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Introduction

What is Xbox?
Gaming Market
Competitive Advantage
Microsofts Current Marketing Strategy
Recommendations
References
What is XBOX?
Xbox is an entertainment hub that provides users:
± High Quality Video Games
± DVD Player
± Internet Support
- Online gaming
- Web surfing, Checking E-mail, etc.

± Audio/Video System
- Create soundtracks
- Supports HDTV and TV resolutions up to 1920 x 1080.
Microsoft Motives in Entering
Game Console Market
One of the initial reasons for Microsoft entering the games
console market was that they believed they could use its
software expertise to aid it hardware-game industry. It was
looking to expand from its focus mainly on PC¶s and
laptops. It was looking for diversification in the video games
market
If Sony were to continue unchecked in games console
development, Microsoft feared it may lose significant PC
sales supported by gaming
Market Size
Total Gaming Market Size: $50 Billion, 2001
2001 total market served by Xbox: $18.5 Billion
2006 total market served by Xbox: $47 Billion
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Market Share
The console market has few players
± Sony owns 45% of the console market
± Sega exited the console market this year
  



  

 



  

  


Gaming Value Chain
The value chain in the game industry
± A few strong incumbents are leading the market
± Content companies and console makers are
creating the capabilities to control the consumer
± Content companies are creating platforms and
consolidating to create economies of scale

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Top Competitors
Sony PlayStation 2 Nintendo GameCube
Sony is the market Leader GameCube is $199 only
PS2 has entered market a Nintendo has historically
year earlier than Xbox and successfully game brands
GameCube
PS2 has achieved critical Nintendo has most
mass advantageous royalty
Sony has the largest structure
selection of video games GameCube is targeted at 7-
PS2 is targeted at 18-34 16 year old consumer
year old consumer market market
Competitive advantages of xbox
Competition Microsoft Sony Nintendo
Basis Xbox PlayStation GameCube
Video game Numerous game 2Over 200 titles, In-house + heavy
variety (most developer winning this 3rd party support
important basis) partnerships basis (due to new
royalty)
Price $299 $299 $199
Differentiation Broadband, DVD, DVD Strictly gaming
733 MHz

Marketing budget $500 million ($111 Comparable Comparable


million this year)

Graphics quality Best among the


three
Comparison

Sony and Microsoft are gunning for pure


performance systems, while Nintendo is shooting at
fun, playable games that rely more on its unique
controllers than impressive graphics hardwar
Current Marketing Strategies
Target Market
- Sophisticated gamers
- Men, ages 18 to 34
- Consumers who want more than just games
Pricing
- Console is priced at $299
- Bundling issues
Distribution
- Sell 1 to 1.5 million consoles by the end of the year
- Xbox will be available at most major retail outlets
- The product will be launched in Europe and Japan next year
Current Marketing Strategies Cont.
Supply
- Flextronics: regional Xbox manufacturing operations in Mexico
- Retailers started taking advanced orders in early September
Partnerships
- The company has signed more than 200 of then world*s top
game developers and publishers to create Xbox games
- Marketing partnerships have been formed with Taco Bell and
Sobe
Communication
- $500 million worldwide marketing budget
- $111 million domestic this year
- Primarily print and television advertising
- Only $500k spent on online advertising
Long Term Strategy
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Competing consoles run on different OSs


Microsoft must ensure that Xbox, and more
importantly, its OS, is the dominant standard.
Keeping Xbox at the forefront of migration to PC
± Introduce new features closely related to PC to
accelerate the consoles transition to a PC
Positioning Strategy
Xbox is positioned as possessing higher quality and more
functionality than existing consoles
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Recommendations: 3 P+s
Pricing: Increase price point $50, to $349
± Aid in positioning as higher quality: oPrice = Performance
± Reduce loss per unit
± Non-Price Competitive signal to Sony and Nintendo
Positioning: Target online gaming niche by focusing on
Internet Gaming as the KEY differentiator
± Ability to improve prices as a result
± Dominate online gaming market niche
Partnerships: Increase game development network
± Tap entertainment industry for band and creativity
± Online gaming developers
Recommendations Cont.

Distribution: Create Incentives for Retailer


± Increase margins on console and/or Video
Games
± Develop joint promotion and advertising
campaigns
Communication: Focus communication of
superior capabilities
± Specifications vs. Capabilities
± Co-Promote games
± More co-advertising online with e-tailors
References
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