It is true that AMD or American Micro Devices does not hold a dominant position in the markets it serves and it still struggles to compete against Intel Corporation and Nvidia Corporation but it is one of several large companies that have demonstrated strong cohesion within its marketing mix. The marketing strategy of AMD features solid alignment across its more specific elements such as its product strategy, pricing strategy, distribution strategy, and promotion strategy. A look at its approach would reveal how it uses marketing to create sources of competitive advantage.
Exploring and Understanding the Marketing Strategy of AMD and Its Elements Using the Marketing Mix Model
1. Product Strategy
An integral element of the marketing strategy of AMD is its specific product strategy that revolves around defining the value proposition of its products, supporting this proposition through manufacturing capabilities and solutions, and ensuring that other elements of the marketing mix complement this value proposition.
Take note that AMD has positioned itself as a multinational semiconductor company. It is similar to companies like Intel Corporation, Nvidia Corporation, Qualcomm, and MediaTek Incorporated. However, while these organizations are also semiconductor companies, they also have other products that make them more expansive tech companies.
AMD is more focused on developing semiconductors and related technologies for the consumer and business markets. This is a critical principle in its product strategy that has enabled it to fixate all of its resources on improving its productions and building relevant technologies. The following are the details of its specific product strategy:
• Product: The company develops microprocessors for general-purpose computing and special-purpose computing. These include the Athlon and Ryzen lines of CPUs, the Radeon line of GPUs, and other accelerators like the Pensando data processing units and Alveo accelerator cards. It also develops systems-on-chips, field programmable gate arrays, and networking or communication adapters.
• Target Market: It has two general market segments. These are the consumer and business segments. The company sells off-the-shelf products to end-use consumers and also to consumer electronics manufacturers. However, based on its product portfolio, it also caters to specific segments within the semiconductor market. These include the CPU market, GPU market, data center market, and AI market. It also caters to different use case levels including the entry-level, mid-range, and flagship markets.
• Proposition: The product strategy of AMD centers on providing products with a better price-to-performance ratio than their counterparts from the competitors. This means that its CPUs or GPUs are more affordable than the competition but can provide excellent and respectable performance for their price points. This strategy has enabled the company to gain a substantial market share over the years.
• Strategies: Another tactic within its product strategy is outsourcing. The company uses contract manufacturers like TSMC for its production requirements. This enables it to focus on product development and marketing while also allowing it to lower its production cost. Outsourcing supplements the value proposition of its production. The company also provides value-added services like software, tools, and platform solutions to increase customer engagement and add value to its products.
2. Pricing Strategy
The value proposition of providing products with a better price-to-performance ratio requires an aggressive pricing strategy. AMD generally sets its prices using a penetration pricing strategy. This pricing strategy is also a differentiation strategy and an acquisition strategy that involves setting prices lower than the competition to enter and gain a foothold in the market.
For example, when the first AMD Ryzen CPU was introduced in 2017, it was marketed around the fact that it had a strong performance and competitive pricing compared to an equivalent Intel Core CPU. The Radeon line of GPUs from AMD also has lower prices relative to the GPUs from Nvidia to attract customers in the GPU market.
Remember that pricing is the only variable of the marketing mix and an element of a marketing strategy that has direct implications for revenue. The company also uses other elements or principles from other pricing strategies to maximize its earnings potential and profitability. The following are the specific pricing strategies used by AMD:
• Penetration Pricing Strategy: An aggressive pricing strategy that involves setting prices of products lower than counterparts from the competitors to attract customers, enter a market, and create differentiation. This strategy is demonstrated in the entry-level and mid-range Athlon and Ryzen CPUs and Radeon GPUs.
• Value-Based Pricing Strategy: The company also determines the price points of its products based on the perceived or estimated value of the product to the customer. This means setting prices in consideration of factors like performance, features and capabilities, and specific product benefits. This strategy is evident in top-tier Ryzen CPUs and Radeon GPUs, as well as in its enterprise DPUs and accelerators.
• Cost-Plus Pricing Strategy: A pricing strategy that involves factoring in the cost of production and profit margin. This principle complements the specific penetration pricing strategy and product strategy of AMD. The company looks for tactics aimed at lowering its production costs to produce products with low price points.
3. Placement or Distribution
Another important element of the marketing strategy of AMD is its distribution strategy. It approaches product distribution using a multi-channel approach. Remember that it caters to business customers like end-use organizations and manufacturers or systems developers and individual end-use consumers. Take note of the following:
• Direct Distribution: The company negotiates and closes deals with organizations like businesses, government agencies, and nonprofits to become a main supplier of hardware components like CPUs, GPUs, and DPUs. It also arranges contracts with personal computer manufacturers and systems designers to supply the hardware products needed to produce the product of these companies.
• Indirect Distribution: The company also distributes its products through third parties like authorized regional distributors and retailers. These distributors carry a large inventory of AMD products. They serve as either the main distributors to business customers or the distributor to other third-party retailers. The retailers distribute and sell AMD products for the end-use individual customers.
The direct distribution channel has become lucrative for AMD. Take note that it has supplied APUs for video game consoles like the Xbox from Microsoft and PlayStation from Sony. It has also supplied PC makers like MSI, Lenovo, and HP with CPUs. The company has supplied processors for the U.S. government and private operators of supercomputers.
4. Promotion Strategy
The promotion strategy of AMD is focused on two areas. These include building brand awareness and generating demand using all relevant elements of the promotional mix while also communicating its value proposition. The following are the specific promotional activities that AMD engages in that collectively represent its promotional mix:
• Digital Advertising: The company channels most of its ad budget for digital advertising activities because its end-use target consumers are digital natives. Its ads appear on websites and social media accounts that are popular with PC gamers, tech enthusiasts, and general PC consumers.
• Online Presence: It also maintains its online presence through non-paid digital activities and online assets. These include managing social media accounts to engage with customers or the target market and its websites to publicize relevant market information about its products.
• Public Relations: Another important activity within the promotion strategy of AMD is public relations. It builds and maintains relationships with media organizations, tech journalists, and digital or online influencers to build brand awareness and generate demand for new products.
• Sponsorships: The company also sponsors different events like tech conferences, gaming conventions, trade events, and even sporting events. This helps in raising and maintaining brand awareness and promoting specific products. Sponsorships also help in building linkages and partnerships.
