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Overview
 Company‟s Vision
 New Product development Strategy
 Video Gaming Industry
 Competitors & Key product launches
 Market Study- An user survey and market size
 Product life cycle and stage at which XBOX live is
 How Microsoft is trying to implement a growth strategy in the games console arena
(using the Ansoff matrix)
 Key success factors of launching the Microsoft X box Live platform (Marketing mix 4-Ps
framework)
 Key weaknesses of Microsoft‟s Xbox

Pre launch Xbox Xbox live Xbox 360 Xbox+Kinect

Company‟s Vision & Idea generation
 Company‟s vision :

Sales of PC software would not last forever and Microsoft had to look ways of future growth. To get a competitive edge, they
followed diversification strategy and changed the existing market

 Idea Generation (thru R&D team)

In 1998 four engineers from Microsoft's DirectX team, Kevin Bachus, Seamus Blackley, Ted Hase and DirectX team leader Otto
Berkes, disassembled some Dell laptop computers to construct a prototype Microsoft Windows-based video game console.
The team hoped to create a console to compete with the Sony's upcoming PlayStation 2, which was luring game
developers away from the Windows platform.

The team approached Ed Fries, the leader of Microsoft's game publishing business at the time, and pitched their "DirectX
Box" console based on the DirectX graphics technology developed by Berkes' team. Fries decided to support the team's
idea of creating a Windows DirectX based console

 Testing
During development, the original DirectX box name was shortened to Xbox. Microsoft's marketing department did not like
the Xbox name, and suggested many alternatives. During focus testing, the Xbox name was left on the list of possible names
to demonstrate how unpopular the Xbox name would be with consumers. However, consumer testing revealed that Xbox
was preferred by far over the other suggested names and "Xbox" became the official name of the product


Business Advantage
 Microsoft dominates in its core market of operating systems (PC) and desktop application
software

 Had monopoly power (almost) in pc era

 High revenue and profits have been healthy and steady

 50 billion in profits over 27 years

 4.2 billion annually invested in R & D

 Had Strong financial backing & long term vision which made them stay despite incurring
losses in the beginning. They forced the key competitors, Sony & Nintendo to get into price
war for survival


Video Gaming Industry.. ..Basic facts
 The video gaming industry is characterized by a 5 year cycle: the games console has
roughly a 5 year life cycle before being replaced with new, improved technological
hardware

 Highly Competitive area: Presence of Industry Giants like Sony , Nintendo .
Also, many giants have come and gone like Sega who retrenched from games
console market due to Sega Dreamcast flop in 1999. (Now they are games
developer only)

 The console industry sells its products at prices that are below costs and makes
money through the sales of games in the form of licensing fees
Industry Structure


Strong Veterans Competitors

1995 2000 2006

2002 2006


History of popular gaming consoles(roughly 5 years)
Sega 6 yrs. 4 yrs.

Sega Mega Drive Sega Saturn Sega Dreamcast
(1989) (1995) (1999)

Nintendo 6 yrs. 4 yrs.
4 yrs. 7 yrs.

Nintendo Entertainment Game boy Nintendo 64 Nintendo Gamecube Nintendo w ii
Service(1985) (1989) (1996) (2002) (2006)

Sony
5 yrs. 4 yrs.

Sony PlayStation Sony PlayStation2 Sony PlayStation3
Pre launch (1995) Xbox Xbox live (2000) Xbox 360 (2006)
Xbox+Kinect

Microsoft‟s Research sources

 Internet
 Special Interest Magazines
 One-to-one Interviews
 Internet Forums
 2 Focus Groups
 Natural Habitat Interviews (LAN

Findings : People Play video games for entertainment. a Good video game lets you
immerse yourself in the experience


Valuing Customer Inputs (Turn Customer inputs into
innovation) [Article]

Strength :
Xbox‟s strength was best hardware, best online gaming, system link & Halo products

Insight :
 it is not important how good a system is in numbers and specs but what it can do for the game
experience.

Strategy
 The new campaign – created by brand agency Landor – – stresses Games
No brand ads but game ads with a brand messages (Halo2 became a killer app of Microsoft’s Xbox)

New Slogan:
 IT‟S GOOD TO PLAY TOGETHER
Why is it good to play together? IT IS MORE FUN!


Messaging
 PlayStation and Nintendo
TO CONVINCE :
people, aged 18-34 to to use their console system instead of not playing
games because they give you a break from everyday life

 XBox
TRIES TO CONVINCE:
people, aged 18-34 to use their console system instead of not playing
games because you should play more to have more fun.


Strategy

Acquire/ Retain
(bungie in 2000
to get HALO
games flagship)

Exciting Innovation that reduced the Complexity
[Article]
 Created a console community
 Access to Downloadable Games
 Big, Fat, Delicious Downloadable
Content
 Hard Drive Storage
 Firmware Updates
 Birth of the Media Center
 Love of Local Multiplayer
 Hello, High-Def
 It Made Microsoft a Player
 Avoided feature fatigue [Article]
 Secured profits by not extending
product lines [Article]
Data Source

Determining Key Success factors of Microsoft Xbox
Live! Platform
Marketing mix 4-Ps framework

Product Price
 Superior technology (broadband-ready) Hard disk for data
safety
 Exclusive games from developers
 Variability–community character(subscribers find friends at
 Gamers only pay costs of starter kit for the Xbox Live! Service
online chat, download games, additional levels, weapons and
(€52 in UK and that Price covers 1 year online
characters,...)
subscription, Headset, and Xbox communicator. )
 Safety aspect(disable downloading content)
 With special emulator programs Xbox enables to play
 After 1 year automatic renewing subscription with credit card.
PlayStation games.
(quick and easy)
 Enable DVD and all other video and audio files as well as web
live streaming.
 With Linux software, mouse, keyboard and USB ports it´s gives
computer‟s experience.

Promotion Place/Distribution

 First broadband-ready gaming console

 Xbox Live! service provides a powerful word-of-mouth marketing  Microsoft distributes its software products over the Xbox Live!
for Microsoft because players interact with each other and platform exclusively for gamers to download fast, easy and safe
recommend games to play.


How Microsoft implemented growth strategy
in the games console arena
 2002 : Diversification Strategy by offering a  2006 onwards : Xbox became obsolete and replaced by
new product (XBOX) for a new market Xbox360 and that is extreme upgrading of Xbox. It can be seen
as product replacement at Product development strategy. ->
New technology, new features(Xbox Live! & Kinect changed the
game). Kinect allowed to integrate technology to what MS had,
giving episodic interactive TV and building connections with
organizations such as Sesame Street and National Geographic.
It's created a whole new level of two-way TV integration that's
given us a brand new growth spurt at this point in the lifecycle.
Products Products
Existing New Existing New

Existing

Existing
Market Product Market Product
Product
Expansion Development Expansion Development
Development

Market
Market
Market Entry into new Market Entry into new
New

New
Development Market Development Market
(Diversification) (Diversification)
Ansoff Matrix

Market Survey Results before the launch of Xbox
360
Time Spent on playing video Online games
Time Spent on playing video games

Top Gaming consoles in use Console hardware sales ( in million $)
%age owning


What Stage of Product Cycle XBOX was
 2002 : Xbox‟s introduction stage was
stretched due to slow sales, no profit and
dragging growth. Sony´s PS2 is two years in
sale ahead and located at growth phase
due to fast sales Nintendo´s GameCube
behind PS2 but close to Xbox sales rate in
introduction phase

 2006 : Xbox360 selling was increased with Kinect
launch. Referred to introduction phase Sony´s
PS2 is located at maturity phase due to
tremendous sales Nintendo´s GameCube way
behind Xbox and Xbox 360 sales rate but in
growth phase Xbox sales were declining with no
profit scored.
However, Xbox Live! is in growth phase captured
35m + subscribers for the service (billion $
revenue for Microsoft) Xbox
Pre launch Xbox live Xbox 360 Xbox+Kinect

Market in 2009

A“controller free gaming and entertainment
experience”-Xbox360addon


Kinect‟s Positioning
“Easy to use and instantly fun, Kinect…gets everyone off the couch. Want to join a friend in the fun?

Simply jump in.”


Current Positioning on Perceptual Map


Product evolution

Xbox live Xbox+Kinect
(2002 ) (2010)
• A sixth generation gaming console •Xbox live service was shut down for a
•Microsoft acquired bungie just before major upgrade.
Xbox‟s launch •Adding a basic service „Xbox live free‟
•Flagship of Halo 2 which provided a •Online Multiplayer Gaming Service with added features • Launched a motion sensing(full body)
readymade fan base which is known as •Voice chat , video chat •Digitized avatars were introduced input device that enables a controller
„killer app‟ •Friend list upto 100 users • Available at low prices ($299 initially & free interactive gaming & entertainment
$279 in Aug 2007) experience
• Windows live messenger integration
•In partnership with Netfix , Bill Gates •8 million units were sold in first 60 days
•In may 2009,it had 20 million subscribers
announced ‘New Xbox live that claimed Guinness books of world
base
experience’ to raise the levels of records.
•A bundle of gaming console, Halo
games and 1 year free subscription was service
sold to consumers
Xbox Xbox360
(2002) (2005)


Current Standings
2012 Best Video Game Console Comparisons and Review

Data Source

Microsoft‟s entertainment division, which includes the Xbox, posted a 45
percent sales gain to $8.91 billion in the fiscal year that ended in June
2011. The Xbox 360 outsold Nintendo Co. (7974)‟s Wii and Sony Corp.
(6758)‟s PlayStation 3 in 2011, and also sold better than any other TV-
connected devices, including DVD players and home-theater systems

Weaknesses of Microsoft Xbox
 Xbox Live! service requires broadband-access, but majority of European/Asian households are
not yet broadband-ready.

 Initially (2001), Microsoft focused more on Japan market that was already hitting lows because
of boom in cellphone industry that delayed the launces in Europe.

 Microsoft launched XBOX an year after Sony‟s playstation2 & lost a golden opportunity to beat
the competiation. By the time the competition arrived, Sony launched a number of improved
titles including Gran Turismo 3

 Microsoft could not retain the talent and its key founder left the company early.

 Lack of broadband-access will not enable future revenues streams as Microsoft expects

 Subscription of Xbox Live! requires gamers to provide credit card details which primarily adults
can afford. Some (children,…) can not afford a credit card.

 In Europe, €60 per annum or €6 per month for use of Xbox Live! Platform is little expensive.
Moreover, subscription is automatically renewed and credit card user is automatically charged
without permission that leads to user‟s distress

Data Sources

 http://www.video-games-survey.com/
 http://forum.pcvsconsole.com/ •http://www.xbox.com
 http://www.wikipedia.com
 Principles & Practice of Marketing by David Jobber


Thank you

Group # 7
Roll #s Name
12PT1-092 Veeresh Srivastava
12PT1-093 Vikas Phalaswal
12PT1-094 Vikram Dhawan
12PT1-095 Vineet Sachdeva
12PT1-096 Vipul Kumar
A09PT2-098 Amit Makhija

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Microsoft xbox live

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