Xbox & Xbox Livea Marketing Strategy

Jose L. RiveraMarketing 310 / 6385

UMUC 2015Professor Peterson

Executive Summary

Key Findings: Sony has dominated the market in the last two fiscal years due to their ability to provide video games on several mobile platforms, their "backwards" compatibility on gaming consoles, and their lower prices

Marketing Mix Recommendations: Xbox is dominating the "home space" with their "all-in-one" Xbox One console; however, in order to increase market shares it must move into a new market segment by introducing a new hand-held mobile gaming device similar to those of its competitors

Table of Contents

A.1. Market Description A.1.a. Description of Market Segments A.1.b. Current Marketing Targeting

Strategy A.1.c. Value Proposition A.1.d. Factors Influencing Consumer

Behavior A.1.e. Buyers Decision Process

A.2. Product Review A.2.a. Levels of Product/Service A.2.b. Type of Product/Service A.2.c. Product/Service Lifecycle A.2.d. Benefits/Features Analysis A.2.e. Differentiation A.2.f. Branding Strategy

A.3. Competitive Review A.3.a. Competitive Analysis

A.3.b. Market Share

A.3.c. Competitive Positions and Roles

A.3.d. Strategic Sweet Spot

A.3.e. Positioning

A.4. Distribution Review A.4.a. Current Supply Chain Members

and Roles

A.4.b. Value Delivery Network Analysis

A.4.c. Current Type of Distribution Strategy

Part B. SWOT Analysis B.1. Microenvironment

B.2. Macroenvironment

Section A. Current Marketing SituationPart B. SWOT Analysis

Table of Contents, cont.

C. Objectives and Issues C.1. First Year Marketing Objectives C.2. Issues That May Hinder Objectives

D. Marketing Mix Tools (Recommendations) D.1. Positioning Strategy D.2. Product and Branding Strategy D.3. Pricing Strategy D.4. Distribution Strategy D.5. Marketing Communications Strategy D.6. Marketing Research

Part E. Action Programs E.1. IMC

E.2. Message Design, Content and Structure

E.3 Media Choices

E.4. Promotion Mix Tools

Part F. Budgets F.1. Objective / Task Method

Part G. Controls G.1. Metrics to Monitor Progress

Section C. Objectives and IssuesSection D. Marketing Mix RecommendationsPart E. Action ProgramsPart F. BudgetsPart G. Controls

Section A

Current Marketing Situation

A.1.a. Market DescriptionDescription of Market Segments

Presently, the product reaches the following market segments:

Demographic: Gender non-specific, children and adults of all ages, who are able to afford the Xbox system and an online membership

Psychographic: Those who have a “gamer” lifestyle or just do it as a hobby

Behavioral: Persons interested in customer loyalty rewards and accolades

A.1.b. Market DescriptionCurrent Marketing Targeting Strategy

The current Marketing Targeting Strategy is: Undifferentiated: Xbox is going after every

market without any segment differentiation

A.1.c. Market Description

Value Proposition

The current value proposition is “More for More”.

Xbox provides a higher upscale product at a higher cost

A.1.d. Market DescriptionFactors Influencing Consumer Behavior

Price Promotions: Different models of the same console are offered at different prize ranges

Peripherals: The Kinect, and other peripherals are able to recognize user's commands and allow for interactivity

Online Features: Video, television ,and music apps offered with all online memberships

Game Quality: Only the highest graphics interface used to develop the most exciting game franchises

A.1.e. Market Description

Buyer Decision Process

Customers are most likely to engage in Complex Buying Behavior

They expect game consoles to last longer with each newer model and to deliver on its promise

They recognize the brand and want to experience and learn more about it “first hand”

They evaluate alternatives, and decide to purchase the product after learning about its benefits and features

A.2.a Product Review

Levels of product/serviceCore Customer Value

Entertainment for the whole family Access to online features, apps, and reward points

Actual Product Brand Name: Microsoft Xbox and Xbox Live Quality Level: Highest Features: Kinect and online features

Augmented Product Product Support: 24/7 online and phone support Warranty: 1 year

A.2.b Product Review

Type of product/service

Shopping

Customer Buying Behavior: Less frequently purchased, is compared to other brands for quality, price, and style

Price: Higher price than competitors

Distribution: Selective distribution through e-commerce, retailers

Promotion: Advertised and re-sold by consumers and manufacturers alike

A.2.c. Product Review

Product/Service Lifecycle Currently in the Growth Phase with newer model

Sales have increased due to new features on the Xbox One

Customer Acquisition Cost: Average

High profits margins: 5.6 billion in the 3rd Quarter of FY12

Most customers are “early adopters” and owners of previous models

A.2.d. Product Review

Benefits/Features AnalysisTargeted Segment Customer

NeedFeatures/ Benefits

Gamers: Gender Non-specific, children and adults of all ages, who are able to afford the Xbox system and an online membership

Accolades, Recognition and Interactivity

Provides rewards as Microsoft Live points, game achievements ,and accolades; enhance user experience through devices like Kinect

All in one entertainment center

Access to television, internet, and radio from one console

Personalization Avatar and voice recognition

Technical Support 24/7 online and phone access

Online access to Internet Apps

Hulu, Netflix, Crackle, WWE, and others

A.2.e. Product Review

Differentiation

Product: The product continues to be innovative and exciting

Services: Online services, multiple Xbox live memberships, and consoles

Channel: Direct seller to buyer channels, e-commerce

People: Only the hardest workers with the best customer service skills are hired

Image: Continuous consumer satisfaction, recognizable, and reliable brand logo

A.2.f. Product Review

Branding Strategy

Microsoft is a highly recognizable brand with high-brand value and a loyal customer-base

Xbox and Xbox Live are part of Microsoft's product line of entertainment services

Easily recognizable from competitors; positioned to reach maximum target market

A.3.a. Competitive Review

Competitive Analysis

Specifications

Xbox One Sony PlayStation

Nintendo Wii

Price $499 $399 $299

CPU MS (64-bit) AMD Jaguar (64-bit) IBM (64-bit)

Core 8 core 8 core 3 core

RAM 8 GB 8 GB 2 GB

Features Live TV, Internet Apps,Kinect

Internet Apps Internet Apps

Storage 500 GB Sold Separately 32 GB

Ports HDMI in-out HDMI, Ethernet, Optical

HDMI out

Media Blu-ray / DVD Blu-ray / DVD DVD

A.3.b. Competitive Review

Market Share (Xbox – Blue Bar)

Photo courtesy of Statista.com

A.3.c. Competitive ReviewCompetitive Positions and Roles

Sony is the market leader for FY14, with Nintendo, and Microsoft as market challengers

Sony’s marketing strategy and positioning includes a variety of platforms, including handheld devices

Nintendo marketing strategy includes families, as well as a variety of platforms, including handheld devices

Possible Vulnerabilities: advertisement, distribution, and maintenance cost due to high volume of products

A.3.d. Competitive Review

Strategic Sweet Spot

Xbox One is sold for $349 without the Kinect, competitors can’t afford to lower their prices

Xbox one is an all-in-one system that combines television, games, and the internet

There are exclusive video game franchises that are only available on Xbox

A.3.e. Competitive Review

Positioning

In the mind of the consumers, the Xbox is a serious, but fun video game console that offers the flexibility and performance other competitors do not

The Kinect voice recognition gives customers a more personalized experience

Multiple screen-views makes it possible to watch live television while playing video games

A.4.a. Distribution ReviewCurrent Supply Chain Members and Roles

Producer: Finances product and gathers information about consumer needs, production and specifications requirements

Manufacturers: Produce, assemble, box, and ship product to wholesaler

Wholesalers: Sells product to retailers

Retailers & Online Retailers: Stock, promote, display, and sell product, either through floor sales or e-commerce

Consumer: Buys, enjoys, and provides feedback about product

A.4.b. Distribution ReviewValue Delivery Network Analysis

Microsoft uses a Conventional Distribution Channel to get the Xbox in the hands of the costumer

This distribution channel is appropriate and keeps the cost of production and distribution stable

The consumer is able to get a good quality product at a reasonable price

A.4.c. Distribution ReviewCurrent Type of Distribution Strategy

Currently, Microsoft uses the Intensive Distribution Strategy

Stocking Xbox in as many outlets as possible, i.e. Walmart, Best Buy, Target, and Amazon.com

Diagram courtesy of Business–Science.blogspot.com

Part BSWOT Analysis

B.1. SWOT Microenvironments Strengths: Long standing profitable relation

between marketers, suppliers, and consumers, makes for a reliable distribution channel

Weaknesses: Inability to cater to all publics; competitors fighting and winning over market shares

B.2. SWOT Macroenvironments Opportunities: Bridge generational gaps by

introducing and simplifying new technology; make environmentally aware choices by using recyclable materials; introduce handheld devices

Threats: Demographical shifting of population, natural disasters, economical, and cultural barriers of expansion

Objectives and Issues

C.1. Objectives and Issues

First Year Marketing Objectives To become the market leader by increasing

market shares

Provide a more versatile option by introducing a new handheld mobile device for gamers

Sponsor "Beta" testing events and collect feed back from participants

Collect, analyze and compare the manufacturing costs of similar products from competitors

C.2. Objectives and IssuesIssues That May Hinder Objectives

Limited market share and shelf-space

Previous reputation with "Zune" device could result in Market Resistance

Failure to reach profit maximization: (Marginal Revenue = Marginal Cost)

Section DMarketing Mix

Recommendations

D.1. Marketing MixStrategy Recommendations

Positioning Strategy

Continue with current positioning strategy which allows for maximum product exposure

Continue to provide online services and multiple Xbox live membership accounts plus trials

Introduce the new handheld gaming device as a more innovative, "trendy“, and reliable option

Include "backwards compatibility" for older-games in newer models, this is a big factor in the market leader's success Appeal to "vintage" and "nostalgic" gamers who would like to

play older video games in newer console versions

D.2. Marketing Mix Strategy Recommendations

Product and Branding Strategy

Core Customer Value Continue to provide "all-in-one" solutions to home entertainment Keep up with online "trends" and update online features, apps, and

reward points accordingly

Actual Product Brand Name: Do not make any changes to the recognizable brand

name and logo at this time Quality Level: Continue with quality assurance of future products Features: Kinect should be reduced in size to aid with its portability

and aesthetic appeal

Augmented Product Product Support: 24/7 online support and telephone help desk will

continue to provide a "peace of mind" to consumers Warranty: 1 year for parts is adequate

D.3. Marketing Mix Strategy Recommendations

Pricing Strategy

Continue to use a mixture of "Cost-based Pricing" and "Value-added Pricing"

D.4. Marketing Mix Strategy Recommendations

Distribution Strategy

Continue to use the Conventional Distribution Channels

Ensure “plenty” of supply available at all levers of the distribution chain to fulfill orders during product debut

Maintain shelf and floor space through all distributors and retail stores

D.5. Marketing Mix Strategy RecommendationsMarketing Communications Strategy The Marketing Communication Strategy should remain a "pull"

strategy in which the customer is "drawn in" to our amazing product

Our main objectives should be to: Increase awareness and knowledge of the product by looking at the

Buyer's-readiness stages

Design a message which appeals to the emotional side of customers by choosing the right media and message source, i.e. the web, and television

Collect feedback from customers in order to improve future products

D.6. Marketing Research

Conduct “Test Marketing" on new hand-held mobile gaming device

Conduct feedback assessment on brand awareness and recognition

Research and analyze individual and competitor market share statistics

Part EAction Programs

E.1. Action Programs

IMC

Continue to release new advertisement and promotional products year-round

Emphasize on the summer months, where most of the target market goes on vacations and has more free time

New hand-held gaming device should debut in the months prior to the holidays

E.2. Action Programs

Message Design, Content, and Structure

Enforce message ideas by holding the consumers attention and arousing their desire

Appeal emotionally to the consumer with a "feel good" and “feel free” attitude towards the product

Emphasize the product “strengths” in the structure of the message

E.3. Action Programs

Media Choices

Choose previously proven smart, and effective forms of media such as: buzz & television

Show TV adds during sporting events (large amount of viewers) & primetime TV shows

Online advertisement through social media sites like Facebook and Twitter

E.4. Action Programs

Promotion Mix Tools

Advertising Television adds: Show how much fun and easy it

is to use the new hand-held gaming device In-store displays: Display posters and other

visual aids Website: Dedicated to the product, it shows

every little detail and specifications Product Placement: Product could be integrated

into movies and TV to connect with the audience

Public Relations▪Support product launch, sales, and address any issues

regarding the product's image

▪ Sales Promotion▪ Stimulate consumer purchase by using "Midnight" releases;

provide bundle packages that include one or more video games

Budgets

F.1. Budget

Objective / Task Method

Budget Percentages

AdvertisingPublic Rela-tionsSales Promo-tion

Advertising: Creating awareness and anticipation about the product before it launches should be the #1 priority

Public Relations: Creating an image and maintaining a good reputation is integral

Sales Promotion: After creating awareness, give the customer an incentive to buy the product

70%

15%

15%

Controls

Track the number of sales and the number of "hits" on the product's website, + the average time spent per customer

Consult consumer reports and independent statistics collection agencies to identify changes in market shares

Track the number of sales and future demand by using:

Q = n x q x p

Collect feedback through surveys before and after the product launches

G.1. Controls

Metrics to Monitor Progress

Xbox & Xbox Livea Marketing Strategy

Any Questions?

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www.vg247.com/2012/05/30/xbox-360-hits-67-million-sales-worldwide-claims-47-market-share/

Jackson, M. (2014). Microsoft: 1.2 million Xbox One sales in FYQ3, $5.6 billion profit. Computerandvideogames.com. Retrieved on February 15, 2015, from: http://

www.computerandvideogames.com/460564/microsoft-12-million-xbox-one-sales-in-fyq3-56-billion-profit/

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