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Gateway: Searching for the Right Advertising Agency
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This case was written by Professors George E. Belch and Michael A. Belch. It is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.
The case was compiled from published sources.
Company Background
The story of Gateway is an inspiring one. The company, originally called Gateway 2000, was founded in 1985 in an Iowa farmhouse by Ted Waitt, the son of a fourth-generation Iowa cattleman. Armed with a rented computer, a three page business plan, and a $10,000 loan guaranteed by his grandmother, Waitt dropped out of the University of Iowa to pursue his dream. Gateway’s early value proposition was similar to what it is today: offer products directly to the customer, build them to their specifications, provide them with the best value for the money, and offer unparalleled service and support. Waitt’s start-up company had $100,000 in sales in its first year and by 1993 it became a Fortune 500 company with sales of nearly $3 billion. The company’s rapid growth continued throughout the ‘90s, reaching a peak of more than $9.6 billion in 2000.
Over the past 18 years Gateway has been a technology and direct-marketing pioneer. It was the first company in the industry to sell computers online, the first to bundle its own branded internet service with a PC, and among the first direct retailers to sell its own branded consumer electronic products. In 1996 the company became one of the first “brick and click” retailers when it introduced a nationwide network of Gateway Country stores. Today, the company has nearly 200 stores where customers can try out Gateway products, get advice from technical experts, and...