott-Forsman learning
series. "Now if you go to the retail implications of that, you're going to start
seeing that 25 feet of wall space having software displayed much like records are
displayed; by author, by title, by series. In records you have jazz, pop, classical;
in software you'll have home management, games, education. So I think we can all
learn a big lesson from the record industry.'

Distribution is a subject never far from Turner's mind, and his ideas on it have
served him well in recent months. "In 1981,' he observes, "distribution was
represented primarily by the catalogers. In 1982, the national account and the
discounter got on, and some video chains. In 1983 you'll see all channels in full
force all year long, and you'll start seeing the video channel come on heavy across
the board. New channels will arise, will come out of the woodwork.'

This thought leads him to what is clearly a focal point of his plans and perceptions
for 1983. "There's a concept we've talked about a lot internally: while we are in
the computer business for the duration, we have a view that's bigger than just the
computer business, and that's the electronics lifestyle business.' "Lifestyle' is a
fairly vague term when it comes to merchandising; Turner says he means the breakdown
of barriers between categories within the electronics area. "In 1982, it (the
electronics lifestyle business) was characterized by the home computer. In 1983 we
are introducing extensions to that, like the professional compact computer series
shown at CES. Those two products are just the bare beginnings of how computers or
electronics will be used in the home. "The kind of store that's in this business
will change a little bit. The way the store is departmentalized will change
significantly. The video store won't think of itself as just a video store anymore,
the same for the TV/appliance dealer . . . they're going to start exploiting more
lifestyle products. "And that's going to change their mix, and their treatment of
floor space, and their profit per square foot models, so there's going to be
dramatic upheaval in the electronics mix in stores. "That's an opportunity for
retailers,' continues Turner, "in that they have a chance to lead a revolution in
the lifestyle business. It's a difficulty in that they have to do their homework
on-line. They can't rely on last year's model, or the last ten year's worth of
models. They have to create new models.'

This retail "revolution' is already underway, in Turner's mind. He says, for one
thing, that just as in 1982 the home computer "crept out' of the specialty store
and into traditional channels, the same will happen to professional computers in
1983. "The number of traditional retailers selling computers in 1982 was 10,000 to
15,000 outlets (depending on whether or not you include Radio Shack stores). The
effective distribution in 1983 has got to be 25,000 to 30,000 outlets. The drugstore
will get seriously involved with the lifestyle business and support it in a way that
extends beyond a "just throw product on the shelf' basis. The video stores will go
beyond just having computers as a product to put in back of their TV and audio
departments. Computers will become a dominant part of their sales. "If the toystore
was a surprise channel in 1982,' predicts Turner, "the specialty video store will
be the surprise in 1983.'

If Bill Turner has visions of blister-packed PCs being sold in drug and toy stores,
then something drastic has happened to his notions of how much POP support is
needed to sell such product. Is there enough expertise in these channels to sell a
professional computer? "Nope,' he says candidly, "there isn't. That's why we are
extending in 1983 our ideas about the kind of service we, the vendor, must augment
the traditional retail store with.'

Turner lists TI's artillery in the service battle: 2,000 instore demonstrators, a
"Computer Advantage' users club which will be running in 100 major markets by the
end of first quarter, and a POP video display unit that he calls "the best in the
business.' But regardless of the efforts being made to bolster the capacity of the
mass merchant to support computer sales, Turner reverts again to a dominant theme
for the year --the video store. "Just look at the outlets that can be called
"aftermarket' stores; forgetting for the moment that we're talking about computers.
The video store is an aftermarket store, so is the photo store. Those are the places
where people buy one thing and then come back and buy three or four other things.
That's where the conversion to the electronic lifestyle is going to happen, and
that's what we're after. We will expand our distribution heavily towards any kind
of aftermarket outlet.'

Retailers might argue that it's still a little early in the script to be looking for
separate hardware and aftermarket outlets. Does Turner expect the 1983 consumer to
buy his console in one store and his software someplace else? "The issue on
everyone's mind,' he answers, "is how to get out of the low-margin hardware
business, and just sell the aftermarket. Well, our experience in '82, and what I
expect will continue in '83, was that the consumer who is buying a computer now is
an early, early buyer, and because of that the comfort factor of knowing "Where I
bought my record player is where I'll buy my records,' is an important leverage
factor in the market.

"In 1984,' says Turner, "we'll see the movement toward less hardware and more
software in an aftermarket store. But I think you'll see some chains spring up
before then that are going for the aftermarket, and the reason they'll be able to
do it is that stores are not committing themselves to that business, so they're
leaving the market wide open to people who want to go for it.' No matter what
skirmishes may develop among the retailers in 1983, Turner and TI are poised for
their best year yet. "Our first quarter business is highly likely to be larger than
fourth quarter in 1982,' says Turner, reiterating another prediction he made back
in early fall. "As a matter of fact, if the first two weeks after Christmas are any
indication, it's substantially better. It's due to what I call "the swimming pool
effect.' There's a cult of consumers out there that, once they buy a computer, are
absolutely committed to convincing every friend, neighbor and relative that they
should get one too.

"That's not only leverage for the TI name; it extends to the retailer as well.
The consumer will go to the store his friend went to 80 percent of the time,
because the friend has already had a positive experience with that retailer.'
Turner is pushing his swimming pool theory by "advertising first quarter like it's
Christmas times two.' He also claims he's prepared to support expected sales with
adequate production levels, but other company officials have said TI is sold out
through June.

Well, sort of, says Turner. "Let's talk about what "sold out through June' means.
We have our semiconductor resources lined up, we'll ship substantial product in the
first quarter, and I think that we're prepared to react to consumer demand. I've
never seen so many outlets come out of the blue that want to be in the business
instantly. To that end, the answer is that if we chose to be sold out in theory by
taking on every Tom, Dick and Harry that walked in, we could do it. I think that
we'll be chasing that supply and demand issue all year long.' Many in the industry
expected TI to come to WCES with a high-end product that would compete with the
Commodore 64 and the Atari 1200. Will there be such a product in the TI family?

"We expect to have a strong position in the home market, and over time you can
expect additional entries from us. In 1983, we'll be there in all segments, but the
distribution channels have to be ready to handle al segments, and our service
network has to be prepared as well.'

Does Turner expect pricing to be as volatile in '83 as it proved to be last year?
"It is my belief that the market will settle around the three positions I've
outlined, and that there will be, say, $50 swings in price around each position.
I expect that our product, which is going to be much more feature-rich than anyone
else's, will be a little more expensive. Basically prices set at WCES will remain
stable throughout the year.

"The competition this year will be different than last year's--we'll all be
competing on feature, not price. The assumption is that we'll be able to educate
the consumer. All of a sudden, store people are trying to set consumer expectations
better, vendors are setting expectations better, and the consumer is responding. We
will see more educated purchases based on criteria other than price.

"During this year,' he sums up, "there will be a transition to more features,
including software. By 1984, this will be a software-driven market. Additionally,
our research tells us that consumers are looking for a serious product that can
entertain. So any position that goes strongly toward the entertainment line will
not be a leadership position this year.'

Bill Turner is serious about home computers; and so is TI. With a new range of
products, a network of information and service operations, and a roster of
distribution channels that's gathering momentum like a tumbleweed in a high wind,
Turner will be in a highly visible position as he struggles to maintain or better
TI's market share.

As the old song goes, "the eyes of Texas are upon him,' particularly since in the
words of James Magid, analyst for L.F. Rothschild, Unterberg, Towbin, "the success
of the 99/4A home computer is being viewed as a prototype for a turnaround for the
entire (TI) company.' Can the man who is giving "the semiconductor mentality' a new
image in the home computer field continue to rope in the profits? The only thing
certain is that Bill Turner will be doing his best to stay on top of his bucking
bronco of a market.