Xbox owned and designed by Microsoft Corporation is their first endeavor in the gaming industry.
It was seen that there was a lot of potential in the video game market therefore Microsoft wanted to enter this part of the industry, also because they wanted to diversify their portfolio as there concentration was mainly on software’s alone. They wanted to come up with a game console design that was superior to all other competitors in the market. At the time of the launch of Xbox there were already tough competitors existing in the market and the intensity of the rivalry was very high there fore the company had to dedicate large sums of money, time and effort in order to launch this new innovation in the gaming industry.There were other substitutes available to the gaming industry such as PC’s and other games.
Since the market was doing well there was a risk of other potential entrants into the market. However among the gaming experts that were already established in the market were Sony that was leading the market with its expensive playstation2 (PS2) followed by the reasonably priced family entertainment, Nintendo’s game cube. Xbox was launched in 2001 in North America first, followed by Japan, Europe and Australia. Before the launch of the product itself the company spent extensive team on the research and analysis of the Xbox in order to understand their target market in a better way. Moreover the customers were at a better bargaining state as they choose their console based on the game proposal as they had information about the market.
There were many challenges that the company had to face before the launch in Canada. Mugford was responsible for the marketing of Xbox in Canada.The industry trend in the gaming industry was that they took the marketing support from the third party publishers or the console manufactures. But in Canada there was not too many resources available related to this compared to US. Unlike the United States Canada provided only 30% of the advertisements through third party publishers and Microsoft had to work them selves in order to promote Xbox and they wanted to maximize consumer purchases and for that they needed an effective promotional campaign. Third party console publishers would prefer to work with successful game developers.Secondly Mugford had to establish relationships with the promotional partners that would have supported and helped in the building the brand, however it was Mugford’s challenge to see that none of the partnerships in the Canadian market clash with the one in US.
Advertising expense was high in Canada relative to the United States. The company had a budget of Cdn$12million for the marketing of the brand. From this amount there were $6.
965 million that were assigned for the advertising for Xbox. However there were a lot of challenges that the Xbox Canada had to face during the advertising of their brand. At the time of Xbox’s launch in Canada Sony had already allocated a huge amount for the advertising, more than Xbox because they had a larger install base. Xbox wanted to reach global markets therefore they adopted the traditional approach of advertising in order to market their brand.Given the budget constraints Mugford had to market the brand. He wanted to use the US based advertising in Canada too in order to reach the target market, which is why he bought MTV media awards which are supposed to be the biggest media event of Canada.
Mugford had to play the ad for Xbox within three weeks of launch. There was less time and too many restrictions on making this ad. However Mugford hired an ad agency which was given the responsibility of making the ad.After the analysis it was seen that the gaming experts used the internet for the information about the games. But Mugford didn’t have resources to launch the Xbox Canadian website, he eventually made one but the site didn’t have Canadian content.The Canadian retailers preferred having a direct contact with Taylor for distribution purposes rather than the new sales associates.
However he was worried because Xbox Canada didn’t have enough resources to set up a direct distribution channel at that point in time.Another challenge that Taylor who was responsible for the distribution of the consoles had to distribute the consoles to the 700 retailers in Canada n that too at a short period of time. Not that the distribution was a problem there were other problems that were associated to it. The products that were distributed in Canada to the entire major retailers they had to fulfill other requirements too which were such as packaging requirements that included French language in order to cater to the French population in Canada.
This increased the cost relative to the US market. Taylor hired three distributors to undertake this task.Taylor had to improve relationships with the retailers in the mean time as well as the game developers. At the launch Microsoft had limited consoles available for sale. But they had to convince the retailers and the gaming experts that their product will give them quality unlike the Sega claim at that time about its promises that eventually failed.
Xbox was priced higher than the Sony and Nintendo. This initially did have an impact on the sales as it didn’t make Xbox the leader in the market. However later the prices were reduced in order to boost the sales for the brand.The public relations planning were another challenge faced by Microsoft. It was becoming difficult to launch the video games on time and meet the dates and thus plans things accordingly Xbox was a new brand in the market. The company wanted to reinforce the brands image of Xbox .there was various ways the company could do this. They took part in major media events.
They wanted to promote the different games of Xbox .they wanted to increase the market share of Xbox. The company had clear marketing objectives. They wanted to improve the relations with the retailers and game developers; this was done spending a major portion of their budget on the advertising of the brand. They had a limited budget allocated by Microsoft and they had to plan their strategy according to that.They had a planned marketing mix which comprised of the 4p’s of product, price, place and promotion. They wanted to maintain the price o $299 Canadian dollar.
This included many things such as increasing the shelf space for Xbox, sponsoring various events, and a commission system for the sales team to increase the sales and the workers motivation.They had a proper research plan that was focused on getting to know the target market. This would have made it easier to promote the product and the brand. They came to know the different kinds of customers who are going to buy the product, the gaming experts were the actual people the company wanted to buy the product.They organized a developer tour in which they promoted four of the Xbox’s games .at the launch time the product was supplied to all the stores across the country.
Moreover in order to reach his target market .he even derived his marketing campaign in the 80% universities of Canada. He even used print media to inform the students about Xbox.A very attractive part of the marketing was an Xbox bus that was suppose to drive all over Canada.
This was an ideal way to target the customers that Xbox wanted to. The bus had all types of Xbox games and equipment. It brought excitement among customers. It was to encourage people to buy video games console.
Mugford’s public relations efforts were to strengthen the brand. Those people were hired who were enthusiastic and knew about the work.Microsoft had to come across various distribution challenges in all this process.
When Microsoft realized that the price they are charging is not giving value to the customers, which are what the customers perceived about the brand. They started to work on that. It lowered its price and came second in the market.
The Xbox strategy was focused and clear. Microsoft was clear about their target and based on that they were making their financial and marketing strategies. The promotional campaign, the launch and the distribution was all based on that. They hired the right kind of people who would do the work such as Mugford and Taylor who gelled well with the entire plan. The launch was planned and implemented across Canada.The market in year2/year3 situation is changing. In year 2 there was a positive growth rate of Xbox in the market. Xbox became the next generation console .
the market share fr the Xbox reached a 24%.there was a growth of the sales as compared to the previous year of 48%.by this time the next generation video game system came second in the united states, across Canada and Europe and was doing very well. December was the year when the company made the highest sales. In Canada it was selling at a very fast rate.
The sale was increasing.They had a different plan for year 2 marketing. They wanted to reach the customers and gain long term success and commitment from the customers.
The public relations and journalists were responsible for to promoting the gaming industry by writing about it. Consumers were interested in the gaming industry there was an upward trend on the sales of such game consoles at this time of the year. The advertising cost in Canada was high as compared to the United States.However in the year 2002 it was still continuously showing a positive growth in the market.
During the start of 2002 Sony was dominating the market with the market of 43% while Nintendo had taken the second place with a 30% there was a growing popularity and the sales of the console increased 6%, the demand for the play station 2 fell by 36% in the same year. Nintendo’s game cube fell by 22% but by this time Xbox had already captured around 27% of the gaming industry’s share. There was also an increase in the hardware demand of the Xbox as compared to the other competitor’s brand of Sony and Nintendo their market share fell by 58% in the same period. With the growing success of the Xbox Microsoft had plans to launch it at other places too such as Korea, Austria m Denmark, Finland and Switzerland. Microsoft had 50 action packed Xbox game which was part of the popular Xbox live. This many number of games online were more than many competitors.
Mugford was concerned that the brand did not come on the second position however the amount of success and sales the brand got considering the amount of finance and resources that was available to him it was good enough and they were confident that very soon the brand is going to grow big in the future and the sales will increase. But Microsoft had to work on this in order to maintain this position because Sony was also doing well and they during the next holiday season and that would give a tough competition.Microsoft was assigned a budget for the implementation of the plan.
the amount of finance available is very important because all your marketing decisions which include planning for the advertising, promotions, sales , launch , paying the workers, the production and distribution is based on that The working strategy, everything is interconnected. The more finance one has then you can choose to spend on them. As is the case here the marketing budget is restricted for Xbox.Therefore the advertising plans and promotions are based on the amount of budget. Based on the finance there are various advertising and branding techniques are implemented such as print media and other means of promotion such as Xbox bus and the event marketing. There are events on campus that Microsoft sponsors such as sporting events of football , hockey and basketball, music bands and performance of bands. Mugford was given cdn$12 million for the launch of Xbox in Canada. and then it was based on this overall marketing expenditure that Mugford decided to allocate a share of Cdn$6.
965 for the advertising .the advertising cost in Canada was more as compared to the united states and this was a challenge for Mugford such things tend to have an impact on the over all strategy for the business and the product.When he wanted to create a Canadian website he didn’t have the resources to do this. Your financial implications also tend to have an effect on the kind of workers you are going to hire. When you don’t have enough finance to pay and hire truly enthusiastic people in your team then your product will not do well.
The retailers wanted a direct relationship with Taylor which was not possible because he didn’t have enough resources to create a direct communication channel. Moreover the company had to bear the cost of packaging and labeling more because in Canada the packaging also required everything to be written in French and that of course added to the cost. Taylor hired extra sales representatives in his team because he wanted qualified team of workers to help him with the sales. The financial implications tend to affect the goals of the brand.