Report on Microsoft Canada: Xbox Marketing

Introduction

Background to the study

Xbox has had a good performance over the past few years compared to its competitors such as Sony and Nvdia. The company has managed to attain a second position after Sony which is the market leader in the gaming industry. To increase its market performance, the management of Xbox Canada has formulated a strategy to increase its market share by venturing into the international market. The target markets for the firm include Europe, North America, Japan and Australia. To ensure that Xbox is effectively launched in the market, the management of Microsoft Canada formed has formed an alliance with 3rd party software developers’ publishers. This alliance has enabled Microsoft Canada to develop games that are compatible with the Xbox console. In total, the firm has formed alliance with 75 software publishers to ensure that its product is effectively launched in the market (Tanya, 2009, p.5).Through these relationships, Microsoft Canada has been able to launch a number of games including launches of 15 games that were developed by 1st party software publishers. In addition, the firm has launched 10 video games that were created by 3rd party. This paper is a report entailing a case study analysis of Microsoft Canada.

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Aim

The objective of the report is to assess the performance of the company in launching Xbox in the Canadian market and the strategies that should be considered in year 2.

Scope

The report analyzes the company’s launch strategy and performance by considering the product characteristics, market segmentation variables and product awareness strategy. The recommendations for year 2 are also considered. These relate to segmentation and targeting, product innovation, pricing, distribution, and communication. Finally, a marketing budget is allocated by considering the various costs to be incurred. However, the report does not consider the implementation plan.

Assessments of Xbox Canada launch strategy and performance

Superior product

In launching Xbox into the Canadian market, Microsoft grouped this market as an international market despite the close cultural relationship between US and Canada. This would enable Microsoft to address the market needs of Canada in relation to video games. In launching Xbox, Microsoft incorporated the concept of product diversity in launching Xbox in the international market. This was achieved by developing five different models of Xbox (Tanya, 2009, p.10). Its products were also effectively differentiated from those of the competitors through effective product development. This was achieved through co-designing Xbox with NVdia enabling the firm to develop games that are more superior video games compared to those of its competitors. This has afforded the firm a competitive edge by incorporating the consumers’ preferences in relation to video game demands. These preferences include fast loading time, good sound performance, storage capacity and best control (Tanya, 2009, p.12).To ensure that Xbox is effectively launched in the market; Microsoft formed a comprehensive team that would ensure effective sales of Xbox in all the regions. The marketing team and sales representatives selected to launch Xbox in the international market had superior knowledge of the international market. This increased the probability of the marketing team successfully launching Xbox in Canada.

Market segmentation variable

To ensure that there was a successful launch of Xbox, the management of the company formulated an effective strategy. This involved conducting prelaunch research to efficiently understand the characteristics of the target market. The prelaunch campaign enabled the firm to identify the market for gamers in relation to demographic variables such as time spent in a game. This is due to the fact that there is diversity in relation to the average time that different gamers spend in a video game. In addition, the firm has also segmented the market using age as a demographic variable (Tanya, 2009, p.12). This will enable the firm to reach its market more effectively.

Effective product awareness

The management of Microsoft has formulated a comprehensive Xbox awareness strategy. To ensure that the launch is effective, the management of Microsoft has set $11 billion in budget to ensure that its marketing program is successfully implemented thus creating a wide spectrum of product awareness. The management team also formulated various media events with Much Music and MTV. This ensured that there was effective product awareness in the target market. In addition, the management team has also incorporated the music industry whilst in creating product awareness. Through development of music CDs consisting of various artists featuring in their video games, the product will receive massive exposure in the target audience sector. Product awareness is also executed through various methods of promotions to create awareness: both traditional and other alternative mediums of advertising including online advertising, print media, television and radio (Tanya, 2009, p.13). In determining the best methods of advertising to use, the management team conducted research to ensure that there would be a high level of product awareness in the Canadian market (Tanya, 2009, p.10).

From market research undertaken, the management team recorded that gamers utilize internet as a major source of information in relation to games. To ensure that the firm provides comprehensive product information online, the management team developed the Xbox website as much as possible. However, due to financial constraints in developing its own website, the firm entered into an alliance with MSN to ensure that there is easy access of information online through MSN.ca through which the consumers could access information about Xbox. The firm worked alongside journalists to ensure that they report on the pages through which consumers could access information related to Xbox: thus creating further awareness and exposure of the brand. Also through online advertisement, Microsoft was able to update the customers on the events related to Xbox in Canada (Tanya, 2009, p.13).

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The company management also incorporated the concept of event marketing in launching the product to the market. These events aimed at promoting the firms 4 leading games. Event marketing was conducted through the introduction of Developer Tour which included a 3 city tour with its video game developers. This enabled the developers to have direct contact with their consumers. These tours enabled Microsoft to promote Xbox in bars where it designed a set to promote 4 of its games (Tanya, 2009, p.14). Event marketing also included supporting the Midnight Madness which entails basketball events which were held in various locations in Canada. Some of these events include Montreal’s Toys ‘R’ U, the Doc in Toronto and Vancouver Virgin Super Store. The firm also supported various games in universities. All these activities enabled the company to reach its customers more effectively.

In 2001, the company sold 66,694 consoles whose approximate worth was 8 million. The management team forecasted that there would be an increase in sales volume with a margin of 1 million units by the end of the year (Tanya, 2009, p.8).

Recommendations for year two

Market segmentation and targeting strategy

To ensure that the firm improves on its performance in year 2, the management team should expand the size of its target market. Growth in sales can be achieved by increasing the age limit while segmenting its market using age variable. Currently, the firm targets males aged 16 to 24 years (Tanya, 2009, p24). During year two, the management of Microsoft should consider increasing its target market to global scales. To effectively achieve this, the team should increase its age limit for males in its target market to 16 to 34 years. It is approximated that males who are aged 16 to 34 years would increase the firm’s customer base to approximately 4,351,000 customers which represents a 15% of the total Canadian population. In addition, the firm managed to acquire a market share of 40% (Marketing plan proposal for second year in Canada, 2001, p.16). As a result, there is a potential increase in revenue from Cdn $ 257 million to Cdn$299,000,000 by retailing a unit of Xbox console at $299. This means that the firm will be able to increase on its level of profit. In addition, the management team should not only consider the males as their target market but should also incorporate females who form 41% of the country’s total population.

The management should also include psychographic variables in segmenting the market. The psychographic variables to be considered include benefits sought by the gamers, their beliefs, usage and perception regarding the video games. By identifying the various categories of gamers (for example committed, wanabees, fun seekers and time killers), the management will be able to segment the market more effectively. In addition, it will enable the firm to add value to meet the demands of the various categories of the gamers. This can be attained through innovation of a video game that will result to maximum customer satisfaction. For instance the committed perceive video games as being a part of their world while the wanabees perceive games as being a challenge. Alternatively, the fun seekers perceive game as a source of fun. Time killers perceive game as just being a source of pleasure. Examples of games that the company developed for customers aged 16-24 years include Halo, Oddworld, Gotham and Amped (Tanya, 2009, p.14).

Penetration pricing strategy

To ensure that Xbox is effectively marketed in the Canadian market, the management team should conduct consumer market research to identify the price sensitive nature of the customers. The team should incorporate the penetration pricing strategy. This will involve setting the price of Xbox at a relatively low point compared to that of the competitors. Penetration pricing strategy will enable Xbox to appeal to a wide range of customers across the ages and gender. In addition, it will eliminate intense price war with Sony in penetrating the female market segment by maintaining its penetration price at Cdn$ 299.

Product innovation

The management team should ensure that it incorporates the concept of product innovation. In all plans, product innovation is essential in order for Xbox to stay ahead of the market thus becoming a market leader and not a follower. This can be achieved by conducting comprehensive market research with an aim of identifying the changes and trends that are occurring in the Canadian market. By incorporating the emerging technologies in Xbox, the firm will be able to meet the game demands of the consumers and retain a high competitive advantage. This is due to the fact that innovation will enable Xbox to be effectively differentiated from those of the competitors through offering distinct and clear USP’s in the present day and moving forward.

Communication

To ensure that the firm continues to create awareness of Xbox in the market, the management should incorporate the current emerging social networking tools such as MySpace, Facebook and You Tube. This will enable the firm to reach to a wide range of potential customers since these online tools are accessed by a large number of individuals daily and are comparatively cost effective versus other advertising mediums. For instance, it is estimated that 14million individuals access FaceBook daily (Social networking, 2007, Para. 12).

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To market the product to institutional customers such as schools, the management team should consider incorporating mail order selling.

The management team should also ensure that the firm continues with outdoor advertising such as conducting roadshows and media events. In conducting road shows, the management should ensure that all the Canadian regions are covered. In addition, advertisement through traditional mediums should be incorporated by diversifying the radio and television channels through which the company posts its advertisements.

Distribution

Microsoft should incorporate the use of agents in distributing Xbox in the market. Use of distribution agents is more effective than direct distribution through establishment of retail outlets in all Canadian regions. The agents have got effective understanding of the distribution channels in the domestic market. In addition, the management should also include mail order selling.

Marketing budget

Xbox Marketing budget for the 2002 fiscal year
Cost item Amount in dollars
Advertising
Fees
1STparty games
3rdParty games
5,300
800
2,000
800
Public relation 1,000
Promotion events 500
Market research 500
Online marketing 100
Total estimated cost of promotion 11,000

Conclusion

To ensure that Xbox is successfully marketed in year 2 in Canadian, market, the management of the firm should ensure that there is comprehensive product awareness program. This should be implemented by formulating an effective product exposure and awareness strategy.

  • The choice of awareness medium should be conducted by determining the most effective and efficient medium through market audit data.
  • The management should increase the age limit in targeting the market which will facilitate an increase in the number of potential customers to be converted into sales.
  • Psychographic variables should also be incorporated in formulating market segmentation and targeting strategies.
  • Continuous product innovation should be incorporated to ensure that Xbox appeals the current and potential new market. This can be achieved through ongoing analysis of developments occurring in the information technology sector through use of market research and focus groups such as the Delphi technique.
  • Taking into account the price sensitive nature of the consumers, the management should conduct consumer market research so as to effectively set its price. The price should be set by ensuring that there is both attractiveness in the market and profit margin required by Microsoft.
  • The management should implement an effective control and audit mechanism which will enable the management to determine the effectiveness of the strategies adopted in launching Xbox in the Canadian market.

Reference list

Tanya, M. (2009). Microsoft Canada: Xbox: marketing Xbox. Ontario: University of Western Ontario.

Microsoft Canada.(2001). Xbox marketing plan proposal for second year in Canada. Web.

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National Association of Realtors. (2007). Social networking. Web.

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