Once Waitt felt comfortable that people knew the company's name, he traded the cows in the ads for people -- specifically, the Waitt brothers themselves. In early 1990 Waitt hired Barb Gross as advertising manager. Gross, local photographer George Lindblade, and designer Kevin Kjeldseth form the inner circle that brainstorms with Waitt to come up with new ads every two or three months, a pace Waitt considers crucial because "this is a fast-paced, rapidly changing business."
Often, the meetings consist of Waitt throwing out ideas and the others refining them, even as they try to keep Waitt from trying to draw. "His biggest frustration is that he can't draw well," confides Gross. He does come up with clear concepts -- often, inexplicably. Once, so jet-lagged he was practically hallucinating, Waitt blurted out a fully formed idea for the "PC Saloon" ad. Eventually shot in Tucson, the July 1990 ad featured an 1890s double-door saloon, where a group of men are playing poker. Waitt, decked out in pinstripes, smirks right into the camera and shows his hand: a royal flush. The others at the table, including a frustrated young man and an older, stodgy businessman, are meant to represent various Gateway competitors. "It was a bit of an in-joke," says Gross. One ad, which featured buffalo, happened to coincide with the release of Dances with Wolves, the Kevin Costner movie. Hey, someone suggested at the next brainstorming session, let's find out what Kevin Costner is doing next. When they did, recalls Gross, "I said, 'You absolutely cannot do Robin Hood. He was a thief, for goodness' sake.' "
But she was outnumbered, and Gateway staged its own ad using a Robin Hood theme, with you-know-who casting himself as the champion of the poor. When the ad came out, this past August, it set records for the number of inquiries from new customers, chalking up as many as 2,000 a day. "I was wrong," says Gross. "Ted's gut feelings were right."
Not that Waitt's satisfaction with ads comes from having his hunches reconfirmed. As a man who never wearies of battling overhead, he insists that every ad pay for itself. Anybody who calls the 800 number first is asked, "Where did you hear of Gateway?" Waitt uses the answers as a guide to where he should spend the 2.5% of sales he's committed to marketing. He sticks pretty rigidly to computer magazines and never consults an ad agency. Often, employees serve as models in the ads. As usual, he finds his own ways to cut costs. For one ad, which featured the nifty gimmick of having a photo wink from black-and-white into color, Waitt was outraged when the lowest quote he got amounted to $3 a pop. So he had the ad printed locally and paid church groups, employees on their free time, and temporary workers to assemble it. The ad came in "far under" that original price.
As long as Gateway's telephone operators stay busy, Waitt sticks with his idiosyncratic traditions. He refuses, for instance, to employ reader-response cards, contending that they attract too many people who are just collecting information. He intentionally skimps on technical information because he wants consumers to call in with their questions. There have been ads in which the computers were squint-distanced in the background, in which prices were barely visible, in which there were so many elements, the eye couldn't possibly behold them all. Waitt admits the ads "have alienated people at some times."
But not enough to worry about. By early 1990 sales had risen to $70 million. "We get horrible marks from the marketing-guru types," Waitt says. "But it seems to work."
* * *
Ted Waitt's gambles on his unpredictable gut and his unorthodox tastes have paid off on a scale that he could hardly have predicted. "I was just hoping this thing would eventually evolve into some kind of business that would provide a good income," says Norm Waitt Jr., who has no operational role but still owns 45% of Gateway.
Remarkably, though, all the growth-inducing risks Ted Waitt has taken have only forced on him his biggest bet yet: he is gambling that he can think through the implications of Gateway's enormousness fast enough to keep the company flexible. "The biggest challenge for us right now," Waitt says, "is figuring out how to add the necessary bureaucracy without becoming slow moving." The more fundamental question, though, is whether Gateway can adapt its core strategy to grow into a sturdier niche.
Gateway's ads do their darnedest to convince consumers that they ought to buy based on value -- a combination of price and factors such as service and component quality and reliability -- but analysts suggest that price carries a disproportionate load of the so-called value equation. "In mail order, the three most important factors are price, price, and price," says David Evancha, director of research at WorkGroup Technologies, a market-research firm specializing in information technology. Gateway has earned industry merit badges in most areas, but price has been its strongest suit. How long before an upstart undercuts the company? It's not hard to imagine, for example, a vertically integrated PC maker from, say, Taiwan, strangling Gateway by living on less. "The pressure on Gateway's margins is never going to abate," says Evancha.
