Creating Added Value for the Customer - Essay Example

?Creating Added Value for the Executive Summary 2 Introduction 3 1 Market Data/Info 3 2 Your Brand Info/Data 3 3 The Consumer structures, guide, intro 4 1.4 Competition Data/Info 4 1.5 Major Trends 4 2.0 Consumer/Customer Behaviour = Task 2 4 2.1.1 Decision Making Units 4 2.2 Mechanism of Purchase- The AIDA Model 5 2.3 Brand presence in industry, how do customers behave, who are the Retailers/channels intermediaries?) 6 Brand Presence 6 Customer Behaviour 6 Retailers/Channel Intermediaries 6 3.0 Segmentation, Targeting and Positioning 7 3.1 Segmentation 8 3.2 Targeting (as per 3.1) = Task 2 8 3.3 Positioning (as per 3.1) = Task 3 9 3.4 Perceptions and Perceptual Maps 9 3.4.i. Research Findings 9 a) Secondary 9 b) Primary 10 3.4. ii Perceptual maps 10 a) Price vs. Quality 10 b) Prioritised consumer attributes/market drivers (factors X vs. Y) 11 4.0 The Marketing Mix ~ Academic and Applied Dimensions =Task 4 12 4.1 Academic Perspectives on the Marketing Mix (product/market) 12 4.2 Product Strategy 12 4.3 Price strategy 13 4.4 Place strategy 13 4.5 Promotion strategy 13 4.6 People strategy 13 4.7 Processes strategy 14 4.8 Physical Evidences Strategy 14 5.0 Focus on one of the 7P’s 14 Promotion 14 Promotion – crucial for brand 14 Promotion- Targeting Teens 15 6.0 Conclusions 15 References 15 Executive Summary This report briefs the current market scenario of PlayStation, a video gaming console series by Sony. It starts with a comprehensive situation analysis of PlayStation, then a focus on its consumer strategy, segmentation variables, targeting and positioning. Then there is a strategic analysis of PlayStation and identification of the most crucial dimension of the brand. The findings are concluded via secondary research. From the research it can be concluded that Sony is trying to position PlayStation as an all round entertainment experience and is trying to attract teens, early adaptors and movie buffs. Their promotional strategy is the main branding strength and addressing the recent security glitches is of prime importance to save that brand image. Introduction 1.1 Market Data/Info The video game console is part of the video game industry, which is again part of the consumer electronics industry. The video game console industry was born in 1972 with Odyssey produced by Magnavox. However the industry was at its nascent stage until the 1980s. Currently the video game console market is dominated by 3 main players – Sony, Nintendo and Microsoft. According to recent data, the gaming market peaked in the year 2008 with a net sales of $21.23 billion (hardware sales $7.81 billion and software sales $10.96 billion). The market is mainly dominated by software sales which comprises of 62% of the total expenditure. 1.2 Your Brand Info/Data Sony Computer Entertainment America (SCEA) was founded in the year 1994 as a division of Sony Computer Entertainment Inc. PlayStation was launched by the in USA in 1995. It was a huge success with more than a million sales volumes in just 6 months. In November 2000, PlayStation 2 was introduced. And in August 2002, the company launched new network adapter that allowed online gaming. Next the company launched PlayStation Portable (PSP) 1.3 The Consumer/Customer, structures, guide, intro The target customers are hardcore and casual gamers around the globe. Also the latest model targets movie buffs and PSP particularly targets teenagers. PlayStation has been upgraded from 1 to 3 and skimming price has been practised, thus targeting early adopters. PlayStation 2 is the part of Sony PlayStation series and is a sixth generation video game console launched in the year 2000. By 2011 the sales volume crossed 150 million mark. The software is distributed on CD-ROM and DVD-ROM, supports online multiplayer gaming with a Linux based operating system. 1.4 Competition Data/Info Sony PlayStation has two direct competitors- Nintendo and Microsoft. Nintendo is in the gaming console business for last 20 years and Microsoft for last 10 years. Till 2010, the lifetime sales of Wii, Xbox 360, and PS3 have been 67.5 million, 38 million and 32 million respectively. 1.5 Major Trends On a year on year basis (2010-Aug 2011), the worldwide hardware sales of PS3 went up by 7% whereas Wii and Xbox’s sales went down by 15% and 32% respectively. However, the worldwide software sales of PS3 went down by 35%, and both Wii and Xbox showed negative sales of 22% and 26%. 2.0 Consumer/Customer Behaviour = Task 2 2.1.1 Decision Making Units The decision making units for the purchase of PlayStation are as follows: Technology – Early adapters and hardcore gamers always move onto new technology. Thus, technological specifications are a key feature for the purchasing decision of the customer Functionality- Another aspect that affects the purchase decision of customer is the functionality of the product. PlayStation has been positioned as the next generation gaming console, therefore the organisation needs to strive towards exceeding expectations of the customer for positive purchase decision making. Game Varieties- A crucial factor is the variety of games that can be played in the console. This forms the key influencer in purchase decision in case of game enthusiasts. 2.2 Mechanism of Purchase- The AIDA Model Attention- PlayStation captures customer’s attention via creative commercials, exhibitions and internet buzz Interest- Interest can be created by project the, multiple usability of the product (gaming, pc, and player-BluRay). Besides, demonstrating the unique audio visual experience in blogs, manuals videos will generate interest amongst a wide range of target profile. Desire- Desire is created when the promotional efforts impressed by the promises of creating an innovative entertainment experience. Action- Such desire of owning the product will lead to the action of purchase. Since Sony has god supplier chain all over Europe, availability of product won’t be an issue. Therefore, the action of purchase can be completed. 2.3 Brand presence in industry, how do customers behave, who are the Retailers/channels intermediaries?) Brand Presence Sony’s PlayStation is highest in terms of brand presence and brand awareness in the gaming console market. The brand awareness rate according to a survey is between 65%-72% in the North America, Europe, and Japan. Customer Behaviour Sony’s “It only does everything” tag line in the PlayStation ads was a hit with its teen customer base. A study has found that teens on an average utilise only 49% of their time playing games in PS3, whereas it is 62% and 69% for Xbox 360 and Wii. It was found that teens engage in more activities like watching movies, browsing, streaming videos, social networking, and playing music in PS3. Thus their involvement with PS3 is more compared to competitors and PS3 has been most successful in connecting with teens than other customer segments. Retailers/Channel Intermediaries The target customers are at the end of the supply chain. The following diagram illustrates the supply chain of a traditional video game market: Figure1: Source: Gattorna,J.(2008). Gower handbook of supply chain management. Aldershot. Sony is the hardware manufacturer, gaining 20% market price and console sales. The publishers and developers have substantial share of the revenues. The top 3% games generate 55% of their revenues. PS3 is operates in varied geographical regions, therefore, they need a strong distributor base, who account for 10% of the revenues. The retail channel consists of both click and mortar and brick and mortar stores. The official website of PlayStation gives a list of retailers: BigW, David Jones, Dick Smith, EB Games, The Gamesmen, Game the next level, The Good Guys, Harvey Norman, JB Hi Fi, K, Myer, Target, ToySrus, Wow. 3.0 Segmentation, Targeting and Positioning Segmentation, Targeting and Positioning are the essential steps in developing a successful marketing strategy. Segmentation refers to studying the market in terms of consumer characteristics, needs and preferences and grouping them based on the similarities of these dimensions. Post segmentation, the organisation needs to analyse and identify the segments that their product, service or idea will be able to serve. This is done by first analysing the company’s resources and comparing it with the competition. Then considering the organisational abilities and matching them, with the needs of the available segments. Positioning refers to the decision of how the product will be presented to the target customer. This refers to the psychological image of the target customer that will maximise the organisation’s objectives. 3.1 Segmentation The segmentation for PlayStation is as follows: Geographic Segmentation- The main target markets are Japan, Europe and North America. Demographic Segmentation- When PlayStation was launched; the target demographic profile was casual and hardcore gamers, predominantly male, from 13-30 years. However, now-a-days the gaming console market consists of both male and female customers. Besides the multifaceted utility of PlayStation, the latest being its BluRay playback technology, the target consumer includes entertainment lovers and gamers from 6-60. Though, the main concentration is still on teenagers. Behavioural Segmentation- Consumers can be segmented in terms of loyalty. Since Sony still has compatibility mode till PS2, customers with high and medium loyalty will come under this segment. In terms of usage, both hardcore and casual gamers and early adopters are Sony’s target. Psychological Segmentation- People having considerable interest in games and movies and gaming as a part of their lifestyle are the target segment here. 3.2 Targeting (as per 3.1) = Task 2 The main target customers of Sony PlayStation are hardcore and casual gamers. They are usually males between 15 to 30 years. The BluRay technology brings a second target profile consisting of people interested in high quality movie experience. Demographically they can be narrowed down to teens or adults with high disposable income. However, the creme of the target audience is still people from 18-25. This became more evident when Sony launched its PlayStation Portable (PSP) at a much lower cost directly targeting teens. 3.3 Positioning (as per 3.1) = Task 3 Sony positioned PlayStation as something beyond a standard gaming console. It has been positioned as a complete entertainment experience. This is evident from Sony’s commercial tagline “It only does everything”. Also there is the appeal of superior quality and innovative technology that attracts hardcore gamers, casual gamers and early adapters. Besides the BluRay technology offers advanced quality detailed pictures, exactly what a movie buff wants. 3.4 Perceptions and Perceptual Maps Perception refers to the minds’ understanding regarding the environment, via processing of external and internal sensory stimulus. Perceptual Maps are used by marketers to graphically exhibit the positioning strategy of the product or service or idea. Positioning of a product is done along various variables; however the two most significant variables are selected for perceptual mapping. 3.4.i. Research Findings a) Secondary The secondary research findings have been compiled below: b) Primary 3.4. ii Perceptual maps a) Price vs. Quality PlayStation has been positioned in terms of its functionality and next generation gaming console promises. The unique experience of high quality gaming and multi functionality is the core positioning factors for PlayStation. The target profiling also relates to the fact that Sony is concerned with teens, gamers and movie buffs, who are always moving on to the newest innovations. In terms of pricing Sony mainly used skimming pricing strategy. PS3 was launched in 2006 in UK with a premium price of ?425. However, the sales volume was below expected and therefore the price was reduced. Also the BluRay technology was introduced to attract customers from the high priced BluRay player market to comparatively cheaper PS3. Thus pricing is also an important factor for PlayStation. But if we go in terms of the core target market, then quality would be the primary factor, since this is what PlayStation is positioned and marketed on. Thus, the price vs. Quality perceptual map for PlayStation will be: Figure: Lamb,C; Hair,J; McDaniel,C.(2011). Essentials of marketing. South-Western Cengage Learning b) Prioritised consumer attributes/market drivers (factors X vs. Y) The prioritised consumer attributes are as follows: Price – The casual gamers, PSP target customers and switchers from BluRay players are all price sensitive segments of the target population. Technology- Sony as a brand triggers superior quality expectations in the minds of consumers, and PlayStation has been positioned as the next generation game console. Therefore, up-to-date technology is an important determinant of PlayStations’ market growth. Reliability- Sony concentrates on loyal consumer base, and one of the requirements of generating a loyal customer base is creating trust and reliability amongst the consumers. A company needs years to build such credibility and trust. Although Sony has a strong brand salience and a loyal customer base, however, the repeated hacking of its PlayStation network and poor handling of the situation by Sony has considerably eroded Sony’s credibility. These hacks exposed the personal and financial details of as many as 77million users and interrupted the online gaming service. Purchasing Power- PlayStation is positioned as an entertainment package, and in terms of income its target customers are the ones having high disposable income. Therefore economic conditions, such as the current recession will be a significant factor influencing the sales volume. 4.0 The Marketing Mix ~ Academic and Applied Dimensions =Task 4 4.1 Academic Perspectives on the Marketing Mix (product/market) Marketing Mix helps to in planning and implementing marketing strategies. These are known as the 4P’s of marketing – Product, Price, Place and Promotion. Planning along these variables helps the marketer facilitate varying customer profile and simultaneously align the strategy towards achieving organisational objectives, so that both sales and customer satisfaction is maximised. However, the 4P’s are now considered as the Product Marketing Mix. Due to the unique characteristics of services (intangible, perishable, versatile, simultaneous, inseparable) 3 more dimensions were added – People, Process, and Physical Evidence. Thus the service marketing mix became the 7 P’s. 4.2 Product Strategy The product is a mixture of improved gaming experience combined with excellent designs and innovations that gives the brand an added lustre. This attracts casual gamers. Besides the enhanced audio-visual experience of the PS3 and improvement of MMO games are strategies to attract hardcore gamers. Another unique product strategy is keeping the control setup almost constant. Therefore the consecutive versions (PS2 and PS3) were user friendly. The BluRay playback feature is also a good strategy, since PS3 is cheaper than Blu Ray players. And there is the PlayStation Network, which comprises of a wide range of games for download. 4.3 Price strategy Sony launched PS3 at premium price of $600 and $60-$70 for the software. However, the sales volume did not turnout as expected, therefore the price was lowered. This price skimming technique of Sony is a good strategy because of Sony’s premium quality brand image. 4.4 Place strategy In Europe Sony has tie ups with majority of the leading distributors. Therefore the product has penetrated and is widely available in markets. 4.5 Promotion strategy The BluRay playback is currently the x-factor for the brand, other than superior gaming experience. This made PlayStation a total entertainment package, instead of a gaming console. Besides the user friendliness has created a loyal customer base and prevented customers from switching. In terms of advertising, it has utilised both traditional and non-traditional channels. However, word of mouth marketing and building communities are the most important promotional vehicle for PlayStation. 4.6 People strategy PlayStation’s target market includes a varied number of profiles. It targets hardcore and casual gamers, teenagers as well as movie buffs. However, one dimension that defines the entire target market is medium and hardcore technology enthusiasts. 4.7 Processes strategy The buying process depends on various variables. Awareness and availability of information is the first step for a target consumer towards the buying process. Then evaluation of information available via promotional channels is evaluated in terms of technology and functionality by the customer. The evaluation process is affected by the opinions of friends, colleagues, word of mouth communications etc. Post evaluation if the criteria matches with consumer requirement, consumers go for purchasing the product. 4.8 Physical Evidences Strategy The packaging, the webpage and networking service forms a part of the physical evidence. Physical Evidence, in this case, helps the purchaser to overcome post purchase dissonance. 5.0 Focus on one of the 7P’s Promotion The promotional efforts for PlayStation combined the existing strong brand image of Sony which helped a lot in gaining attention. Besides it was easier to generate a loyal consumer base and maintain them via relationship marketing online. Promotion – crucial for brand The reason promotion is crucial for the brand, amongst all the other P’s of the marketing mix is that the high level competition in the industry necessitates not only good product qualities but also strong brand salience, which can be achieved only via exhaustive promotions. Promotion- Targeting Teens Although the target market varies in case of PlayStation, but it is evident from the commercials and the launching of the low priced PSP’s, that Sony is targeting teens towards a complete entertainment experience. The effect is easily discernable, since amongst teens using Wii, Xbox and PlayStation, those using PlayStation spend more time. This is also because of the latest BluRay technology that allows much more than just playing games. 6.0 Conclusions PlayStation is a successful product. However, certain aspects can improve the product’s performance and lengthen its PLC. For example the production cost should be lowered to make it more affordable amongst casual gamers. Secondly their online connection system should be improved. Thirdly a major glitch in the way of the product’s success is the recent security breaches. Sony needs to improve its PR activities and instil that lost sense of security amongst the customers. References Gallaghe,J.(August 16th,2011).PlayStation 3 Now Available at €249.99.[Online]. http://blog.eu.playstation.com/category/ps3-news/.[December 8th 2011]. PlayStation Network.(December 16th 2011). PlayStation Network scheduled maintenance - PlayStation Network, PSN official news.[Online]. http://uk.playstation.com/psn/news/articles/detail/item284695/PlayStation-Network-scheduled-maintenance/.[December 8th 2011]. Stuart, K; Arthur,C.(April 27th 2011). PlayStation Network hack: why it took Sony seven days to tell the world.[Online]. http://www.guardian.co.uk/technology/gamesblog/2011/apr/27/playstation-network-hack-sony.[December 8th 2011] Stuart, K.(April 27th 2011). PlayStation Network hack: what every user needs to know.[Online]. http://www.guardian.co.uk/technology/gamesblog/2011/apr/27/psn-security-advice.[December 8th 2011] Armstrong, G., Kotler, P., (2007) Marketing: an Introduction. Pearson Brassington, F., Pettit, S., (2007) Essentials of Marketing Prentice Hall Blythe, J., (2009) Essentials of Marketing Prentice. Hall Dibb,S; Simkin, L; (2009) Marketing Essentials Cengage Learning Jobber, D., (2008) Principles and Practice of Marketing. 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