Xbox canada - marketing

Title of the case: MICROSOFT CANADA – MARKETING BOX

Section: B

Date: 21/12/2009

1- A first approach…

* The market for video game consoles is in the home entertainment industry; its products have a short life cycle, and time is crucial factor to the success of a product (short term);
* The launch of the Xbox during the month of November 2001 is a success on a global scale,with about 4 million consoles sold in just 8 months, despite initial expectations of Microsoft's estimated 6 million in sales volume. Even so, the objectives enabled Xbox to reach a market share of 27%, behind Sony's Playstation 2 (56%), and pushed Nintendo to third place (17%) in the Canadian market, making it a peripheral competitor.
* Other features essential for the sector of "homeentertainment" in Canada:
* four different groups in this segment:
* game developers, in-house software publishers and "third-party” software developers; third-party software developers produce most of the games and prefer to produce for the market leader, the PS2, due to limited financial resources they have; the existence of "first-party software developers is a feature of the Xbox,allowing to have exclusivity in some games;
* console manufacturers: Sony [its latest console was launched during the summer of 2000, PS2 had some competitive advantages that allowed to rapidly reach the market leader position: the fact that Sony games from previous consoles could also be played in PS2, its CD / DVD capabilities, the fact that was the first manufacturer to launch a “nextgeneration” console (taking therefore benefits as being the first entrant in the market) and the large game catalogue (PS1 and PS2 games) are some of the key factors that are responsible for Sony PS2 success; Philosophy - "game is entertainment"]; Nintendo [the GameCube console is the cheapest console on the market, with small controllers and video game characters that differentiates GameCube fromthe other competitors; Philosophy – “game is a toy”].
* Retailers; the retail market in Canada is restricted, where two large groups are distinguished: dominant mass merchandisers and chain stores, it is also relevant the existence of rental companies like Blockbuster;
* consumers.

Market Analysis and Market Research / Segmentation / Consumer behavior:

Xbox and PS2consoles are targeted to the same segment: their main target is composed of males aged 18-24 years old, who are finishing school or entering college or the job market. According to the exhibits provided, these consumers consume firstly clothes and technical goods and in general they tend to spend more money for them and for their equipments.
Nintendo's GameCube is targeted to the younger consumer,the 8-12 year old video game play. It is relevant to refer that is not considered Xbox’s main competitor, as it covers a different segment.

Microsoft conducted focus groups with all the sector intervenients (consumers, developers and retailers) to show evidence of the superior characteristics of the Xbox console and to gain insights and familiarity for later investigation (i.e. what should bethe ideal marketing program?).
After collecting and compiling the qualitative data from this exploratory research, Mugford discovered that 4 categories existed among gamers: committed individuals, wanabees, fun seekers and time killers.
Each of these categories look for something in particular in video games, but every gamer is linked by a “rule“ that says that gamers are not loyal to a consolebut to a video game; therefore the success of the console is not in the hardware but in the games.

Product

The Xbox is the best and most technologically advanced console on the market. It comes with a 8G hard drive, where users can store information, a graphics processor (developed by partner and industry leader Nvidia, and built-in Dolby Surround). Its technology is far superior to the...