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The Xbox

The Xbox is a sixth-generation video game console manufactured by Microsoft (Anderson 2009). It was released in North America in 2001; Japan, Australia and Europe in 2002. Its main competitors at the time of its launch were PlayStation 2 by Sony, Dreamcast by Sega, and GameCube by Nintendo. People were impressed with the technology of the console, when Bill Gates, the then-CEO of Microsoft, unveiled the Xbox at the Game Developers Conference in 2000. The Halo: Combat Evolved, which was the product’s launch title, proved effective in driving sales of the Xbox. Other popular games for the console included: Fuzion Frenzy, Dead or Alive 3, Amped etc.

Despite being new in the video game market, the Xbox managed to beat Dreamcast and GameCube in sales, emerging second, after PlayStation 2. The huge financial backing of Microsoft enabled the Xbox to enter and penetrate the market amidst stiff competition. The Xbox, however, was discontinued in Japan towards the end of 2005, Europe in 2006, and North America at the beginning of 2007 (Anderson 2009). Microsoft launched the Xbox 360 in September 2005 in the U.S., Canada, Europe, and Japan to succeed the Xbox. Afterwards, the launch extended to several other countries, making Xbox 360 the only console to be launched in 36 countries in one year.

The Xbox 360, a 7th generation video game console, permitted Microsoft to differentiate its product from others and push it ahead of the competition. The product offered more than just a gaming experience for home entertainment; the Xbox 360 provided interactive features via the Xbox Live that preceding gaming systems lacked (Blainey 2005). The Xbox Live Service allows users to play video games online and download TV shows, game trailers, music, game demos, as well as movies. It is reported that Microsoft invested more than $2 billion to come up with the product, in an attempt to rival its close competitor, Sony’s PlayStation (Bass 2007). It is important to note that the Xbox 360 is the only console that is compatible with the Gears of War series and Halo; video games that have a huge following worldwide. In fact, it has been reported that a majority of people who purchase the console do so mainly to play these games. As at September 2011, about 57.6 million Xbox 360 consoles had been sold globally (Takahashi 2011). According to the Head of Xbox in the UK and Ireland, Neil Thompson, the foundation laid by the Xbox Live Service, has given the Xbox 360 a competitive advantage over its competitors, which are Sony’s PlayStation 3 and Nintendo’s Wii.

The video game market has been fairing on well despite the 2007-2008 economic recession (Dumitrescu 2008). Having been released a year prior to its competitors, Xbox 360 was the leading console in the market in the first half of 2007, but by September 2007, the Nintendo’s Wii had surpassed it in terms of sales worldwide. However, the launch of Halo 3 had a remarkable impact on Xbox 360’s success, enabling it to double its sales; it sold 3.3 million units in the United States within a period of twelve days. It is estimated that about 2 million Xbox 360 units were sold in Europe in 2006. In 2008, 870,000 copies were sold in Canada, 7 million copies in Europe, 866,160 copies in Japan, and 10 million copies in the U.S. Microsoft termed 2008 as the biggest year in the history of the Xbox 360, with a 25% increase in sales being recorded in comparison to the previous year (Dumitrescu 2008). In 2009, 3.9 million copies of Xbox 360 were sold in the United Kingdom. Microsoft announced on May 28, 2009, that its sales had surpassed the 30 million mark. As at January 2011, more than 50 million Xbox 360 copies had been sold globally (Johnson & Mackenzie 2011). Wii, however, still holds the world’s leading position in terms of cumulative sales.

Brand Data/ Info

The Xbox 360 is an improved version of the original Xbox with increased capabilities and functionalities. The Xbox 360 is slimmer and quieter when compared to the original Xbox. Its features include an 802.11 b/g/n Wi-Fi connectivity, 5 USB ports (2 in front and 3 on the back), a digital audio port that accepts TOSLINK S/PDIF, wireless controller, and 250GB hard drive (Takahashi 2008). The console also features the Xbox Live Service that allows users to play video games online, as well as to download TV shows, music, movies, videos etc. The Xbox Live Marketplace, which is a virtual market for the console, allows users of the Xbox Live to download contents they have purchased such as game trailers and demos, and movies to the system (Takahashi 2008). The Xbox 360 is certainly bound to change the gaming experience of numerous enthusiasts of video games all over the world.

The Consumer

The target markets for the Xbox 360 are consumers between the age of 18 and 25 years in the UK. The console has been doing well in most parts of the world including the UK, and, therefore, winning the hearts of youths in the UK should not be a problem for Microsoft, owing to the fact that the new model of Xbox has enhanced functionalities and potentials (Wonko & Google Answers 2005). The youth, who are the target market for this product, are very knowledgeable in technological matters such as computers, internet, video games etc, and they also love entertainment. Since the Xbox 360 offers a lot more to home entertainment than just video gaming, it is highly likely that the reception of the product in the UK will be great.

By reaching out to both male and female youths between the age of 18 and 25 years in the UK, Microsoft aims at taking advantage of the rapidly growing video gaming market in the UK to increase its market share. Since video gaming has been a male-dominated area, Microsoft has incorporated multimedia features in the Xbox 360 to reach out to female consumers. Not only can the system play DVDs and CDs, but also media stored on its hard disk, as well as the hard disk of another PC reachable over a network (Waterhouse 2007). With the wide variety of options for home entertainment, youths in the UK are bound to enjoy this Christmas holidays.

Competition Info/ Data

There is a very stiff competition in the video gaming industry, especially among the three main players i.e. Microsoft, Sony, and Nintendo (Wonko 2005). In order to create the competitive advantage for its product, Microsoft improved the Xbox by coming up with the Xbox 360, which has given players a whole new gaming experience due its increased capabilities. The new version has a doubled bandwidth and eight times the memory of the original Xbox. Besides, the CPU of the Xbox 360 has a processing power that is ten times more than in the original Xbox. These enhanced features have increased customer base for the product, as more and more new customers are attracted to buy the system.

The Xbox Live Service, a feature of the Xbox 360, allows users to play games online, purchase add-ons to games, as well as stream the media. Microsoft has somehow locked its customers. The fact that the Xbox 360 is the only console that is compatible with the Gears of War series and Halo, compels customers who have purchased the console to purchase the games too in order to get value for their money; a strategy that has tremendously increased the sales of Microsoft (Wonko 2005).

In order to beat its competitors, Microsoft adopted the approach of focusing on video games, as well as differentiating its product from others in the market. The Xbox is categorized under focus, since it deals only with a single section of the technology (the video game industry), and is under differentiation, since Microsoft has provided a specified product with a variety of outstanding features, for instance, the Xbox Live, which allows online gaming; a system which is unmatched by other available services. The Xbox Live is solely designed to operate on Xbox systems. The functionality and potential of the broadband network also supersedes those of Xbox 360’s competitors (Waterhouse 2007).

Major Trends

The video game industry has experienced a massive growth in the past and is continuing to expand attracting more customers. Market competition is stiff especially among the three key players: Microsoft, Sony and Nintendo, as well as other players in the industry. As a result, the prices for video games and video game systems have decreased, while quality has increased, as different companies try to outsmart one another (Stiles 2005). While the United States has remained the leading market for video games, there is an explosive growth being witnessed in China, as well as other countries like Brazil and India. However, the sales of video games in Japan have significantly reduced over the years, perhaps due to its aging population.

Consumer Behavior

Consumer behavior is the study of persons, groups, and organizations, as well as the actions they take regarding how they make decisions about purchasing different goods and services (Steel 2005). Understanding consumer behavior enables marketers to formulate marketing strategies that will increase sales and brand loyalty. Successful marketing requires the understanding of the factors that influence consumers to purchase a product or reject it in favor of another option. Self-image, for instance, is a major influence on consumer behavior; people who desire admiration so as to feel good about themselves, will go an extra mile to purchase the latest trend of clothes, car, etc. in order to be validated by others. Social pressure is also another factor; people who yearn to fit in a certain social class are motivated to buy specific brands as the other members of the same social class. Research shows that companies that focus on meeting the needs of a single group of consumers tend to be successful; after all, a single firm cannot meet the needs of all people. By focusing on video games, Microsoft has managed to target a specific need of the consumers that is home entertainment. The youths, who are our target consumers, are most likely influenced by peer pressure or social pressure; as a result, they will strive to purchase the Xbox 360 because their friends also have them. In addition, interest has also greatly influenced their purchasing behavior; the need to know more about the new Xbox 360 and experience its benefits is likely to compel them to purchase the product.

Segmentation, Targeting and Positioning

Segmentation refers to the determination of the kinds of consumers existing in the market and their various needs. Consumers can be segmented based on demographics (income, education, gender, location etc), lifestyle, behavior (i.e. brand loyalty), benefits sought etc. The target consumers for Xbox 360 will be segmented based on gender; male gamers and female gamers. That is why Microsoft has incorporated various multimedia features in the Xbox 360 to cater for the needs of both male and female consumers.

Targeting refers to the identification and focusing on a particular market segment that is considered to generate the most sales of the products of a company. In targeting a particular market segment, a firm should be aware of the needs of the consumers, and how well the existing firms are serving those needs. It can be very difficult to appeal to a market segment that is getting the services they need (O’Rourke 2007). Therefore, targeting a market segment whose needs are not met is vital. Microsoft’s target is young consumers between the age of 18 and 25 years in the UK, and it is providing them with a whole new experience of video gaming, making their home entertainment more enjoyable.

Positioning refers to the location that a product or service occupies in the customer’s perceptual map of the market, alongside its main competitors. Currently, Nintendo’s Wii has a leading position in the minds of customers worldwide, followed by Xbox 360, and then Sony’s PlayStation 3. All the three processes, which are segmentation, targeting, and positioning, are part of the value creation and addition process for consumers. Value creation for consumers is achieved through excellent customer relations and service, provision of high quality prices at reasonable prices, delivery of products on time, etc (O’Rourke 2007).

A perceptual map is a visual illustration of a product within a specified market showing its position in comparison to its competitors (Welsh 2008). The following perceptual maps show how Microsoft’s Xbox 360 is positioned in the UK market based on Quality vs. Price, and Brand Reputation vs. Consumer Loyalty. Figure 1 shows that the Xbox 360 has the highest quality among the three products, yet it has the lowest price. Figure 2 show that Microsoft, the producer of Xbox 360, seconds Sony in terms of the number of loyal customers it has because of the company’s reputation.

Marketing Mix

This is a term that refers to the different fundamental marketing elements that must be effectively blended to form a good marketing campaign for a product or a service. The various elements of marketing mix are discussed below.

A product is the outcome of the manufacturing process that is sold to the consumers to satisfy their needs or wants. My product is Microsoft’s Xbox 360; a video game console, with enhanced capabilities. The console not only permits users to play video games, but also to video chat, listen to music, as well as media streaming and downloading purchased videos and TV shows.

Price strategy

Price strategy refers to setting prices that are aimed at attracting the target market, and increasing profits. The relatively lower price of Xbox 360 of $299 as opposed to Sony’s PlayStation 3, which is charged at $499, has given it a competitive advantage over its competitors (Robbins 2005).

Place strategy refers to developing effective ways of handling and storing finished goods, as well as delivering them efficiently to the target market (Underdahl 2002). Microsoft has a quick distribution network that makes available its products in any part of the world at any time. The Xbox 360 will mainly be distributed through Microsoft’s online stores and sales agents.

Promotion strategy refers to selecting the proper mix of advertising, PR, sales promotion, individual selling, etc., that will ensure that maximum level of communication with the target market is achieved (Underdahl 2002). Microsoft will promote its product via its website, digital billboards, TV and newspaper ads, PR, as well as the social media i.e. Twitter, ‘Facebook, YouTube etc.

This refers to the act of putting a firm’s workforce first. People strategy is the basis of an organization’s culture; it defines company as a whole and its values. People are the most important assets of a company. Microsoft has demonstrated that it values its human resource through provision of good remuneration, staff development, and treatment of employees with respect among others.

This refers to the decisions made to manage processes of a company with the aim of attaining competitive advantage (Thorsen & GameSpot 2008). Microsoft’s decision to enhance the features of the original Xbox, amidst numerous customer complaints and declining sales, enabled it to come up with the Xbox 360, which has been successful in the market.

This refers to the material component of a good or a service (Thorsen & GameSpot 2008). Examples include packaging, brochures, paperwork i.e. tickets, invoices, etc. The Xbox 360 is packaged in a matte black box.

Promotion strategy discussed in detail

There are various ways of promoting a product, for instance, through social networks, the media (TV and Newspapers), public relations, billboards, etc. (Leopold 2004). Since the target market for the Xbox 360 are consumers between the age of 18 and 25 years, the main means of promotion will be the social media i.e. Facebook, Twitter, and YouTube, since a majority of youths use these social services. In addition, the digital billboard will be used to reach young consumers who are travelling or walking by the roadside. The TV and newspaper ads will target consumers who love watching the television as well as reading the newspaper. Public relations are also very important; the image that the public has about Microsoft will greatly determine the success or failure of the Xbox 360 in the UK market. Therefore, Microsoft will employ the services of PR professionals to market its product. All these methods of promotion will enable Microsoft to promote its product to a large number of its target market.

In order to find out how the Xbox 360 will perform in the UK market, I did a secondary research on its pros and cons. According to Mossberg & Boehret (2005), the Xbox 360 is slim and stylish, cheaper than Sony’s PlayStation 3 ($299 and $499 respectively), has the best graphics, and permits downloading of purchased movies and TV shows to the machine. It also allows online video gaming, is very clear when playing, has five USB ports, and also has built-in Wi-Fi receiver. However, the disadvantages are that the loud clear noise of the system may be annoying, especially when one is playing a DVD movie on the system. Its newer games are hard to play, hence may not interest somebody who is not into hardcore games, and the power source of the Xbox 360 is also very heavy (Robbins 2005).

Primary Research

To verify the claims above, I interviewed three students from my campus who own the Xbox 360, asking them their opinion concerning the product, and these were their comments:

Zhou: The Xbox 360 is small and sexy, has awesome graphics and has very clear sound. However, the power brick is very heavy.

Clair: The console has varied features which are awesome, and the graphics are top quality. You can voice chat with any person, while doing anything like watching a movie or listening to music. The price is also reasonable, I love this system.

Brian: It has a lot of interactive features from the Xbox Live Arcade to Xbox Live Marketplace, and its price is low considering everything it has. However, the system can overheat very easily, if it is not properly ventilated.

Microsoft’s Xbox 360 is certainly revolutionizing the video gaming industry with its wide variety of features (Salvator 2011). Both the findings of the primary and secondary research have confirmed that the consumers love the Xbox 360 for its small size, varied features, clear sound, and fairly low price. However, the heavy power source and the loud noise are the main problems to most users. Microsoft should take these complaints seriously and make the necessary adjustments, in order to provide their consumers with the best quality product. This way, penetrating the UK market will not be a problem.