XXXXX Marc
XXXXXXXX Julien
TOHME Rami
XXXXXXX Amélie
University of Hull
Marketing planning case study
Xbox marketing plan proposal
for second year in Canada
1
Table of Contents
1.0 Executive Summary...................................................................... 1
2.0 Situation Analysis ........................................................................ 6
2.1 Market Summary ......................................................................... 6
2.2 SWOT Analysis .......................................................................... 10
2.2.1 Strengths and weaknesses ......................................................... 10
2.2.2 Opportunities and threats ......................................................... 11
2.3 Competition ............................................................................. 12
2.4 Product Offering........................................................................ 16
2.5 Keys to Success ......................................................................... 17
2.6 Critical Issues ........................................................................... 18
3.0 Marketing Strategy ..................................................................... 19
3.1 Mission.................................................................................... 19
3.2 Marketing Objectives .................................................................. 19
3.3 Financial Objectives ................................................................... 19
3.4 Target Markets.......................................................................... 19
3.5 Positioning............................................................................... 21
3.6 Strategy .................................................................................. 21
3.7 Marketing Mix ........................................................................... 22
3.8 Marketing Research .................................................................... 24
4.0 Financials ................................................................................ 25
4.1 Sales Forecast........................................................................... 25
4.2 Expense Forecast ...................................................................... 26
5.0 Controls .................................................................................. 27
5.1 Implementation......................................................................... 27
5.2 Marketing Organization ............................................................... 28
5.3 Contingency Planning ................................................................. 29
Conclusion
30
Appendices
31
2
1.0 Executive Summary
In this marketing study we have to prepare a marketing plan for the second year of the Xbox
console in Canada. This study and our recommendations are intended to the Canadian Xbox
Marketing Team.
Xbox is a revolutionary video console with incredible multimedia capabilities, in particular by
its online mode: Xbox Live. Technically, the Xbox is the best console but Sony keeps the first
place in terms of market share.
The main challenge: close the market gap between Xbox and industry leader PS2
In June 2002, the Xbox is 8 months old, and its launch is a success in the whole world with
3.9 million consoles sold, but Microsoft and Bill Gates expected 6 million Xbox to be sold.
However, the Xbox is a real success in North America with an incredible start in the United
States and in Canada. Between the 15th November 2001, launch date of the console, and the
end of December, it has been sold in 5 weeks about 1.5 million of Xbox. In three months the
Xbox permitted Microsoft to realize US$ 7.5 billion turnover and US$ 2.5 billion of benefits.
This performance eclipsed the second competitor Nintendo with its GameCube which was
launched just before the Xbox.
Nevertheless, Sony‘s PlayStation 2 is still the first in the Canadian market of the video
consoles with 56% of market share; the Xbox is second with 27% (April 2002) and Nintendo
third with a market share of 17%.
How are we going to close the gap?
First we have to describe and determine the Canadian market in his whole environment.
With more than 30 millions of inhabitants and 11, 9 millions of households, Canada is not a
very important market on the point of view of figures but many facts need to be taken into
account in this marketing plan. More than 80% of Canadians are linked to the internet. The
possession rate of video games console on the Canadian market increased for many years, this
1
phenomenon is regular and stable since 1998 so in 2002 more than 21% of Canadian
households are equipped with a video console. Moreover the consumer expenditure on leisure
and recreation increased of almost 19% between 1998 and 2003. The Canadian video game
industry has seen a 42% growth since the launch of Xbox, from Cdn$402 million to Cdn$570
million, and the market is anticipated to grow to Cdn$1 billion in the next calendar year. All
these trends of the Canadian market are good opportunities on for Xbox in this country,
because it is its first market (market share in June raised 30.1%).
Xbox and PS2 target the same population: Main target is composed of males aged 18 to 24
years old.
We decided to enlarge our global target to the Canadian males aged between 16 and 34 so our
market is now composed of 4.3 million of customers. Our new second target is composed of
the Canadian males aged between 15 and 18, and between 25 and 34. We extended our
second target because we decided to take into account those who discovered in the 1980s the
video game revolution and who can still be interested in video games. They have a reasonable
level of disposable income available and they are likely to be in or just leaving the education
system.
Every gamer looks for great graphics, overall value, best controls, fast loading times, ability
to store and save games constantly, and great sound performance. There are 4 different
categories of gamers: Committed individuals, Wanabees, Fun seekers, Time killers.
Each of these categories look for something particular in video games but every gamer is
linked by the same “law”: gamers are not loyal to a console, they are loyal to a video game;
thus the success of the console is not in the hardware but in the games.
Two other next generation consoles compete with us in the home video game market:
PlayStation 2 of Sony and GameCube of Nintendo.
GameCube targets younger people, aged between 8 and 12. But this growing target is our
future main target and it can already be interested in the Xbox. Anyhow the GameCube
market share declined the last four months, going from 30% in January to 17% in April.
Unfortunately it seems that, for the moment, PS2 profited the most of the GameCube decline.
2
The PS2 has been launched a year before the Xbox and is very well settled. In April 2002, its
market share reached 56%. It has a very good brand image thanks to its large range of games
and to its big advertising budget. Nevertheless, PS2’s quality is much lower than Xbox’s.
Xbox is technically the best “next generation” console. It includes a hard drive in which
users can stock videos, games and music, a powerful graphic processor developed by the
sector leader Nvidia, an integrated Dolby Surround sound system, DVD capabilities, and a
slot for an internet access. The Xbox also let the user play with three other friends on the same
game thanks to the four controller plugs. This capacity of the Xbox to be global and the
network developed by Microsoft with “Xbox live” could be a real strength face to PS2.
The success of our console depends of three key factors: games, retailers, and game
publishers.
The success of a console depends overall on the games designed to work on it. “A hit can
drive millions of gamers to buy a new hardware” (James Lin, analyst at Jeffries & Co.). That
is why relationships with the third-party game publishers are vital and must be fructuous.
These game developers are very powerful since they know how much important they are for
console manufacturers, and they decide for which console they want to produce games. One
of the major challenges is indeed to make them prefer producing games for the Xbox instead
of the PS2. Xbox has an advantage, because it is easier to design games for it, but game
publishers also consider how much the console manufacturer will take part into the
advertising campaign of the third-party game. Our plan recommends that we finance 70% of
third-party game advertising in Canada.
Retailers, at the other side of the channel, also play a major role. They can choose a console
to push. In most cases, the shelving space for the PS2 is 12 feet and the one of Xbox is only 4
feet. Consequently we have to work on it to have our shelving space increased. This goes by
the Xbox sales force, which can leverage the retailers. Our commission system for the sales
force, which is based on the consoles bought by the customers and not on the consoles sold to
the retailers, seems to be very adapted and motivating, since it makes the sales force pay
attention on how the products are placed in the shop, find the best solutions to make the
console the most visible and, by the way, increase the sales. Our marketing plan proposes also
3
to install Xbox for demonstration in some outlets. This will let people see by themselves the
technical superiority of our console.
Another challenge for us is to improve our brand image. We shall consider these different
means to reach this goal:
> Sponsorship of a national Canadian sport event (Ice Hockey)
> Restart “Xbox bus”
> Sponsorship of parties organized in famous pubs with demonstration of Xbox and gift
offering
> TV campaign for Xbox and 1st party games
> Radio campaign
> Magazines campaign
> Posters campaign
> Press campaign
> Xbox.ca website development
For the new marketing plan Microsoft allocated us a budget of Cdn$11 million. Budgeting
details are available in the “Expense forecast” part of this report.
Sales forecast
According to our sales forecast study, three scenarios are possible:
The pessimistic scenario forecasts 801,000 Xbox to be sold and a turnover of
Cdn$215,700,000.
The average scenario forecasts 955,000 Xbox to be sold and a turnover of
Cdn$257,000,000.
The optimistic scenario forecasts 1,100,000 Xbox to be sold and a turnover of
Cdn$298,300,000.
To sum up, the Xbox has got an exceptional base plate to succeed in its final aim to be the
first console on the Canadian market.
Nevertheless Xbox must be careful about the law of gamers: the success is not in the console,
it’s in the games. Today the games are the most important so the third-party software
publishers which are the most important game developers prefer developing games for the
4
market leader, Sony Playstation 2. Xbox has to convince them that its technology is easier
than the one of PS2 in order to conquer the third-party developers to create exclusive “hits”
for Xbox. Furthermore Xbox is not a separate entity of Microsoft: it is hard to create a new
brand image and Microsoft is not really appreciated by gamers so we have to create an Xbox
image without the Microsoft’s shadow.
5
2.0 Situation Analysis
2.1 Market Summary
We want to analyse the market of the video game console (entertainment market) in order to
evaluate the opportunities and the threats that represent this market for the Xbox. We have to
realize a whole evaluation of the market in order to adapt our marketing strategy and to
become the first console of the Canadian market
2.1.1 Market Demographics
Demographics
Canada counts approximately 32 millions inhabitants of which 11,900,000 households.
If we consider only our target:
-
Males aged 16 to 30.
-
They have a reasonable level of disposable income available.
-
They are likely to be in or just leaving the education system.
-
They represent about 3,187, 000 people and about 10% of the Canadian population.
Geographic (Appendices)
Principal cities: Toronto, Montréal, Vancouver, Calgary, Winnipeg, Edmonton, Hamilton,
Regina, Québec, Halifax, Thunder Bay which count more than 60% of the inhabitants.
Canada has a very large land area (9,976,140 square km) and a very small population, which
is unevenly distributed across the country. The main urban centres in Canada are Toronto,
Montreal, Vancouver and Ottawa, which combined are home to 36.5% of the Canadian
population.
Approximately 60% of the Canadian population live in the 25 largest urban centres in the
country.
6
Technological Environment
We know that Xbox is the most powerful video game console of the market. Its technology in
term of pure power exceeds that of its competitors, in particular that of the leader Sony,
thanks to the origin sphere of Microsoft: data processing. However, PCs also constitute a
real threat because of their capacities and their multipurpose use: Internet, work,
entertainment... In 2000, one-in-four Canadians, compared to just one-in-ten Canadians at the
end of 1995, were using the Internet. Xbox has this length in advance on his competitors;
Internet is an undeniable asset for the "on-line" play which gives access to a total dimension
of the play in order to meet players of the whole world.
Household PC Penetration and Internet Usage 1998-2003
PC households online
(% of PC households)
Internet users ('000)
1998
1999
2000
2001
2002
2003
-
-
61,55
71,4
81.26*
91.11*
7500
11000
12700
13500
15526.53*
16336.16*
*Provisional figures. Source: Euromonitor from national statistical offices
Third-party publishers produce the majority of the games. The “hits” are mostly always
produced by third-party developers. Third-party software publishers prefer developing games
for the market leader, Sony Playstation 2. It represents one of the most important matters for
the Xbox Team, so we have to create particular links with this this-party companies in order
to promote the capabilities of our console and create exclusives “hits” for Xbox.
Market Psychographics & Behaviours
Personality: in general, gamers are confident, optimistic, successful and competitive. Above
all, they are not loyal to a console; they are loyal to video games.
Lifestyles:
-
Male users aged between 18-24 years, consume firstly: clothes and technical goods
(music, video...)
-
They spend more money for them and for their equipments: the main target is still
young; we can deduce that most of them are singles.
7
-
Non-users are less sportive than users.
2.1.2 Market Needs
The needs of customers are varied. In general, they look for great graphics, overall value, best
controls, fast loading times, ability to store and save games constantly, and great sound
performance.
2.1.3 Market Trends
Since a few years Canadians spend more and more money in leisure and recreation.
Moreover, Canadians spend approximately 10% of their total consumption in leisure and
recreation. This phenomenon is a real trend and tends to continue in the future years. We
notice a growth of 18.94% of the part of the income of the Canadian for the leisure and
recreation between 1999 and 2003.
Consumer expenditure on leisure and recreation
80000
70000
60000
50000
40000
30000
20000
10000
0
1998 1999
2000 2001
2002* 2003*
Cdn$Million
1998
1999
2000
2001
2002*
2003*
52368
56225
60196
63634
67589
70173
*Provisional figures. Source: Euromonitor from national statistics
The Internet is omnipresent since 10 years; more and more Canadians use it. The table of the
“technological environment” permit to be aware of this evolution. The World Wide Web is a
tool for many aspects and takes each day more and more importance in our lives. An aspect of
the fantastic internet capacity has been immediately found by gamers: the online games.
8
Today this trend is real in the world of the computer games, many “hits” are available to play
online and a majority of new games are developed in order to permit on line play. This
capacity to be global is researched by gamers in order to confront their talent with foreign
gamers. But, this trend is just beginning in the console market; it should become a major
influencer in console choice (more details in the appendices).
Possession rate of video game consoles
(per 100 households)
25
20
15
10
5
0
1998
%
1999
2000
2001
2002*
2003*
1998
1999
2000
2001
2002*
2003*
17,17
18,28
19,22
20,28
21,32
22,35
*Provisional figures.
The possession of video games console on the Canadian market increased for many years, this
phenomenon is regular and stable since 1998.
2.1.4 Market Growth
Canada currently has the highest percentage of Xbox gamers in the world. In fact, according
to the latest independent survey by AC Neilson, the Xbox market share in Canada is 30.1% in
June 2002.
According to AC Neilson, the Canadian video game Industry has seen 42% growth since the
launch of Xbox, from $402 million to $570 million, and the market is anticipated to grow to
$1 billion CDN in the next calendar year.
9
According to Ryan Mugford, forecasts for the expansion of the consoles market are about
51% over the next year.
2.2 SWOT Analysis
2.2.1 Strengths and weaknesses
STRENGTHS
•
Microsoft: the worldwide leader of
WEAKNESSES
•
computer software.
The Microsoft philosophy is not
really defined
•
A computing power advantage
•
Relationships with over 75 software
Microsoft: it is hard to create a new
publishers
brand image
•
•
Xbox has been launched with 15
•
•
Xbox is not a separate entity of
Third-party software publishers (the
games
most important game developers)
Microsoft: financially stable and very
prefer developing games for the
competitive company.
market leader, Sony Playstation 2
•
Relationship with the US team
•
Video game market research (survey
about gamers, define a precise
•
Limited budget allocated to
advertising
•
The most expensive video game
console available on the market
target…)
•
•
Relationships with game experts
•
Good and precise marketing strategy
been with the team for several years:
•
Relationships with partners who have
lack of new idea
capability to promote Xbox brand
•
Specific budget allocated to the
•
Each of Microsoft team member had
Weakness of brand because
assimilated to Microsoft
marketing programs
•
A technically superior product
•
Microsoft worked with market leader
NVidia to co-design its graphic
10
processor.
•
The team knows well Microsoft
policy and the video game market.
Good know-how
•
The Xbox website.
•
Public Relations have been taken into
account
2.2.2 Opportunities and threats
OPPORTUNITIES
-
-
Canada is the first market of the
-
English and French. So it can
market share.
necessary to adapt the games for
Market
trends
in
increase
leisure
since
these 2 languages.
and
several
-
Leader of the market is Sony PS2
years.
with 56% of market share (April
Sales of game consoles increase
2002), in Canada.
constantly since several years: 42%,
-
Video games consumers are not loyal
to a console.
since November 2001. Good
-
Two languages are talked in Canada:
world for Xbox (30.1% in June 2002)
recreation
-
THREATS
perspectives for the next calendar
-
Advertising is expensive in Canada.
(+Cdn$1 billion).
-
Third-party
software
publishers
More than 80% of Canadians are
prefer to work for successful video
connected to internet. The online
game consoles.
game is a real trend and so Xbox has
capacities to connect on-line.
-
Game Cube went to the third place at
the time of the Xbox launch.
-
The technology of Sony is difficult to
work for the game developers.
11
2.3 Competition
Canadian entertainment market
Canadian home entertainment market
Canadian home games market
Canadian home video games market
Cultural events
Cinema
Television
Internet
Board
games
Theatre
PCs
PS2
XBOX
GameCube
Exhibitions
Card
games
Mechanic games
Books and
magazines
DVDs and VHSs
Theme parks
Sport
Music
We work in the Canadian home video games market, which is part of the global entertainment
market.
Competition Analysis of BCG (Boston Consulting Group):
Potential competitor advantage
Source of
numerous
Poor - Low
high
Fragment activities
Activities of
specialisation
competitor
differentiation
limited
Deadlock activities
Activities of volume
It is the volume of production which confers an economic advantage.
12
The following table compares the three consoles and gives rates for each one in terms of
product quality, brand image, financial and advertising resources, partnerships with
manufacturers, relationships with retailers, and range of games. It is primordial to master all
these issues in order to reach our objectives.
XBOX
PS2
GameCube
November 2001
March 2000
November 2001
Manufacturer
Microsoft
Sony
Nintendo
Retail price at launch
Cdn$ 459
Cdn$ 449
Cdn$ 330
Cdn$ 299
Cdn$ 299
Cdn$ 249
-34,86%
-33,41%
−
Target
Males, 18 to 24
Males, 18 to 24
8 to 12
Quality
***
*
**
Image
**
***
**
Financial resources
***
**
*
**
***
**
**
***
*
**
***
*
**
***
*
27%
56%
17%
Main competitor
Peripheral competitor
Releasing date
Retail price on
January 2002
Price evolution
Advertising
resources
Partnerships with
game manufacturers
Relationships with
retailers
Range of games
Market share (spring
2002)
13
Market share comparison and analysis
Market shares of the "next generation" consoles
Sony’s PS2 dominates
Figures of April 2002
the market, followed by
Xbox.
Xbox
27%
GameCube
been launched
has
at the
same moment as Xbox
Gam eCube
17%
and
PlayStation 2
56%
has
the
smallest
market share, but it does
not
target
the
same
population.
Market shares’ evolutions
Sony’s PS2 is our main competitor product, not
PS2 market share evolution
only because it has the biggest market share,
60
but it also targets the same customers.
50
generation” console. Thus it profited from the
first entrant effect. It developed from the
Percentage
Sony was the first manufacturer to launch a “next
40
30
20
beginning good relations with most of game
10
manufacturers and many retailers. Moreover,
0
the PS2 was compatible with all PS1 games, so
%
11/2001
01/2002
04/2002
42
43
56
that PS1 owners could buy the new console
keeping all their old games. That makes them tend to choose the PS2 instead of any other new
console. By the way the PS2 was born with an already dense game catalogue. Their
marketing philosophy is “Game is entertainment”.
14
GameCube market share evolution
Nintendo’s GameCube targets younger people,
aged between 8 and 12. It is not our direct
Percentage
35
30
competitor but their age-growing target can be
25
interested in our console or in the PS2. Their
20
marketing philosophy is “Game is toy”. The
15
10
GameCube is adapted to young people thanks to
5
its smaller controllers; however it has a higher
0
11/2001
%
01/2002
04/2002
30
17
technological level compared to the PS2. In just
four months, GameCube market share declined of
13 points.
Our market share remained stable between
Xbox market share evolution
January and April 2002. Actually the 13 points of
30
market share lost by GameCube have been won
25
56%. We did not profit from the market share
decline of GameCube.
In June 2002, Xbox market share reached 30.1%.
Percentage
exclusively by PS2, raising its market share to
20
15
10
5
0
%
11/2001
01/2002
04/2002
27
27
15
Competitive industry structure: 5 forces of Porter
Potential Entrants
Launch of new video game
console or another computer
software like Apple.
Threat of New
entrants
Suppliers
Third-party
software
publishers
Bargaining
power of
suppliers
Competitor of the video
game console market
Bargaining
power of
buyers
Customers
Choose their
console in function
the games proposal.
Intensity of rivalry
Threat substitutes products or
services
Substitutes
PC & others games (with an
interactive character)
2.4 Product Offering
The Xbox console is an anomalous product because its purchase frequency is weak and its
price is quite high. It is also a sustainable and technical product.
The Xbox console is the technically superior product for home entertainment. It is the most
powerful console and has the better graphic quality. The graphic processor is co-designed by
the market leader Nvidia, so Xbox makes a distinction with its competitors because game
16
developers now have access to a simpler platform allowing powerful games with a better
graphic quality.
Regarding customer needs, our console let them experience new playing sensations thanks to
the very high technological level of the Xbox (733 MHz Pentium III with an included 8Go
hard disk).
Moreover Xbox includes four controllers, which let users play together on the same game.
The internet access capabilities and Xbox Live let people play with friends from all around
the world.
The high quality of the sound system, the reduced loading times, the built-in hard disk and the
DVD capabilities bring people a new experience in video gaming.
2.5 Keys to Success
Good relations with retailers: create favourable financial conditions with retailers in order to
promote the Xbox and increase sales (increasing the space allocated to Xbox in sales outlets,
advertising into sales outlets…)
Strong partnerships with game developers: develop stronger partnerships with game
developers (third-party software publishers). Third-party software publisher are a very
important entity for console manufacturers. Sony is the first who arrived on the market and
consequently, it offers a lot of games. Moreover, Sony’s advertising budget is substantial and
it represents the lesser risk for third-party software publishers. Thus Microsoft must launch
new games for its Xbox.
An adapted communication strategy: communicate about the quality of Xbox and its high
level of technology, in relation to our target needs and our objectives. In the same way,
increase Xbox’s brand image. In fact it is quite contradictory that the Xbox is better than the
PS2 (Sony) in terms of quality and technology but PS2 enjoys a better brand image.
17
2.6 Critical Issues
Because users are firstly attracted by the games and not the consoles, one of the main issues
for Xbox is to increase its partnerships with game developers. Since the PS2 technology is
hard to develop games for, we should attract game developers with our easier technology and
offering them good financial conditions (especially for the advertising).
At the other extremity of the channel, we should act on the sales outlets to increase our
shelving space, which is in average much smaller than Sony’s.
Another important point to deal with is the improvement of our brand image, which is low
compared to PS2, even if our product is technically better.
18
3.0 Marketing Strategy
3.1 Mission
We provide customers with a multipurpose console, which can be considered as the best of
the market, with all its home entertainment capabilities (video games, music, DVD) and its
high level of technology and quality.
3.2 Marketing Objectives
Reinforce the brand image of Xbox showing its superiority.
Promote the games of the Xbox nearby our large target.
To launch the Canadian Xbox website.
Improve relations with game developers and retailers.
Increase our market share of 12 points.
3.3 Financial Objectives
Xbox expect for a turnover of 215,700,000 $ Cdn minimum with 800000
Xbox sold in year 2.
We must respect the budget accorded by Microsoft for marketing: 11 millions
Cdn$.
3.4 Target Markets
Our global target:
-
males
-
16 to 34 years old
19
-
Have a reasonable level of disposable income available and they are likely to be in or
just leaving the education system.
-
Represent about 4,351,000 customers about 15% of the Canadian population
Main target:
-
males
-
18 to 24
-
they are the first choice of Microsoft
Second target:
-
males
-
16 to 18 and 24 to 34
-
They are still in the education system or young workers on the job market. The last
category was this one who discovered during 80’s the NES and the revolution of the
video games.
Third target:
-
The rest of the population (young females...)
Males aged between
18 and 24
Males aged between 15 and
18 and between 24 and 34
Other actual
and potential
customers
The main target is shared in four segments of gamers. This segmentation was done in taking
account of motivation, mode of use, frequency of use, level and beliefs.
20
Committed
Research
Purchase
occasion
Usage
Perception
and beliefs
Wanabees
To improve
To finish the
their level in
hottest game
order to
and to find the
become
best tricks
committees
For a “hit” and
Each
for a console
innovation,
which received
each new game the acceptance
or console
of the
specialists
13h/week and
7-12h/week
more
Game is their
Game is a
world
challenge
Fun seekers
Time killers
Fun,
entertainment
A past time
Games which
permit to play
in 2, 3 or 4
players mode
or on line
3-6h/week
Game is fun
Just for an
excellent game
and which not
require too
much time to
finish
Less than
3h/week
Game is just a
pleasure
3.5 Positioning
Xbox is positioned as a high quality console. It is recommended that we keep our price
slightly more expensive than our competitor’s, because our price must be linked to the
advanced capabilities and the high quality of Xbox.
3.6 Strategy
Porter’s Generic strategies
Industry wide
Single segment
High technologic product – Strategic Advantage
Unique character perceive
Low cost
by customer
Differentiation
Cost leadership
focus
21
Strategy and tactics chosen; programs to implement
STRATEGY:
TACTIC 1:
improve brand
Improve penetration of Xbox
TACTIC 2:
TACTIC 3:
image
act on game
developers
PROGRAMS:
PROGRAMS:
PROGRAMS:
Take part into a
major sport event
Advertising
campaign adapted
to our target
Choose a new
forceful message
Good financial
conditions
70% contribution
of Xbox on game
advertisements
Highlight our
technical
simplicity for them
act on retailers
Advertising in
sales outlets
(demonstrations)
Increase payment
delays
Increase discounts
besides purchase
amount
3.7 Marketing Mix
Product
Xbox has to become a separate entity of Microsoft.
Launch more games (both first-party and third-party games).
Price
We can’t fall Xbox’s price because it could have a negative impact on the customer’s
behaviour. It could devaluate the brand image of the Xbox and lead to a lack of interest of our
target. It is a technically superior product and not a cheaper product.
So, we maintain the sale price, that is to say Cdn$ 299.
Place
Retailers play a major role. They can choose a console to push. In most cases, the shelving
space for the PS2 is 12 feet and the one of Xbox is only 4 feet. Consequently we have to work
22
on it to have our shelving space increased. This goes by the Xbox sales force, which can
leverage the retailers. In order to favour our relationship with the retailers, our commission
system for the sales force, which is based on the consoles bought by the customers and not on
the consoles sold to the retailers, seems to be very adapted and motivating, since it makes the
sales force pay attention on how the products are placed in the shop, find the best solutions to
make the console the most visible and, by the way, increase the sales. Our marketing plan
proposes also to install Xbox for demonstration in some outlets. This will let people see by
themselves the technical superiority of our console.
We could also create a link on internet. The on line sales increase more and more each year
since 5 year. It’s a real opportunity for increasing our sales with the new Xbox internet site. In
order to avoid to Microsoft for creating an on line sales system which would be too expensive
we could create a link which directing customers toward the websites of our nearer retailers.
This solution should be better for Xbox because less expensive, better for retailers because
they recover sales and better for customer because faster than a global system.
Promotion
To launch the owns Xbox Canadian website. The website could include a forum of
discussion for all gamers, a description of the console and the new games which will
be launched (demonstration, trailer…), a line where we can find article of journalist
and their feedback about the Xbox performance. It will be interesting to suggest a line
of mail-order selling with a transfer on the retailer’s website of the city concerning.
The website will be in English but in French too. The graphics will be attractive as the
image of the console.
Advertising on sales outlet (hoarding, animation, to give demonstration…): to show in
order to be seen!
We can launch a special offer for an important occasion like Christmas. We suggest
selling bundles (Xbox + one game + a second controller) in a short period to reach
new customers. (cost detailed in the appendices)
Advertising in specialized press: magazine of Ice Hockey and of Video Game as
Semipro Magazine (Ice Hockey) or Jeuxactu…
23
Organization of press conferences with the creation of a clear and detailed Press
Document. We must encourage journalists to write about the Xbox.
Radio spot. Music has become a very important thing in the entertainment universe
and there is no exception for the video game market. So we will broadcast a radio
advert on the main radios: The Edge (CFNY 102.1 FM), Q107 FM, MOJO AM 640,
Energy 108 FM, KISS 92 FM, Z103.5 FM et FLOW 93.5 FM.
TV spot: launch a new advertising campaign with a strong message. A good idea
could be to create a new character that will let the customers identify our brand.
To be present in at least one major sportive event in Canada as an Ice Hockey National
Champion Cup like Banque Royale RBC Cup, Telus Cup, Allan Cup, Cup
Championship of Air Canada 2002… We want to develop sales in reinforcing the
brand image of Xbox. To credibilize our message in appropriating the event’s success.
We have chosen an Ice Hockey event because we want an adequation between our
message, our target (who practise this sport) and the target’s country habits: hoarding,
support a famous sportive or a team.
To sponsor different parties in famous pub and nights club in the main cities of
Canada (Toronto, Vancouver, Montreal) in order to promote the Xbox. To give
demonstration of game, distribution of gift at the effigy of our brand.
3.8 Marketing Research
A market survey should be done in order to evaluate the female market. It seems that this
market is still marginal but is developing.
We should undertake another research to identify what customers expect from our website.
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4.0 Financials
4.1 Sales Forecast
According to an AC Nielsen marketing research, 248,852 Xbox consoles have been sold
during the 2001 December holiday period. This number does not include second tier and club
stores’ sales.
This number represents about 55% of the whole year sales.
(248,852 * 100) / 55 = 452,458 Xbox sold in year 1.
PESSIMISTIC
AVERAGE
OPTIMISTIC
Xbox sold in year 1
452,458
452,458
452,458
Market growth year 2
40%
51% (R. Mugford)
60%
Xbox sold in year 2
with same market
share (prevision)
452,458 * 1,4 =
633,441 units
452,458 * 1,51 =
683,211 units
452,458 * 1,6 =
723,932 units
Market share June
2002
30,1%
30,1%
30,1%
Market share growth
(prevision)
8 points
12 points
16 points
Xbox sold in year 2
with same market
share considering
provisional market
share growth
38,1 * 633,441 / 30,1
=
801,797 units
42,1 * 683,211 / 30,1
=
955,587 units
46,1 * 723,932 / 30,1
=
1,108,746 units
Retail price
Cdn$299
Cdn$299
Cdn$299
Retailers gross margin
10%
10%
10%
Provisional turnover
per sold Xbox
299 * 0,9 = 269,1
299 * 0,9 = 269,1
299 * 0,9 = 269,1
Xbox Year 2
provisional turnover
269,1 * 801,797
=
Cdn$215,763,572
269,1 * 955,587
=
Cdn$257,148,461
269,1 * 1,108,746
=
Cdn$298,363,548
Approximation
Cdn$215,700,000
Cdn$257,000,000
Cdn$298,300,000
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4.2 Expense Forecast
TACTIC 1:
Improve brand image
Sponsorship of a national Canadian sport event (Ice Hockey)
Cdn$2,500,000
Xbox bus and advertising for Xbox bus
Cdn$1,350,000
st
TV airtime for Xbox and 1 party games 6 months
Cdn$2,640,000
Radio 6 months
Cdn$220,000
Magazines 4 months
Cdn$420,000
Posters 6 months
Cdn$1,260,000
Press 4 months
Cdn$770,000
Xbox.ca website (development and webmastering)
Cdn$300,000
Sponsorship of parties organized in famous pubs with
demonstration of Xbox and gift offering
TACTIC 2:
Cdn$650,000
Act on game developers
TV airtime for 3rd party games 6 months (Cdn$2,640,000 * 70%)
Cdn$1,848,000
Magazines for 3rd party games 4 months (Cdn$420,000 * 70%)
Cdn$294,000
TACTIC 3:
act on retailers
Advertising and demonstration in sales outlets
Cdn$300,000
Christmas bundles (see appendices for detailed costs)
Cdn$867000
Total
Cdn$10,909,000
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5.0 Controls
5.1 Implementation
The program will be revised each year.
This plan organizes the marketing actions for year 2.
Schedule
Nov.
2002
Task 1
Dec
Jan
Feb
Mar
Apr
May
Jun
2003
Depending on date of event
Task 2
Task 3
Task 4
Task 5
Task 6
Task 7
Task 8
Task 9
Task 10
Task 11
Task 12
Task 13
Task 1: Sponsorship of a national Canadian sport event (Ice Hockey)
Task 2: The Xbox bus and advertising for Xbox bus campaign
27
Task 3: TV airtime for Xbox and 1st party games
Task 4: Spot Radio
Task 5: Advertising in Specialized Magazines
Task 6: Posters 6
Task 7: Press 4
Task 8: Xbox.ca website (development and web mastering)
Task 9: Sponsorship of parties organized in famous pubs and nights club with demonstration
of Xbox and gift offering
Task 10: Special offer
Task 11: TV airtime for 3rd party games
Task 12: Magazines for 3rd party games
Task 13: Advertising and demonstration in sales outlets
5.2 Marketing Organization
Forecast
Forecast of the Xbox’s sales
“Survey of buyers” in order to know the customer’s behaviour.
Budget
Budget for advertising is Cdn$ 11 million for year 2
Metrics
Task 1: make a survey of notoriety in order to see if this event is quote as knowledge’s source
of the Xbox.
Task 2: evaluate the repercussions of the Xbox bus and of the advertising campaign for this
trip round. Survey of notoriety.
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Task 3, 4, 5, 6 and 7: Survey of notoriety of the Xbox: “How do you know the console Xbox?
How do you hear about the Xbox?” (Multiple choice Question).
Task 8: evaluate the click rate in order to know the number of customer who has visited the
Xbox website. Moreover, the website places a space at the visitor’s disposal where they could
to set their different feedback.
Task 10: estimate the repercussions of our special offer in evaluate the sale’s total for this
period comparing this result to the result before the launch of the promotion campaign.
Task 11 and 12: Survey of notoriety.
Task 13: evaluate the repercussions of animation on sale’s outlet in estimate the sale’s level
on the period concerning.
5.3 Contingency Planning
•
If our competitors, especially Sony with it PS2, launch a promotional offer more
attractive than ours.
•
Difficult of restock or late of delivery (strike…)
•
Product defect and consequently too return of product
•
Difficult to increase the brand image
•
Inadequacies between our message and our target
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Conclusion
Considering the market situation, Microsoft detains today the best video game console of the
market. However, the success of a console also depends on the games offered.
Facing the market leader PlayStation 2 which has a better experience and a well settled brand
image, Xbox has three goals to remain a successful console and reach the first place of its
market.
Firstly, closer partnerships with third-party game developers will let Xbox increase its game
offer and create hits which will be associated to Xbox.
Secondly, better relations with video game retailers will permit to increase the presence of
Xbox in the outlets.
Thirdly, a better brand image, in which Xbox will be a real entity apart of Microsoft, will let
Xbox be considered as the reference in the market of next generation consoles.
The actions we propose aim to provide a solution to these three issues.
For the future version of Xbox, we recommend to focus more on the entertaining gaming
experience, both in its design and in its communication, in accordance with the exceptional
capabilities of the console and the notion that it comes from a world apart.
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