MKTG 510

Marketing Plan Microsoft Surface Book

Melissa Godar

12/12/2015

I did not work with any other person on this project. Signed:

Executive Summary

The Microsoft Surface Book is Microsoft’s first laptop. It is an extension of the Surface tablet

product line. The Surface Book is a 2-in-1 hybrid laptop/tablet with a detachable screen. It comes with

the well-known Surface Pen to allow for a natural handwriting experience as well as the ability to draw.

The power and performance features surpass other 2-in-1 hybrids that run the Windows OS and

compete with the popular MacBook Pro 13. The goal of marketing is to introduce this new product and

build awareness and knowledge initially. After traction on that goal, the campaign will move toward

building liking and preference. The laptop market consists mostly of household consumers with

expected future growth. The business market for laptops is smaller and has been stagnant. For this

reason, the target market includes high-tech household consumers who own multiple devices and are

less price sensitive when presented with a premium product. Microsoft should position the Surface Book

as the premium, performance-driven, 2-in-1 laptop that delivers Microsoft’s legacy and commitment to

providing customizable solutions for all of your productivity needs among other high-performance

laptop computers that limit your options. This plan recommends a mixed distribution strategy;

advertising on television, online, and in magazines; a public relations campaign including a press release,

executive interviews, executive lectures, and providing free trials to tech reviewers; and establishing a

premium pricing strategy to promote the quality of the Surface Book. Promotion will change according

to consumer awareness and feedback.

Situation Analysis

Internal Environment

Company History. Microsoft was founded in 1975 by Bill Gates. The company has been at the

forefront of the growth of technology in the computer industry. Beginning with operating systems and

then adding software, the early 2000’s saw the launch of Microsoft’s gaming platform, the Xbox. At the

turn of the decade, Microsoft introduced Bing and the Windows phone. In 2012, the first Surface tablet

was introduced. Each year since its launch, new iterations of the standard Surface have been introduced

including the enhanced Surface Pro. According to 2014-2015 fiscal year data, Microsoft’s employees

number just over 117,000 and net revenue climbed to $93.58 billion although net income was the

lowest in potentially a decade. (http://news.microsoft.com/facts-about-microsoft/)

Microsoft’s mission is to “Empower every person and every organization on the planet to

achieve more” and their strategy to achieve it is to “Build best-in-class platforms and productivity

services for a mobile-first, cloud-first world”. (https://www.microsoft.com/en-us/about)

Product Introduction. The new Surface Book is a product line extension of the Surface tablets. It

is Microsoft’s first laptop/tablet hybrid. It is a full laptop with a touchscreen that detaches to act as a

tablet. The Surface Book is thin and lightweight. It comes with the well-known Surface Pen, which allows

users to take handwritten notes and draw. Innovations include increased pressure sensitivity in the

Surface Pen to allow for a more natural writing feel as well as Palm Block to allow users to comfortably

rest their hands on the touchscreen while writing. The new Surface Pen also allows users to summon

Cortana, the digital assistant, or OneNote with one click. Options include different levels of memory,

storage, and processing. The base model comes with the Intel Core i5 processor. There is the option to

upgrade to the Intel Core i7 processor. (https://www.microsoft.com/surface/en-us/devices/surface-

book?&SEMID=1&WT.srch=1&ocid=OCWin10Red_SEM_GOO_MSBranded_FAM_en-

US_microsoft%20surface%20book&wt.mc_id=OCWin10Red_SEM_GOO_MSBranded_FAM_en-

US_microsoft%20surface%20book#keyfeatures-ultimate-versatility)

External Environment

Industry Market. The computer environment has been changing rapidly, especially in the last 15

years. Technological devices were popping up to meet different needs requiring consumers to carry

multiple devices. Now the trend is to meet multiple needs with a single device. The tablet market once

took away sales from the laptop market, but is now declining as consumers rely on their smartphones,

touchscreen laptops, or hybrid laptop/tablets. According to a 2015 Fortune.com article, “the 2-in-1

segment will see shipments worldwide jump 86.5% in 2015.” (http://fortune.com/2015/10/17/2-in-1-

hybrids/). There are now 40 vendors shipping these devices compared to only 14 two years ago. The

market for 2-in-1’s is expected to see positive growth in 2016. According to an ICON Group International

report, the estimated latent demand for laptops in the U.S. in 2013 was over $34 trillion with the

Southeast, Far West, and Mid-Atlantic regions making up nearly 60% of the market. Growth in latent

demand is expected, reaching nearly $39 trillion by 2018. Similar trends are expected for personal

computers, portable handheld computers, and portable pen-based computers. According to an

IBISWorld report, the general laptop market has $97 billion in revenue and $5.8 billion in profit. Annual

growth is expected to be 6.4% until 2019. In 2014, full-size laptops comprised 69.7% of the market. Also

in 2014, 81.7% of households had at least one computer, which is a jump from 74.1% in 2009.

Affordability is allowing computers to become a staple household item. As seen in the figure below,

households make up nearly half of the laptop market with businesses making up over a third.

Competition. Competition could come in many forms. Although tablets are declining, some users will still choose a lower priced tablet over a hybrid. There are other 2-in-1 hybrid laptops on the market that offer competition considering that they also come with the Windows operating system making less distinction with the user experience among them. PC Magazine names the Lenovo ThinkPad Helix 2nd Gen and the Toshiba Portege Z20t-B2112 as top 2-in-1 competitors, but distinguishes the Surface Book as having better performance, bigger screen size, and more features for a lower price. Then there are other laptops, specifically the Apple MacBook Pro 13, that seem to be the closest competition according to a review from PC Magazine. While Apple does not have a touchscreen laptop and does not think that it is necessary (http://time.com/4108200/apple-tim-cook-microsoft-book/), the new IPad Pro has a 12.9” screen and can be used with a keyboard and the Apple Pencil. (http://www.apple.com/ipad-pro/specs/) Marketing Objectives

Introduce a new product into a competitive market. o Build awareness and knowledge.

Create a liking and preference in order to convince consumers to purchase. Marketing Strategies STP Segmentation. As seen above, the market can be segmented into household consumers and businesses. Both of these segments could be further segmented based on needs. There are many options to serve many needs or preferences. Portability, security, user-friendliness, power, battery life, speed, storage, display, size, and weight are often important aspects in decision-making along with price and brand image. Targeting. In the household consumer segment, given the Surface Book is a newly launched, premium product it would be best to target current computer owners who are looking for another device or want to trade-up. Since the Surface Book is a premium product, it will most likely appeal to

medium or heavy users as light users may not be willing to spend the money for features they may not use. Being that the Surface tablets offer a range of features and benefits, the key benefit to highlight with the Surface Book is improved performance and utility. Using criteria such as mid to high technological adoption, midscale to wealthy household income, and urban and suburban locations, Nielsen identifies 36 segments (https://www.claritas.com/MyBestSegments/Default.jsp?ID=30&menuOption=segmentexplorer&id1=2611099&prevSegID=1027&filterstate=&sortby=segment_code). In order to further narrow and target those most likely to be innovators and early adopters, only those in the high technological adoption group will be the initial focus of marketing. This leaves 17 segments (see Appendix 1). Demographics for this segment include: mostly 25-44 years old, half have children, nearly all have an upper-middle class income or above, all are college educated, and nearly all work at the management level. Most of the households within this segment own a range of electronic devices which are used for entertainment, convenience, and work. This group sees technology as a necessity, likes to add new products, and is less-price sensitive than other groups. The goal is to market the Surface Book as a premium product, so it is important to target those seen as tech-savvy and not target those who are looking for a budget laptop. On the business side, the Surface Book could be a solution for self-employed or small business owners as well as those working in industries that value versatility and portability. The business segment however, is smaller than the household consumer segment according to an IBISWorld report, and growth is expected to remain stagnant and businesses do not upgrade technology as rapidly as household consumers. Therefore, this segment will not be included in the initial marketing campaign. Positioning. To high-tech, urban and suburban, management-level consumers, the Microsoft Surface Book is the premium, performance-driven, 2-in-1 laptop that delivers Microsoft’s legacy and commitment to providing customizable solutions for all of your productivity needs among other high-performance laptop computers that limit your options. This positioning statement highlights the Microsoft Surface Book’s advantage over the MacBook Pro 13 as the ability to detach the screen and use the laptop/tablet in multiple ways and the ability to customize Windows OS more so than Apple’s OS are key points of differentiation. Marketing Mix Product. The Surface Book is a product line extension to the Surface tablets that offers higher performance at a higher price point. This product will help Microsoft break into the laptop market and improve the brand’s reputation for quality and innovation. The core product is improved productivity. The actual product is the Microsoft-branded, premium laptop computer that has a versatile 2-in-1 design and performance features that compete with other well-known premium laptops (e.g. Apple MacBook Pro 13). The augmented product includes a one year limited hardware warranty, pre-sale education, tech support, and the ability to be an innovator or early adopter for a new, innovative product. The introduction of the Surface Book may cannibalize some of the sales that would otherwise go to Surface Pro tablets, however, as tablets are on the decline, the Surface Book is looking ahead to be an integrated 2-in-1 laptop and tablet. The Surface tablets still exist for those wanting to have less performance at a lower price. Place. Microsoft will use a mixed distribution strategy, selling both directly to consumers and indirectly. It is important to have the option for consumers to test the new product and gain education in-store at convenient locations such as Best Buy. By only having one step in between consumers and Microsoft, Microsoft can retain some control over the presentation of the Surface Book and the quality of service and education provided. The contract with retailers will provide instructions on the

presentation of the Surface Book as well as required training for salespeople. As more consumers are researching new products and buying online, Microsoft will also offer the Surface Book on its website as well as those of retailers including Best Buy and Amazon. A pull strategy will be used to build product awareness, knowledge, and liking that will either persuade consumers to visit a store to try out the Surface Book or search online to learn more or purchase it. Promotion. In order to introduce the new Microsoft Surface Book and build awareness and knowledge about the features, a series of television and digital ads will be created. Video ads will be placed on CNN and other news channels, and on YouTube. Photo and banner ads will be placed in tech and business magazines and their websites. Social media marketing will be important to help generate buzz. Photo ads will be placed on Twitter, Facebook, and LinkedIn to generate online and in-person word-of-mouth marketing. The Microsoft website will have a section dedicated to the Surface Book. A strong public relations campaign will also help boost awareness. Microsoft will offer complementary Surface Books to tech and business magazines/websites to encourage them to try out the new product and review it. A press release will be sent. Microsoft executives will schedule interviews and speeches at industry conferences. Personal selling will take place at retailers to demonstrate the product in person and to further educate the consumer or answer questions as advertising generates interest. Sales promotions may be considered once sufficient attention has been gained. Price. The pricing objective is to establish quality leadership. For that reason, as well as in order to be seen as a valid competitor against the MacBook Pro 13, the Microsoft Surface Book’s price should communicate that it is a premium product. The target market is less price-sensitive with mostly upper-class income and a high value placed on technology that is new and/or provides a desirable solution to a need. The MacBook Pro 13 starts at $1299 with two higher levels of storage priced at $1499 and $1799 (http://www.apple.com/shop/buy-mac/macbook-pro). With Apple being a well-established, premium brand, it is important to place the Surface Book in Apple’s range while maintaining a competitive price. Another consideration is the pricing of the rest of the Microsoft Surface product line. The Surface 3 starts at $399 without the keyboard and the Surface Pro 4 starts at $899 without the keyboard. In order to charge a premium price, the marketing communications must highlight the differences in features and performance among the Surface Book and the rest of the Surface product line as well as the differences between the Surface Book and the MacBook Pro 13. Because of the differences in features and performance, Microsoft Surface Book’s starting price is $1499 (http://www.microsoftstore.com/store/msusa/en_US/pdp/productID.325716000?vid=325721500). There are a total of six options for processing speed, storage space, memory, and graphics. There is between a $200 and $600 difference between each option and the next level up to communicate that a significant difference in value is added. The top of the line Surface Book has 1 terabyte of storage, an Intel Core i7 processor, 16GB of memory, and a graphics card priced at $3199. While this option will be sought out by only a few professionals who need to do video work, it helps to promote the quality of the Surface Book overall. Implementation & Evaluation

Advertising will begin two months before the product launch to generate buzz and provided education.

The launch will take place in time for the holiday shopping season.

Initial tactics will seek to generate buzz.

After the holiday season, sales and consumer feedback will be evaluated in order to determine further promotion strategies.

Works Cited Eadicicco, Lisa. "Apple CEO Tim Cook Slams Microsoft’S Latest Product." Time.Com (2015):

N.PAG. Business Source Complete. Web. 11 Dec. 2015.

DOMINGO, JOEL SANTO. "The First PC Hybrid That Can Stand Up To A Macbook." PC Magazine (2015):

57-62. Business Source Complete. Web. 11 Dec. 2015.

MOSSBERG, WALTER S. "Laptop Guide: Timing the Market and The Machines." Wall Street Journal -

Eastern Edition May 2013: D1+. Business Source Complete. Web. 11 Dec. 2015.

http://www.apple.com/ipad-pro/specs/

Ulama, Darryle. The Retail Market for Laptop Computers in the US. IBISWorld Industry Report OD5703

December 2014.

Parker, Philip M. The 2013-2018 Outlook for Portable Pen-Based Computers in the United States. ICON

Group International, Inc. (2012).

Parker, Philip M. The 2013-2018 Outlook for Portable Handheld Computers in the United States. ICON

Group International, Inc. (2012).

Parker, Philip M. The 2013-2018 Outlook for Personal Computers in the United States. ICON Group

International, Inc. (2012).

Parker, Philip M. The 2013-2018 Outlook for Laptop Computers in the United States. ICON Group

International, Inc. (2012).

https://www.claritas.com/MyBestSegments/Default.jsp?ID=30&menuOption=segmentexplorer&id1=26

11099&prevSegID=1027&filterstate=&sortby=segment_code

http://www.apple.com/shop/buy-mac/macbook-pro

http://www.microsoftstore.com/store/msusa/en_US/pdp/productID.325716000?vid=325721500

Appendix 1. Nielsen Target Segments