A Gaming Console X-BOX 360 - Essay Example

Introduction Microsoft Corporation launched X-BOX 360 in November 2005 with much fanfare at an MTV exclusive program. (Chris Kohler, 2005) This was followed by the retailers being mobbed by customers who were clamoring be the first to own the latest offering. The official sales forecast fell short – not because there was slack in demand, but due to supply shortages. Within three weeks, Microsoft had introduced X-BOX 360 to three different regions – North America, Europe and Japan. While some analysts consider this as a faulty approach, Microsoft has its own rationale – to capture the mind share (if not effect sales right away) of the maximum population, before Sony’s next Playstation hits the stores later in 2006. The promotional strategy largely focused on the integration of the new gaming console with other media – X-BOX 360 can play music from your CDs, iPod or your PC. You can watch movies, TV or Video through it. It integrates with all digital cameras so you can view pictures and slide shows. And of course – it lets you play your choice of games. (Darren Waters, 2005) With this product, Microsoft has suddenly short-circuited the life of current generation of gaming hardware – by launching its X-BOX 360, it has ushered in a new era of entertainment. The X-BOX 360 is all set to provide a media hub as opposed to pure gaming. Microsoft’s website, TV and print ads, as well as the PR speeches by company officials, are all directed towards highlighting the multi-tasking aspect of X-BOX 360. The promotional activities are targeted towards a rational positioning of the product – as a complete home entertainment system. (Microsoft’s website). While reaching out to a majority of early and new starters, this approach might not appeal to the hard-core gamers, especially since there are still numerous OS glitches and hardware breakdowns reported by those who have made the purchase. (Peter Cohen, 2005) With 1.5 million units of its next-generation video game console already sold in the December quarter, Microsoft now expects to sell 2.5 million by February end. (Todd Bishop, 2006). The market looks receptive and Microsoft’s promotional stance has apparently paid off. However, the marketing communication efforts were not complemented by delivery and supply, thus leading to some discontent and aversion towards the company if not the product. The following pages will present the description and analysis of the Promotional Activities undertaken by Microsoft, the effectiveness of the efforts, and the impact that the strategy had on the Organization itself. Pro-forma A Purpose of Promotional Activity Name of Company  Microsoft Corporation Name/ description of promoted Product/ Service X-BOX 360 X-BOX 360 is a gaming console that can be integrated with other media to play music from CDs, iPod or PCs. You can watch movies, TV or Video. It integrates with all digital cameras so you can view pictures and slide shows. And of course – it lets you play games. Is this a new or existing product/ service?  It is a new product. What are the key product and or service attributes?  X-BOX 360 has taken gaming consoles beyond their original use – it gives features that can help you do much more than play games, like listen to music, watch movies and view pictures. Type of Marketing communications tool used (may be more than one)    TV ads, banners in tube stations, radio, bill boards, promotional speeches, testimonials. Key message of promotion   Evidence   The key message is to place X-BOX 360 as a home entertainment hub, a gaming console that is much more than just that. Evidence – 1. Microsoft’s Website (http://www.xbox.com/en-US/media/default.htm) carries detailed highlights on how X-BOX 360 can be integrated with other products to get music, pictures and video. 2. TV and print ads extol this multi-tasking in addition to maintaining that X-BOX 360 will take the gaming to the next generation.   Media Chosen (may be more than one)    Print, Billboards, website, TV, in-store display, press-releases Assumed Customer segment(s) addressed   Evidence The targeted segment comprises of people in the age-group of 15 – 35, with sufficient disposable incomes, and having an interest in new technological innovations and gadgets. Evidence: The price of the product (at around 200 pounds) points out to the fact that it is affordable to people with disposable incomes; Mostly young people are religiously hooked on gaming per se, and they like to be up to date with the latest inventions. (PEGI, http://www.pegi.info/pegi/index.do?method=faq) Microsoft also hopes to entice the existing Ninetendo and Sony Playstation users to make a switch-over. The launch was “rushed ” before Sony’s expected release of its PS3 that is scheduled for later this year. This move obviously aimed at getting a lead (especially since the launch was world-wide) over competitors, and also luring existing Sony loyalists into buying X-BOX instead of waiting for the Sony’s product. (Games Galore: Video gaming News and Reviews, 2006)   Assumed required Marketing Communications outcome Evidence  The entire promotional activity was streamlined to affect a change in the way people think of gaming consoles. The company’s website, TV and print ads, all elaborate what ‘extra’ can be done with the product. The potential consumers are expected to ‘discover’ a consolidated solution to their entertainment needs in the X-BOX 360. Assumed required Marketing outcome Evidence 1. The promotional activities were aimed at selling the X-BOX product to those who are new to gaming (and this market is exponentially increasing as world over); Launch was made simultaneously in three distinct regions – North America, Europe and Japan. In North America, it was made on prime-time MTV special by un-veiling of the XBOX 360 directly to consumers. This was done four days before E3 (Electronic Entertainment Expo) started, where most announcements are made. This was a tactical approach, to reach out directly to the customers, even those who are not very-much into gaming. 2. To influence the existing users of other brands to switch over to X-BOX 360 as a better alternative and a total entertainment solution; (Games Galore: Video gaming News and Reviews, 2006) 3. And to make the existing X-BOX users to update as TV and print ads all boasts of taking the gaming to the next level.     Pro-forma B Effectiveness of promotional activity Assumed required Marcoms outcome (summary from form A) The required communication objective was to present a rational appeal about X-BOX 360 – that the product is a best buy because it is combining gaming and other entertainment (video, TV, Picture and Music), while at the same time ushering in a new generation of gaming. And it is available now, a whole year before Sony’s PS3 or Nintendo’s next generation of the offering hits the market. Assumed required Marketing outcome (summary from form A) Marketing Outcome was to boost sales among the new/first time users by telling the novices that this console will do more for them than simply play games; To make existing and potential customers of the competitors to switch-over, and to establish a lead in as many markets as possible before Sony launches its PS3 or Nintendo comes up with its latest invention. Type of research undertaken (brief description) The consumer research was carried out using a multiple-choice close-ended instrument that the respondents were required to fill out. A diverse group of people were selected for the administration of the above questionnaire. The total sample size was taken to be 200, and all efforts were made to include equal number of respondents from 4 age groups (15-25 years, 25- 35 years, 35-45 years, and Over 45 years) In each age group, the respondents were selected on the basis of 3 income groups – 20 for less than 20,000 Punds/year, 10 for between 20,000 and 30,000 pounds per year, and 20 for those having more than 30,000 pounds per year. Sample distribution can be seen in the following table: 15-25 25-35 35-45 >45 Total < 20,000 10 10 10 10 40 20,000-30,000 20 20 20 20 80 >30,000 20 20 20 20 80 Total 50 50 50 50 200 The responses collected using the above questionnaire were analysed to report the Findings that are listed below.     Purpose of research The purpose of the research was to evaluate the effectiveness of the promotional activities – to find out whether the desired communication and marketing objectives were achieved. For this, respondents were questioned on their awareness about any promotional activities (Ads in media, in-store promotions etc.) and how did they perceive X-BOX 360. They were also as asked about their purchase intentions.   Conclusions drawn from research       The survey confirmed that the position postulated by Microsoft through the various promotional activities, did indeed register well in the minds of the consumers. They viewed the new product as innovative and as taking gaming to the next level – above all, X-BOX 360 was acclaimed as an entertainment hub with its various integration features with other products. Research Findings (Also, see appendix A) 1. Of the 200 respondents surveyed, 45% stated that they were interested in buying the X-BOX 360, 30% wanted to wait for PS3, and the rest said that they intend to purchase both the products. The 45% that intended to make the purchase were mostly in the age group of 25-35 years and income group of 20,000-30,000 pound/annum. 2. Of the 90 people who said they prefer to buy X-Box 360, 70% (63) wanted to do so because they found the device more useful because of its additional linkages with other products. These 90 also were found to be owners of more than 3 technological products including the previous versions of X-BOX. 3. Out of the 200 respondents, 60% had come across the massive Billboards, 30% stated that they remembered the M-TV launch and have seen the Billboards, while 42% recalled the TV ads. Almost all (except 2) were aware of the X-BOX 360, and have seen its ads either on the TV or the Billboards. 4. For the rating of the three products: Sony was ranked first on Quality and Price, while Nintendo came first on ease of handling. X-Box 360 was ranked as having the maximum features, came second on appearance and price, and stood last on ease of handling criteria. Post research review         The research was concentrated only in one particular geographical region (Europe) while the product was launched in three continents. This, coupled with the fact that only 200 people were surveyed, narrows the scope of he research drastically. To arrive at a better conclusion on the effectiveness of the promotion activities, a much larger and more diverse sample size will be required. Also, it’s recommended that an in-store survey be made to gauge the reasons (an hence the communication effectiveness of the promotional strategy) why people are there to buy X-BOX 360.   Pro-forma C The impact on the Organisations Operations as a result of the promotional activity   Sales activities High Impact The simultaneous launch of X-BOX 360 in 3 different continents placed a tremendous pressure on the stores that carried the product. Additional sales staff force had to be deployed to meet the order requests. Complexity of operating X-BOX 360 (with its features that help to integrate with other products) required that customers making the purchase should be told about the features of the new product. For this, The personnel also had to be trained in the use and assembly of the product so that they could satisfy the queries of the customers. In addition to the above, help desks and help lines had to be set up to resolve customers doubts, stock-availability queries, and technical support Accounts, billing and receivables Low Impact No drastic changes were mandated in the present system of accounting – the new product was simply added on to the list of the existing Microsoft products, with the new pricing structure. Customer/materials/information processing operation Medium Impact The existing channels of data collection were employed to keep tabs on the sales. However the unexpected demand required Microsoft to improve its info systems with respect to its manufacturing partners; in spite of this, Microsoft saw a tremendous shortage and hence loss of potential customers. The   Procurement of goods/services and distribution of the same Heavy Impact The worldwide release that was followed by acute shortage tested the supply chain for the product to its limits. There were just not enough supplies to meet the demand. Microsoft had to bring in its partner, Celestica Inc’, to ease the shortages. (Planet Xbox 360 News) The product sold-out through Best Buy Stores, and repeated assurances had to be given to the customers of new stock arriving soon. (Brian Dunn, President, Retail, North America, in an open letter to the customers at http://www.xboxcircle.com/portal/content/view/844/1/)   Retail stock and stores management   High Impact In addition to the pressure of maintaining supplies and coordinating and speeding-up the procurement of the stock, the retail stores also had to face the task of disseminating information on the product features, and appeasing the customers who were disappointed for not getting the coveted product. Recruitment of additional/temporary resources Medium Impact Microsoft had to rope in additional manufacturing partners to ease of the supply. (Planet Xbox 360 News)). Some of the retail stores had to hire additional staff to handle orders and provide information on the product. Some stores had to train employees had to be trained in customer support due to the new features of X-BOX 360, and additional Help Desks had to be used. (The researcher found the above position in several of the stores that he visited. Also, friends and colleagues conveyed the same information.)   Design (for example; new product, new service, new process, new job) Low Impact. Order fulfilment Low Impact The existing systems were used for order fulfilment with only few changes. Customer service support Low Impact   Analysis The marketing stance taken up by Microsoft for its new product is quite aggressive. The evidence can be had from the fact that the organization decided to launch the product from a non-traditional platform (through a prime-time MTV special) instead of through the Electronic Entertainment Expo that is considered to be the conference for such announcements. This was an act understating that Microsoft’s priority is the customer. Secondly, Microsoft has rushed in with the next generation of product almost a year earlier than its competitors, especially Sony with its PS3, can manage to enter the market. The promos sought to convey that X-BOX 360 is much more than a gaming console; it’s capable of giving holistic entertainment in tandem with other products like PCs, iPods, and even video and TV. And, it is available now! With this approach, Microsoft sought to get Sony and Nintendo loyalists to switchover to its side instead of waiting a whole year. In addition to the tremendous pressure put on its engineers to come with a innovative and yet sturdy product, Microsoft also ran the danger of killing the sales of its own existing generation of gaming consoles. However, company officials believe that X-BOX 360 will be a big hit, justifying the timing of the launch. Microsoft has been fomenting intense speculation about X-BOX 360 through its Ourcoloney.net site and through well-crafted press quotes by Bill Gates. As a part of the overall promotional strategy, Microsoft had announced the new product six months prior to shipment. This was obviously done to generate eager anticipation among the gamers. (Ourcoloney.net) The launch was simultaneously made in three regions (North America, Europe and Japan) in the hope of reaching out to maximum consumers. This way, Microsoft wanted to entice the novices to purchase the product as an entertainment tool, to convince the hardcore gamers to upgrade, and to generate a potent lead over Sony or Nintendo’s next generation products. (Fiona McDonnell and Paul Jackson, 2005) The consumer research undertaken for the purpose of the present study, too pointed out that the strategy has been successful in what it set out to do – changing the perception about the gaming consoles (from pure gaming to entertainment), and in effecting purchase behavior. (see research findings in pro-forma B) The promotional strategy did indeed translate into a gush of sales, but this had an adverse affect on the operations of the organization. The shortage of supply and the numerous hardware and OS problems that were encountered by the users, suggest that the product was rushed prematurely – Microsoft was caught unawares when the multi-million dollar promotional campaign generated an overwhelming response. Conclusion Microsoft channeled millions towards its advertising campaign (that included TV ads, Billboards, Magazine Ads, Radio Ads); it even arranged with Samsung to display the games on it’s monitors across the retail stores – a move that took the X-BOX 360 out of the gaming aisles into the main electronics and entertainment goods section; and it’s officials gave fiery interviews and press releases extolling the product. Microsoft’s stance with X-BOX 360 had broken numerous conventions of the gaming scene – launching direct to consumers, simultaneously entering in 3 highly differentiated markets, and coming up with a next generation offering much before the five-year cycle of its existing X-BOX was over. (Fiona McDonnell and Paul Jackson, 2005). The total promotional effort did make an impact – if the sales trends are anything to go by – even if shortages in supply, and a few production and quality glitches did stand up. Though the promotional campaign was not adequately backed by suitable chain management and might backfire on the company’s image. Already flaked by OS glitches and hardware breakdown, the hype generated with X-BOX 360 may well become the undoing of the product, especially when Sony comes up with its PS3. But for now, it can be safely concluded that the Microsoft’s stance appears to be paying off. Appendix A Sample Design: 15-25 25-35 35-45 >45 Total < 20,000 10 10 10 10 40 20,000-30,000 20 20 20 20 80 >30,000 20 20 20 20 80 Total 50 50 50 50 200 Major Highlights of the Consumer Research 1. Of the 200 respondents surveyed, 45% stated that they were interested in buying the X-BOX 360, 30% wanted to wait for PS3, and the rest said that they intend to purchase both the products. The 45% that intended to make the purchase were mostly in the age group of 15-35 years and having an income of over 20,000 pound/annum. Fig 1a: Purchasing Intent of the respondents Table 1b: 90 people out of 200 intended to buy X-BOX 360, majority (61% or 55) being in the age-group of 15-35 years, and income group of over 20,000 pounds per annum. 15-25 25-35 35-45 >45 Total < 20,000 5 4 4 0 13 20,000-30,000 15 16 10 5 46 >30,000 10 14 6 1 31 Total 30 34 20 6 90 2. Of the 90 people who said they prefer to buy X-Box 360, 70% (63) wanted to do so because they found the device more useful because of its additional linkages with other products. These 90 also were found to be owners of more than 3 technological products including the previous versions of X-BOX. Table 2: Answer to question no. 7: What do you remember from that ad? What do you remember from the ad Respondents X-BOX 360 has special features 130 (63 out of these showed buying intent) It’sjust another gaming console from Microsoft 10 It’s better than other available products 50 It’s better than anything that competitors might launch in the near future 10 3. Out of the 200 respondents, 60% had come across the massive Billboards, 30% stated that they remembered the M-TV launch and have seen the Billboards, while 42% recalled the TV ads. Almost all (except 2) were aware of the X-BOX 360, and have seen its ads either on the TV or the Billboards. Table 3: Answer to question no. 6*: Specify, where you’ve seen the Ad TV Ad 84 Magazine 30 Billboard 120 In-store display 45 Website 60 I saw the M-TV launch 68 * There is lot of overlapping, people who saw TV Ads also saw the website or the Billboards etc., hence the total will not amount to 200 but the figures show how many people reported seeing the different promotional strategies 4. For the rating of the three products: question no. 8 Sony was ranked first on Quality and Price, while Nintendo came first on ease of handling. X-Box 360 was ranked as having the maximum features, came second on appearance and price, and stood last on ease of handling criteria. 4a. 4b. 4c. 4d. 4e. References 1. Darren Waters, 2005, Xbox 360 wants to be your hub, available online at http://news.bbc.co.uk/1/hi/technology/4482200.stm, accessed on 23 rd May 2006 2. Chris Kohler, 2005, MTV Pimps XBOX 360, available at http://www.wired.com/news/e3/0,2879,67519,00.html, accessed on 23rd May 2006. 3. Microsoft’s website: http://www.xbox.com/en-US/media/default.htm, accessed on 29th January 2006. 4. PEGI, http://www.pegi.info/pegi/index.do?method=faq, accessed on 23rd May 2006. 5. Games Galore: Video gaming News and Reviews, 2006, available at http://games.techwhack.com/category/sony-playstation-3-news/, accessed on 19th January 2006 6. Games Galore: Video gaming News and Reviews, 2006, available at http://games.techwhack.com/category/sony-playstation-3-news/, accessed on 19th January 2006 7. Peter Cohen, 2005, in “Glitches mar Xbox 360 launch”, available online at http://www.macworld.com/news/2005/11/28/xbox360/index.php, accessed on 23rd May 2006 8. Todd Bishop, 2006, “Xbox 360 sales figures released” available at http://72.14.203.104/search?q=cache:OXU-6TzMCq4J:blog.seattlepi.nwsource.com/microsoft/category.asp%3Fcategory%3D34%26page%3D2+1.5+million+units+of+its+next-generation+video+game+console+already+sold+in+the+December+quarter,+Microsoft+now+expects+to+sell+2.5+million+by+February+end&hl=en&ct=clnk&cd=2, accessed on 29th January 2006. 9. Microsoft’s website: http://www.xbox.com/en-US/media/default.htm, accessed on 29th January 2006. 10. Ganes Galore: Video gaming News and Reviews, 2006, available at http://games.techwhack.com/category/sony-playstation-3-news/, accessed on 19th January 2006. 11. Planet Xbox 360 News, http://www.planetxbox360.com/, accessed on 19th January 2006 12. Brian Dunn, President, Retail, North America, in an open letter to the customers at http://www.xboxcircle.com/portal/content/view/844/1 13. Planet Xbox 360 News, http://www.planetxbox360.com/, accessed on 19th January 2006 14. Fiona McDonnell and Paul Jackson,2005, at news.com, available at http://news.com.com/Commentary+Microsofts+Xbox+360+spin/2030-1069_3-5706144.html, accessed on 29th May 2006. Read More