The Failure of Sega Genesis CD Gaming System - Essay Example

Running Head: SEGA MARKETING Sega Marketing Sega Enterprises Ltd., known today as a third-party developer for various game platforms used to be a very successful organization in the worldwide game console manufacturing industry. However, due to a series of mistakes in management, marketing, product development and operations decisions, it practically lost its market hold on the game console industry which made it decide to focus on development of third-party software instead which it could provide to hardware manufacturers, even those which were formerly its competitors. This paper takes a look at the mistakes that Sega experienced in the game console industry and how they relate to poor marketing strategies, plans, and implementation. Alternative ways to prevent the mistakes or remedy them are also included in the paper. Finally, it concludes with the idea that the marketing function and its objectives, strategic plans and implementation cannot be over-emphasized ni any organization. Introduction Sega was originally founded in 1951 by American David Rosen in who permanently moved to Japan after WWII. The name Sega is a contraction of "Service Games", which Rosen's company adopted when it began producing arcade games and software for early game consoles like Atari 2600 and ColecoVision. By the 1980s, Sega had an American division which sold console software. Later on the company was sold to Japanese investors and officially became Sega Enterprises Ltd. During the mid-80s, Sega produced a series of hit games which made a lot of money for funding future development of Sega's own game consoles (Planet Dreamcast 2008). Various industry reports say that Sega's game consoles were technically superior than those of the competitors. But stiff competition in the 1990s, which had better product launches, marketing campaigns and more funds made the company decide to concentrate on software development for multiple platforms (Kent 2004). Year 2002 was a major shift for Sega as it moved out of the console manufacturing business. It has since evolved into a "third-party publisher" role providing games even to former rivals. By the end of 2005, Sega was experiencing strong earnings growth across multiple divisions which continue to this day. Today, Sega's main offices, Sega Corporation Japan, are located Tokyo. The company also operates Sega Europe Ltd. in London, Sega of America Inc. in San Francisco, California and Sega Australia in Sydney (Wikipedia 2008). Body Sega's downfall in the game console manufacturing business was caused by a series of unfortunate management, production and marketing decisions Starting in 1984, when Sega's Mark III was competing with Nintendo's very successful Famicom, Sega decided to follow Nintendo's lead of bringing their product to America. Re-christened Sega Master System, the American launch was a failure due to "poor marketing, bad timing, lack of third-party software developers, and the absence of a 'killer app' and lead to the Master System's demise (Planet Dreamcast 2008). One of the elements of marketing mix is product positioning which refers to the place a product offering occupies in consumers' minds relative to competing offerings. Sega's launch campaign for the Master System failed to communicate its benefits and the characteristics of the product that the target market desires. Sega would have done well if the product attributes it announced were perceived by consumers as being close to their ideal and were more ideal than the competitor's. Instead of allowing customers to position competing products by themselves, Sega's marketers should have planned to influence and shape consumers concepts and perceptions (Chapter 11). Planet Dreamcast reports that the Sega Master System (SMS) was technically superior than Nintendo's product and this does not seem to have been properly communicated. Moreover, the product development process for the SMS as intended for the US market seems to not have a comprehensive market requirements specification which should have taken into account that consumers will buy game consoles and used them to play games. As it was, the SMS was not an ideal product for its target market because it lacked the variety of games that the market desired (Crow 2002). Planning a product launch involves several phases with their corresponding activities. Sega's bad-timing bespeaks of an inadequate product launch plan. The US marketplace should have been examined along with Sega's position in it both inside and outside its organization. Employees, editors, analysts, and key customers and prospects should have been surveyed or studied as to positive or negative reaction to the intended launch. A marketing communications plan should have been prepared to address the current situation, where a competitor, Nintendo, was already successful in the market about to be entered; specific goals and objectives; and the marketing vehicles that need to be employed to achieve the plan. In the face of lack of software developers or a killer application to support the SMS, strategies should have been developed to enhance the product's credibility despite shortcomings such as press conferences with media editors, endorsements of reputable individuals in the industry and the like. By 1993, Sega began to losing out on the home console market to Nintendo's Super NES. Although Sega enjoyed initial success with the Sega Genesis, SNES overtook it in popularity. Sega CD, a CD-ROM-based expansion for the Genesis was released later that year to shore up revenues but sold poorly due to lack of good games and expensive price (Planet Dreamcast 2008). Competitive pricing requires not only that prices should be set to be profitable but should also consider competitors' prices and the price the buyer will pay (Newman 2006). It seems Sega failed to take into account that the pricing for Sega CD, which was intended as an expansion for the Genesis, should have taken into account the price of SNES and that both Sega Genesis and CD, taken together should have been competitively priced against SNES. Strategic pricing should have been employed by Sega to determine the appropriate price to capture the value it was providing its customers through an understanding of how costs, competition, and customer values influence price; how customer values affect the benefits customers seek and the price they are willing to pay; tools to price elasticity, and evaluate features/price trade-offs; identify lifecycles to establish prices for current and future market conditions; decide when and how to raise prices; and address price erosion situations (CAI 2008). Sega had priced Sega CD out of the market because it probably based the price on its development and production costs. It could have chosen to initially implement a price trade-off to be able to regain market share from Nintendo before it raised its prices at a future time when Sega's hold on the market would have been more secure. Sega seems to also have lacked competitive product development considering that it faced a stiff competitor in Japan, even before it decided to enter the US market. It should have more closely studied its competitor as part of its product development process. This would have involved the target market of the competitor's product and the features of the competitor's product that it was competing against (Miller 2008). 1994 brought with it another dismal product performance for Sega with its 32X. Although it sold well initially, again lack of software and lack of promotional activities failed to counteract the imminent launch of its own Sega Saturn as well as the Playstation (Planet Dreamcast 2008). Promotional activities keep the product in the minds of the customer and helps stimulate demand for the product and involves ongoing advertising and publicity or mention in the press (McNamara 2008). Sega again failed to utilize a promotions plan for the 32X to keep the product on the consumers' minds even while Sega Saturn and Playstation had already started their own marketing activities. Moreover, unless it was deliberate on Sega's part to kill the 32X, it seems Sega's product planning group had not sufficiently planned its product mix. Product planners should have managed a dynamic product mix for the changing marketplace because the product mix is company's face that customers see and experience (Emcien 2008). In 1995, Sega Saturn, purported by some as the best and most sophisticated 32-bit dedicated videogame console to ever hit the market. It was praised by media during its launch but within two years an inferior and less sophisticated system managed to surpass it and capture the hearts and minds of the masses largely due to marketing prowess. Sony formally entered the 32-bit console market in 1993 and its first project was what would eventually be named as Sony Playstation. The Playstation was a jack-of-all trades with RISC architecture which was better than anything that was available at the time. It was also easy to program which was advantageous to third-party developers, which Sony hoped to win over from Sega and Nintendo. Moreover, Sony had the money, the marketing muscle, the machine and the software to go to launch taking away significant market share from Sega and Nintendo (Pettus 2001). Again, Sega failed to implement product development strategies to counteract the threat of a competitor. It tried to redesign the Saturn so that it can compete with the Playstation in terms of programmability for the game developers but the redesigned version carried with it a much higher price which proved to be uncompetitive in the market place. In 1998, Sega initiates the next generation in game consoles with Dreamcast, a 128-bit system. It experienced soaring sales in the US and Europe in 1999 and 2000. However, with Sony's introduction of Playstation 2, Sony again grabbed market share. The very successful launch of PlayStation 2 broke the back of Sega. Dreamcast didn't do very well in Japan and with the arrival of Playstation 2 in America, consumers were no longer interested in Dreamcast. On January 24, 2001, Sega formally dropped out of the game console business (Kent 2004). Studying consumer behavior helps companies improve their marketing strategies by understanding issues such as how consumers think, feel, reason, and select between different alternatives, how consumers are influenced by the environment in terms of culture, family, media, the behavior of consumers while making shopping decisions, limitations in consumer knowledge which influence decisions and marketing outcome, different consumer motivation and decision strategies for choosing products, and how marketers can adapt and improve their marketing campaigns and marketing strategies to more effectively reach the consumer (Perner 2008). Sega seems to have failed again to take into account the previous popularity of the Playstation and the way it upstaged Sega Saturn. It should have had a plan to build customer loyalty by ensuring that its products are highly differentiated from those of the competition, developing products where price is not the primary buying factor, and providing unique services with its product (Business Town 2008). As it was, Sony had proven better at building customer loyalty so much so that even with the initial success of Sega's Dreamcast, Sony was able to practically annihilate Sega from the game console market with Playstation 2. The Sony brand which connoted high quality products also played a role in the Playstation's success. Whereas Sega had had a series of unspectacular products before it launched the supposedly spectacular Dreamcast. Although Dreamcast was purported as uniquely the pre-cursor of its time with its 128-bit system, aside from that, no other benefits to customers are contained in product reports to make it the product of choice. This lack of benefits may not be the reality but only a deficiency of communication where advertising and promotions should have played a more dominant role to help keep Sega in the market despite a very stiff competitor. Conclusion The history of Sega is peppered with short-lived phenomenal innovations and business successes. Although it seemed that the products it was initially producing were highly innovative and technologically advanced for its time, which should have spelled their immediate success in the marketplace, this has not been the case. Product features are not the only requirement for marketing success. Products have to be introduced, announced or communicated to prospective customers; desired by customers and preferred against those of a competitor; must reach the intended customer at the right time and priced at a level that the customer would be willing to buy. All these requirements are part and parcel of the marketing function and each objective can be achieved by a well-developed marketing strategy and a marketing plan. Because of Sega's failure to achieve its product success objectives, it can only be surmised that the marketing strategies and plans it implemented for its string of technically superior game console products had not been carefully and thoroughly thought out. Reference List Business Town. (2008) Customer Loyalty. BusinessTown.com. Retrieved July 31, 2008 from http://www.businesstown.com/marketing/customer.asp California Institute of Technology. (2008). Strategic Pricing. Retrieved July 31, 2008 from http://www.irc.caltech.edu/p-163-strategic-pricing.aspx Chapter 11. The Product and Developing New Products. Retrieved July 31, 2008 from http://www.udel.edu/alex/chapt11.html Crow, K. (2002). Product Definition. NPD-Solutions.com. 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(2008). Consumer Behavior: The Psychology of Marketing. Retrieved July 31, 2008 from http://www.consumerpsychologist.com/ Pettus, S. (2001). Kamikaze Console: Saturn and the fall of Sega. Retrieved July 31, 2008 from http://www.goodcowfilms.com/farm/games/www.eidolons-inn.net/segabase/SegaBase-Saturn(Part1).html Planet Dreamcast. (2008). Sega History. Retrieved July 31, 2008 from http://www.planetdreamcast.com/about/sega/ Wikipedia. (2008). Sega. Retrieved July 31, 2008, from http://en.wikipedia.org/wiki/Sega Read More