Deakin University
Faculty of Business and Law
MMK277 – Marketing Management

Business Report: Microsoft Xbox –
Marketing concept and strategy

von: Stefan Lacher

1. INTRODUCTION 4

2. MARKETING CONCEPT 4

2.1. Microsoft’s Application of the Marketing Concept 4
2.2. How does Microsoft create Value to the Customers? 5

3. TARGET MARKETS 5

3.1. Market Segmentation 5
3.2. Target Markets of the Major Players 6
3.3. Comment on Major Player’s Choice 7

4. MARKETING STRATEGY AND MARKETING MIX 8

4.1. Strategy and Positioning 8
4.2. Marketing Mix 8

4.2.1. Product 9
4.2.2. Place 9
4.2.3. Promotion 10
4.2.4. Price 10

4.3. Evaluation of Microsoft’s Marketing Mix 11

5. CONCLUSION 11

REFERENCE LIST 12

1. Introduction

By launching the game console Xbox, Microsoft did not only introduce a new product but stepped into a totally new market where there company did not have any experience yet. Although they had a huge marketing budget, they focused on spending it as effective as possible. Therefore Microsoft’s marketing team had to find out, who their target customers are and with what marketing strategy they could reach their challenging goal to become leader in the game console market. But has their way of segmenting the market and choosing a marketing mix for the Xbox really been successful?

2. Marketing Concept

The Marketing concept consists of three principles that hold that achieving organizational objectives require determining needs and wants of targets markets and delivering the desired satisfactions more effectively and efficiently than competitors do (Hoffman et al 2003, pp.10-11).

2.1. Microsoft’s Application of the Marketing Concept

Microsoft took advantage of all three principles. Microsoft did put enormous effort in identifying potential customers’ needs. The research was concentrated on so called “hardcore gamers” who spend more than 25 hours playing a week. This group was seen as early adopters as well as opinion-leaders. Of high importance were an appealing design to young customers and performance like speed of the console and high quality of audio and graphics. Therefore the design of Xbox became modern and was equipped with fast processor and games were designed so that games were faster, with better quality graphics and sound (www.business2000.ie). As more than 20 quality games were available at the launch time Microsoft erased a main concern of gamers having not enough choice. Since Microsoft launched the Xbox worldwide the company assembled many resources. About 5000 gamers and game creators were involved in the development of the Xbox. The global marketing campaign did cost USD 500 million (Elkin 2000). To offer the game console at a competitive price Microsoft accepted a loss of USD 150 for each sold consoles. Instead of setting up a price covering all costs Microsoft accepted the loss per console. The company did neglect profits in the launching period in order to reach its long-term objective to gain a high market share (Stegemann 2004).

2.2. How does Microsoft create Value to the Customers

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