Business Report Microsoft Xbox. Marketing concept and strategy

Table Of Contents

1. Introduction

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

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

4. Marketing Strategy and Marketing Mix
4.1. Strategy and Positioning
4.2. Marketing Mix
4.2.1. Product
4.2.2. Place
4.2.3. Promotion
4.2.4. Price
4.3. Evaluation of Microsoft’s Marketing Mix

5. Conclusion

Reference List

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?

Microsoft creates values through various aspects. The company addresses “hardcore-gamers” and offers this target group a console customized for their needs. Due to the technical features a new gaming dimension can be experienced. Just to mention the graphics, uninterrupted game playing, etc. The Xbox offers easy multiplayer gaming which allows the social aspect of gaming together. It also addresses “core gamers” via the internet connection port fast action online gaming.

3. Target Markets

3.1. Market Segmentation

As it is an important point of the marketing concept to identify and satisfy customer needs, the company has to find out who their main customers are. These groups of customers who are willing to buy the firm’s product form the company’s target market (cp. Hoffman et al. 2003, p. 11). First step to outline the target market is to segment all potential customers whether currently served or not. “Market segments are those segments of the market or submarkets that seek similar benefits from product usage, and that shop and buy in similar ways that are different from other market segments and submarkets”(Hoffman et al. 2003, p. 11).

Applying this approach to the computer games industry there are different possibilities to segment the market (see Figure 1).

illustration not visible in this excerpt

It is not possible to define one single target market for computer games as the customer’s willingness to buy the product depends on the specific game features. For example Nintendo’s Gameboy hit Pokemon target kids age 6 to 14 and is simple to handle (Elkin 2003, p.4) compared to PC business applications which would attract students or adults with a high education level (Syken. 2000, p. 75). Nevertheless we think the typical target market for the average computer game are teenagers or young adults all over the world that play several times a week.

3.2. Target Markets of the Major Players

The 3 major players (Microsoft, Sony and Nintendo) have different approaches to target the computer games market.

Concerning games Microsoft clearly targets hardcore male players which want to use the broadband access for online battles. This hardcore group comprises about 7 millions males between the ages of 16 to 26 (Gaudiosi 2000, p. 31). On the other hand they are going after an older more sophisticated user that will use the Xbox not only to play games, but also watch DVD movies, surf in the web check e-mails and listen to CDs (www.coursework.info).

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