Marketing Plan: Xbox 360 - Term Paper Example

Marketing Plan: Xbox 360 Table of Contents Table of Contents 1 1. EXECUTIVE SUMMARY: 2 2. SITUATION ANALYSIS: 3 2.1. Market Analysis: 3 2.2. Industry Analysis: 4 2.2.1 Bargaining Power of Customers: 5 2.2.2. Bargaining Power of Suppliers: 5 2.2.3. Threat of New Entrants: 5 2.2.4. Threat of Substitute Products: 5 2.2.5. Competitive Forces: 6 2.3. Competitive Analysis: 6 2.4. SWOT Analysis: 8 2.5. Environmental Factors: 10 2.6. PESTLE Analysis: 10 3. OBJECTIVES: 12 4. MARKETING MIX: 12 4.1. Product: 13 4.2. Price: 13 4.3. Promotion: 14 4.4. Place: 15 5. INFORMATION SOURCES: 16 6. CONTINCENCY PLAN: 16 7. BUDGET: 17 8. IMPLEMENTATION PLAN: 18 1. EXECUTIVE SUMMARY: Microsoft is the big name in the field of computer. The company decided to enter in the industry of gaming in order to diversify its operations and make more profits and revenues. Xbox 360 in this regard is one of the biggest innovation and development from the Microsoft. From its introduction in the year 2005, it has been able to attract considerable amount of customers. Microsoft has created competitive advantage and unique selling proposition on the basis of additional benefits and features and low prices as compared to the competitors (Graft, 2009). The two main competitors of Microsoft in the industry of gaming consoles are Sony and Nintendo. Microsoft has been able to capture large share of market, despite of the intense competition in the industry. 40 percent of the market share is captured by Microsoft, followed by Sony with 20 percent of the market share and then Nintendo with 20 percent of the market share (Jelliothoward, 2010). Xbox 360 is still in the growth stage of product life cycle. Microsoft has not been able to promote and market all features and benefits of the product to the target market in an effective and efficient manner. This is restricting the ability of the company to increase the overall sale and further improve the market share. Overall environment and external factors on one hand presents some hurdles in the process of growth and development and on the other hand provide support to the companies operating in the gaming industry. Microsoft has to come up with such strategies that it is able to capitalize the opportunities presented in the industry and minimize the impact of threats. Microsoft is facing the issues regarding the market penetration of Xbox 360 and should come up with marketing strategies and tactics in order to increase the overall market penetration. This requires serious measures on part of the company. Microsoft has to look for different channels and mediums in order to reach the larger share of the target market which in turn will increase the market penetration of the product. Along with this the company can focus on establishing strong relationships with retailers and game developers in order to take advantage of co-marketing. In order to outpace other competitors in the industry, Microsoft has to implement the well devised and well thought marketing plan and has to formulate strategies in order to take advantages of its strengths and opportunities presented by the industry. 2. SITUATION ANALYSIS: In order to be able to come up with effective and efficient marketing strategies and plan, it is necessary to first investigate and analyze the internal and external environment of the organization. This allows the organization to identify important strengths and weaknesses, along with opportunities and threats in the industry (Haberberg & Rieple, 2008). 2.1. Market Analysis: Xbox 360 is competing in the rapidly growing market of video game consoles. The market of video game consoles comes under the broad market of interactive video entertainment. The target market of the video game consoles is segmented on the basis of age of the customers. Around 36 percent of the market is composed of the consumers who are terms as casual gamers, who do not consider video gaming as the basic source of their entertainment (The NPD Group). Microsoft has been able to capture considerable share in the gaming industry and has always been a follower. Nintendo has always taken the credit of being the first mover and leader in the industry. In previous some years, Microsoft, with the help of different strategies, has been able to maintain the position in the market. In August 2011, Microsoft reported sales of around 308,000 units of Xbox 360 and thus maintained the position of number one provider of game consoles in the market of United States (Digital Digest, 2011). Apart from this Xbox 360 has around 43 percent market share in the industry of game consoles. Market has been showing considerable growing potential in future as companies are focusing on targeting different groups of target market. Microsoft has been targeting different consumer groups in order to increase the overall sales and revenues. However, the main target market of the Xbox 360 is the hard core male gamers who are addicted to different types of video and online games. The age of the target market of the Microsoft Xbox 360 falls in the range of 15 to 34 years. Apart from this, Microsoft has also followed the strategy of Nintendo of targeting different target markets like females who are either living single or with the male gamers. For this purpose, Microsoft has incorporated different multimedia features in Xbox 360. 2.2. Industry Analysis: Overall gaming industry has been reporting growing trends. In order to understand important elements of the industry and other associated players, it is beneficial to use the framework of Porter’s five forces analysis (Grundy, 2006). 2.2.1 Bargaining Power of Customers: The target customers of the game consoles are presented with various options and hence this results in increasing the bargaining power of customers to some extent. However, the hardcore gamers are addicted to the game consoles and this in turns reduce their bargaining power. 2.2.2. Bargaining Power of Suppliers: The bargaining power of suppliers is low, as Microsoft is a huge name in the industry and is able to control the suppliers. Microsoft have dedicated suppliers who provides the company with the required supplies on time. 2.2.3. Threat of New Entrants: Threat of new entrants is high on hand, as other companies in the business of electronic and computers, like Apple, can enter into the market of game consoles without any large requirement of investment. Apart from this they can also capitalize on the existing market image and position. On the other hand it is difficult for any fresh company to start business venture in this industry, as it requires considerable amount of investment and infrastructure. It is also difficult to build strong market image in this industry with the presence of three major companies i.e. Nintendo, Sony, and Microsoft. 2.2.4. Threat of Substitute Products: Threat of substitute products is relatively high in the industry of gaming, particularly that of game consoles. The target customers can switch to different online games available over the internet. Apart from this there are several other options available with the customer for home entertainment. 2.2.5. Competitive Forces: There is high competition in the industry of game consoles. The three main companies in the industry namely, Sony, Nintendo, and Microsoft have been competing with each other for the market share and position. These three companies keep on bringing different marketing strategies and tactics in order to capture the largest market share. This increasing competition also places downward pressure on the prices of the game consoles. 2.3. Competitive Analysis: There are three major competitors in the game consoles industry are Nintendo, Microsoft, and Sony. All three companies are facing strong competition from each other in the industry and are trying to capture considerable amount of market share. All three companies keep on coming with different innovations and changes in order to keep the target customers engaged with the products. Nintendo has been always able to take the advantage of being the first mover in the industry. Microsoft and Sony has always been a follower in this regard. This has given Nintendo a relatively strong position in the market. Recent sales data of three companies shows that Microsoft has been able to sell maximum number of units of Xbox 360, but Nintendo has been able to make more sales revenue. This is because of the difference in the level of prices of Nintendo and Microsoft. Microsoft sold around 308,000 units of Xbox 360 in August 2011, as compared to the 356,700 units sales in August 2010. This represents a decline of almost 14 percent. Apart from this the overall sales revenue earned by Microsoft was around 28.4 million dollars. On the other hand Nintendo sold around 190,000 units of Wii in August 2011, which represented a decline of around 22 percent as compared to the sales in the same month previous year, which was 244,300 units. The total sales revenue earned by Nintendo was around 36.3 million dollars. Sony was able to sell around 218,000 units in August 2011, as compared to the sales of 226,000 units in August 2010. This marked a decline of around 4 percent. Overall revenue earned by Sony was around 17.5 million dollars (Digital Digest, 2011). (Source: Digital Digest, 2011) (Source: Digital Digest, 2011) 2.4. SWOT Analysis: Strengths: Microsoft has the advantage of being the universal leader of computer software and can use the same brand image in the industry of gaming. Microsoft is into different business and product segments and is based in different countries for this reason the company has stable financial position and is able to come up with high quality technically superior products Xbox has the credit of bringing huge innovation in the field of gaming and online games. Microsoft has advantage of lunching the Xbox 360 with 15 games Microsoft has strong relationships with different game developers and software publishers, which allows it to establish competitive advantage over other companies. Its relationship with US team, game experts and partners who have capability to promote Xbox brand always gives an edge Microsoft has price advantage of other competitors as the prices are reasonable as compared to similar products introduced by the opponents Microsoft is able to attract more customers with the help of website of Xbox 360. Weaknesses: One of the biggest weaknesses associated with the Xbox 360 is the sensitivity and high cost of the hardware which is used for the production of Xbox 360. Microsoft is not able to control the flow of production and it is imbalanced Microsoft is having tough time in the process of creating a new brand image for Xbox as it is not a separate entity of Microsoft Microsoft has inefficient promotional strategies as the company allocated limited amount of budget for advertising. Opportunities: There is the opportunity of expanding further as several new markets are being integrated with this overall gaming industry. It’s over emphasized partnerships mainly with the studios of Hollywood would establish good relations in long run and will allow the organization in further increasing the sales and revenues. Jumping in untouched markets could gather the extraordinary sales particularly in the regions of Asia that is lacking such technologies Threats: Monopoly of Microsoft in the European market has resulted in lack of trust on the company in the respective market and Microsoft has to face severe aggression in this regard Low price services is being offered by the competitor companies The target customer and customer base is same for the Nintendo and Microsoft as a result, Nintendo presents more direct competition to the company with different new innovative features and benefits. 2.5. Environmental Factors: Overall gaming industry is highly affected by different environmental factors. It is important to carefully monitor the all associated environments in order to monitor the different positive and negative factors. Overall gaming industry is exposed to excessive political and legal regulations owing to the restriction associated with the age limit and content of the games. Apart from this there is also strong influence of the technological environment on the companies in the gaming industry because of the high technological nature of the gaming consoles and other associated products. PESTLE analysis will be beneficial in the process of identifying important external forces and factors. 2.6. PESTLE Analysis: Political factors Rules and regulations may be changed by government which may affect Microsoft at times National and international laws and policies may affect their working, as Microsoft is operating in several countries. Apart from this there is huge impact of the several taxes and currencies on the overall profits and revenues of the company. Trading restrictions and tax policies by the government may affect the way they work Economical factors People with low income range may not afford to buy its products Gaming market is rapidly growing in developed markets but there is considerably small market in the developing countries. Social factors Socio-cultural environment is changing all over the world, people are now giving preference to the cost effective home entertainment. Customers have now become more technology savvy. Technological factors Continuous improvement and up gradation in technology is required to increase its productivity. Continuous research and development, conducting market research and using customers information help them to create new products Environmental factors Playing games does consume lot of electricity. Microsoft needs to see that their games (products) utilize low power 3. OBJECTIVES: The goals and objectives behind the respective marketing strategy are: 1. To expand the reach and availability of the Xbox 360 to all customers by easy to find locations. 2. To explore and find new and different market channels in order to reach more target market and capture larger segment of customers internationally. 3. To increase the market share and improve the market position. 4. MARKETING MIX: In order to ensure that the company is able to achieve the set objectives and targets associated with the Xbox 360, it is essential that effective and efficient marketing strategies are implemented by the company. In this regard it will be beneficial to change or alter the 4 P’s of marketing mix in accordance to the needs and requirements of the target market (Borden, 1984). In order to increase the overall sales of Xbox 360 and capture more market share, Microsoft has to target different groups consumers. In this regard there is a need to come up with appropriate marketing mix strategies. 4.1. Product: Since its introduction in the year 2005, Xbox 360 has been able to stand out from other the products of competitors on the basis of difficult features and benefits offered by it (Morris, 2005). The basic foundation for the promotion and marketing is provided by the benefits and features of the product. Microsoft has designed Xbox 360 in such a way that it offers several benefits and as a result provides a strong base for marketing and promotional activities. Different and unique features of Xbox 360, allow the company to target different groups of customers. The features of the product result in adding value for the customers during the process of purchase. Xbox 360 has highly advanced processor and has large hard drive in order to store the saved games and other data. Apart from this the hard drive can be detached from the device and can be easily taken to any place. Xbox 360 is able to support both types of controllers i.e. wireless and wired, and is compatible with the wi-fi connectivity. Along with this, it also supports different types of DVDs and CDs. Xbox 360 is still at the stage of growth. Company has been not able to promote all associated features and benefits of the product and gain increase the market share by promoting and marketing these features and benefits (Jelliothoward, 2010). Microsoft has been targeting several group customers. It can further increase the market share by continuously modifying and innovating the product according to the changing needs and requirements of different target markets or customers. 4.2. Price: Increasing and intense competition in the overall gaming industry results in putting downward pressure on the prices of the game consoles. Xbox 360 has been able to create competitive advantage in the industry because of the low prices. This has facilitated Microsoft in the process of increasing the sales and associated revenue with it. Customers are more attracted towards the game consoles which not only offers different features and benefits but is also priced low. However, recent decline in the price of the PlayStation 3 by Sony has resulted in eliminating the price advantage of Xbox 360 (Dominguez, 2011). In order to achieve the objective of reaching more number of customers and increasing the overall market share, Microsoft has to further lower the prices. But at the same time has to ensure that the quality of the product is maintained. 4.3. Promotion: In order to achieve the objectives of increasing the market share and reaching larger number of market segments, Microsoft has to capitalize on the features and benefits which are still not explored by the customers. Microsoft has been lacking in the area of effectively and efficiently marketing and promoting the Xbox 360. Considerable effort in this regard is required from the company. Microsoft has to increase the penetration of the product through strong and excessive promotional activities all over the world. This will require considerable amount of budget. Different promotional strategies which will be implemented by the company in order to increase the penetration of Xbox can be divided into three broad categories: Improving overall brand image in the market Establishing strong and effective relationships with the developers of different games Establishing strong and effective relationships with the retailers In order to improve the overall brand image Microsoft will participate and sponsor major gaming events. Along with this, Microsoft will come up with effective marketing campaign according to the requirements of the target market with a consistent message through all marketing mediums. Apart from this sales and revenues can also be increased by the establishing strong relationships with the developers of the games in order to co-branding and co-marketing. Along with this several trade promotions and incentives can be offered to the retailers in order to motivate them to promote the respective product. Apart from this Microsoft can do advertising and promotions in the retail outlets through different marketing material. In order to identify different channels and mediums for reaching the customers, Microsoft will pay considerable attention on different social media techniques and online marketing. Along with this Microsoft will come up with online ecommerce store for the product. 4.4. Place: In order to attract more customers through easy to find locations, Microsoft has to increase it physical presence. Microsoft will offer different incentives and trade promotions to the retailers in order to increase the shelf space of Xbox 360 and increase the visibility of the product. This in turn will result in attracting more customers thus increasing the sales and revenues of the company. Apart from establishing more physical stores and establishing partnerships with the retailers, Microsoft will come with online store in order to target large number of customers and provide customers with ease of ordering the respective product. 5. INFORMATION SOURCES: All information and data associated with the marketing activities of Xbox 360 will be integrated with the help of information management system. Marketing manager along with the top management will be able to access this data and information in order to monitor the effectiveness of the marketing strategies and activities. Different sources of information in this regard will be the data of the retail outlets, the online customer relationship management system, customer representatives, and the sales personnel. Apart from this proper market research will be conducted by the marketing and research department in order to check the changes in the market after the implementation of the new marketing strategies. This collection and monitoring of data and information will enable the company to make sure that the marketing activities of the company are on the right track. Also the company will be able to monitor any changes in the requirements and behavior of the customers. 6. CONTINCENCY PLAN: In order to monitor any unexpected changes in the market, there will be an ongoing process of monitoring the internal and external environment of the organization. There can be different situations which will require immediate actions on part of the company. For example, competitors can come up with similar type of promotional and marketing plan, there is some kind of defect in the product, some kind of legal or political regulation effects the sales of the product etc. If there is any such condition, the marketing team and top management will revise the marketing objective and will take immediate actions to come up with different strategy. 7. BUDGET: Budget allocated for marketing activities is $150,000 for two years. The marketing budget is sufficient if this budget is utilized efficiently. Budget for first year would be just less than $65,000 and in the second year this budget would increase and the total budget for two years would $150,000. Devising of marketing strategies and direct marketing will be done by the company in-house however online marketing, SEO and social media marketing will be outsourced in order to make the most out of these marketing platforms. For direct marketing, business development executives will be directly managed by the marketing manager of the company. Marketing manager will also be supervising the activities that are outsourced by the company. Marketing manager will be directly reporting to the managing director of the company.   Y1 Y1 Y1 Y1 Year 1 Total Y2 Y2 Y2 Y2 Year 2 Total Total Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Online Advertising 2,250 2,250 3,000 3000 10,500 3,500 3,500 4,000 4,000 15,000 25,500 Database Marketing 1500 1,500 1,500 1,500 6,000 2,000 2,000 2,250 2,250 8,500 14,500 Direct Mail 3,000 2,000 3,000 3,000 11,000 3,500 3,500 4,200 4,200 15,400 26,400 Blogs 2,200 2,200 4000 2,200 10,600 2,500 2,500 2,500 2,500 10,000 20,600 Social Media 4,600 4,600 4,600 4,600 18,400 6,000 6,000 7,000 7,000 26,000 44,400 SEO 400 400 600 600 2,000 500 500 700 700 2,400 4,400 Viral Marketing 400 400 500 500 1,800 1000 1000 1200 1200 4,400 6,200 Other 1000 1000 1000 1000 4,000 1000 1000 1000 1000 4,000 8,000 Total   64,300   85,700 150,000 8. IMPLEMENTATION PLAN: Most important step is the implementation of the whole marketing plan. In this regard first import aspect to be considered is the product design and development. Microsoft will keep on coming up with new and innovative feature and benefits in order to attract more customers. Along with this the marketing requirements will be fulfilled by the marketing department, which will be responsible for the development of different marketing material. Finance department will be responsible for sales forecasting and assessing the financial outcomes of the overall marketing plan. REFERENCES Borden, N. (1984). The concept of marketing mix. Journal of Advertising Research, 7-12. Digital Digest. (2011). Game consoles – August 2011 NPD sales figure analysis. Retrieved November 15, 2011, from Dominguez, J. (2011). Xbox 360 price has to drop. Retrieved November 15, 2011, from Graft, K. (2009). Exclusives Analysis: Xbox 360. Retrieved November 15, 2011, from Grundy, T. (2006). Rethinking and reinventing Michael Porter’s Five forces model. Strategic Change, 15(5), 213-339 Haberberg, A., & Rieple, A. (2008). Strategic Management: Theory and application. New York: Oxford University Press. Jelliothoward. (2010). Xbox 360: Market Identity. Retrieved November 15, 2011, from Morris, C. (2005). Xbox 360 makes its debut. Retrieved November 15, 2011, from The NPD Group. Annual US Video Game Sales. Retrieved November 15, 2011, from Read More