Xbox: Marketing Audit

Marketing Audit Approach: Microsoft Xbox 360

Company Description

Microsoft is motivated and inspired every day by how our customers use our software to find creative solutions to business problems, develop breakthrough ideas, and stay connected to what's most important to them (Microsoft Corporation, 2006). Microsoft is in various technological areas (computers, IT programs, IT Solutions, and gaming systems). This Marketing audit will focus on the Microsoft Xbox 360.

Currently, Microsoft has three goals for the Xbox 360:

1. Gain a considerable portion of the rapidly growing video gaming market. Microsoft's core PC software businesses have slowed, so moving into a fast-growing and sizable market is very attractive to the company.

2. Microsoft would like to diversify beyond PCs by attracting consumer home entertainment spending.

3. Microsoft's reputation has suffered considerably over the last few years as a result of the litigation surrounding its Windows monopoly. The company hopes Xbox 360 will combat the impression it is not innovative and well change the public's view of the company (http://www.xb360info.com).

Porters 5 Forces

Target Audience

Microsoft has multiple targets for the product. Mossberg and Boehert (2005) reported that Microsoft is attempting to attract dedicated male gamers by offering "...the most powerful computer ever sold specifically for gaming". Additionally, Microsoft has opted to expound upon Nintendo's strategy of broadening the appeal of consoles to nontraditional demographics. Specifically, Microsoft is targeting single women, and women who live with male gamers by incorporating multimedia features. Not only can it play DVDs and CDs, but it can also play media stored on its own hard disk, the hard disk of another computer accessible over a network, or an iPod when it is plugged in.

Product Marketing Plan An interesting decision Microsoft has made is to offer two versions of Xbox 360 at the time of initial release. The $300 Core System is more like a traditional console with wired controllers and no hard drive, making it unable to play original Xbox games. The higher-end $400 version includes a wireless controller, a headset, a remote control, and connection cables. The Core System has the same price as the original Xbox at the time of its initial release, whereas the $400 version hits a new price point for gaming consoles. Additionally, the Xbox consoles will have interchangeable face plates, which will allow one to personalize his or her console, for example, a single woman may prefer to look at a pink Xbox console, as opposed to the traditional silver. Both packages provide the user with everything needed to begin playing right out of the box, but the Premium Pack is geared towards a more serious gamer, including cables to connect to a high-definition display and the hard drive to play older games as well as to store pictures, video, and music. An analyst indicates that Microsoft will lose at least $126 for each Premium Pack sold. The company's goal is to make a profit on software titles, royalties, and Xbox Live subscriptions. Selling more consoles creates more developer interest in developing games, which in turn encourages more demand for consoles and creates licensing revenue for Microsoft (Mossberg & Boehret, 2005, p.2).

Competitors (Sony, Nintendo, PC'S) Microsoft's competitors limit the company in terms of both price and performance. Therefore, Microsoft must provide a console that provides customers a gaming experience that is at least as good as its competitors at a price that they are willing to pay. Managing the price/performance ratio is critical to ensuring success. Sony's PlayStation 2 was much less powerful than the original Xbox; therefore, Sony has greatly increased the capabilities of its forthcoming PlayStation 3. Microsoft needed to offer a similarly compelling platform even though it was coming to market six months sooner. Microsoft also has to provide a good reason for customers to prefer a specialized console over using a computer. Providing connections to the latest televisions and specialized controllers, along with unique technical capabilities, provide a gaming experience that many view as superior to that provided by PCs. Microsoft has benefited from its competitors' establishment of the video gaming market and the growing acceptance of video gaming as a leisure activity worldwide.

External Environment Many external environmental trends are affecting the gaming industry and Microsoft specifically. Growth in interest in video gaming and in home theater/multimedia is driving interest in the acquisition of gaming consoles that can also act as multimedia hubs. Concerns about violence and sexual content in games are creating the threat of regulation. Continued advances in technology and decreases in hardware costs make it possible for each generation of console to provide an even better experience. However, the rapid changes also make it easy to make a mistake when planning the next generation of consoles, resulting in disastrous loss of market share (Nintendo being a key example of a former market leader in serious decline). The increase in consumer demand and the need to manage technological change are both extremely important influences. It is unclear whether or not regulation will play an important role, however newly proposed federal legislation may become important.

Information/Data Sources This writer will utilize the following information and data resources in conducting the Microsoft Xbox 360 Market Audit: This auditor will begin researching Microsoft's existing information such as annual reports, information from marketing reports, consumer responses to prior marketing attempts, and the media reports. Managers will discuss their responsibility areas in depth; many questions are asked of several managers to elicit different perspectives. All interview data will be confidential. This will allow the audit team to continually draw upon the manager's experience to probe the consistency, appropriateness, and sufficiency of the firm's marketing plans and actions. After initial interviews, this auditor will conduct a library search for independent published material on the firm, competition, and industry. Secondly, this auditor will become familiar with the sales force and customer buying behavior by making joint customer calls. Through