1.IntroductionThis report focuses on the way in which Xbox, as a product, should, and does manage its marketing mix in order to meet the needs of its markets segmentations. The marketing mix is classically seen as the four P’s of marketing: product, price, place and promotion (Brassington and Pettitt, 2006).
Each P must be looked at individually before being brought together, so Xbox can then respond to each segment accurately, keeping them interested and loyal, which is vital for Xbox due to the highly competitive market that it occupies.These high levels of competition are what make the management of the marketing mix so important. The report also looks at market research and how Xbox should be using it to find the preferences of its customers. Without strong and effective market research any product, including Xbox, can fall behind their competition and drift away from customers needs and expectations.Xbox was established in 2001 as part of Microsoft and was their first attempt to move into the video game console industry.
They claimed better graphics, faster game play and a better all around gaming experience (Microsoft.com, 2000). The console market in 2001 was already dominated by Sony’s PS2 and Nintendo’s Gamecube, making it a risky market to try and enter and gain market share in. Xbox’s initial launch was purely focused on one market segment consisting of 7-16 year old males but soon found a need to expand and grow.They have since branched out into many different market segments that were not even considered during their initial launch including the female market, adults and families. Xbox have achieved the move to these segments using different techniques, which will be covered later.
Since the launch of the Xbox 360 in 2006 Xbox’s market share has overtaken that of Sony’s PS3 and have kept a close second to Nintendo Wii according to NPD Market Shares for Game Consoles, January 2009 (TG Daily, 2009).2.Market Segmentation.Market segmentation is the process of identifying different groups of consumers in a market, that can be targeted with distinct products or marketing methods (Croft, 1997). After identifying these groups Xbox need to adjust their marketing mix accordingly to keep competitive advantage, appeal to each new segment and still keep their original segments interested.
Each segment should consist of groups of people with related interests and characteristics, who, can be marketed to in a similar way. Numerous different types of segmentation exist, with the main groups for Xbox to focus on existing within the demographic sections of, Age, Gender, income and family structure.The information on these segments can be easily accessed through public sources, and worked into the marketing mix (Brassington and Pettitt, 2006:192-206). When Xbox are looking to move into a new segment it is important for them to evaluate the segment and decide whether it is worth working towards.
There are three main factors to look at when making this decision; segment size, segment growth potential and the companies objectives and resources (kotler and Armstrong,2010). Once these things have been evaluated Xbox can look at their marketing mix and make the necessary changes.3.The Marketing Mix.
3.1.Product.A Product is everything favourable and unfavourable that is received in an exchange. It is a complexity of tangible and intangible attributes, including functional, social and psychological utilities or benefits according to Dib et al.(1997)(cited in Groucutt,2005:168).
So for Xbox the console is the tangible form of the product they wish to market to their segments. This tangible product can be seen and touched by the consumers and is the core element of what they are going to buy, so must be attractive and stylish; this however this is not all they are purchasing, they are also purchasing the intangible attributes.They main intangible factor for Xbox is the joy gained from playing the games thus, if the consumers are not interested in playing games they will not buy it, this is why the product must be further marketed and adjusted to fit segments other than specifically “hardcore” gamers, statistically male. There is also the intangible element of the brand name, Xbox and also Microsoft, both now very big names and just these brands alone will attract buyers away from competition. To gain favourability from a wider group of segments Xbox must augment their product to add features, and in turn add value in the buyer’s eye.
At Xbox adding features such as online gaming, influences customers to market the Xbox for them to their friends in a hope they can play against them online, building a relationship between friendship and ownership of the Xbox adds another intangible attribute. To grow their product to include segments such as families, females and the older buyer, Xbox need to continue adding value in this way. By making deals with other companies such as Sky, Xbox attract adult buyers and families who can use the Xbox, not just for the children to play games on, but also as a skybox so the adults can watch movies and television at a small extra fee.Next by designing additional products to be sold as complimentary items, Xbox can attract buyers to these additional products, rather than changing the Xbox itself and risk losing market share from their primary segment. These complimentary items can include games aimed at females rather than males, meaning if a female is attracted to the games they will also have to buy an Xbox to play them on.This can also work when attracting an older buyer by offering them games that remind them of their youth, such as the Xbox arcade, which has games from the past like Pac man.
This relationship with their youth will bring back fond memories that the adult may wish to relive, encouraging them to buy the Xbox. It is however not just the product that attracts the customer, Xbox also need to look at the remaining aspects of the marketing mix.3.2.Price.The price of a product is directly related to customer value.
This is the relationship between a customers perceived value, compared to the actual value. If the price is higher than they are willing to pay for the benefits received, they will not buy the product (Christopher et al, 2004:20). Therefore if Xbox put their price too high they will lose out on certain sales, however if they set it too low they are going to lose out on the extra value some of the segments would have been willing to pay. This shows that the correct management of pricing is vital in order to keep certain segmentations interested, and not to lose extra value from stronger segments.When a customer decides to buy the Xbox they do not just think of the price for the Xbox alone there are also the added costs, or “life cycle costs” of the product.
For Xbox this means the cost of extra games or new complimentary devices as well as the “risk costs” such as warranty or breakages (Christopher et al, 2004:20). With games consoles falling under the speciality good section, once a customer buys one they don’t want to buy another due to breakage or disappointment so the thought process is drawn out and of high risk to the customer.Xbox therefore have decided to lower the price of their product to try and move the Xbox into the shopping goods section, therefore lowering the risk and encouraging lower income segments to buy their good as their perceived value will out rank the actual value. In the current economic climate and as competitors start a price war it may become necessary for Xbox to make their product a loss leader in order to respond to their market segments and rely on the extras, such as games, to make a profit (deaton and Muellbauer, 1989).
The main draw back to this pricing strategy is the devaluing of the Xbox, if the price falls to low and everyone starts buying them, the segment that only bought one to be different and cool will no longer want one and may move onto the more expensive competitor. Also price can signify quality and if the price is too low it may show the Xbox as being an inferior good (Brassington and Pettitt,2006:432-505).3.3.PlaceThe next section to concentrate on is place.
Place doesn’t just consist of the place in which the product is sold it is also about managing distribution, quantity of goods supplied and the quality in which it arrives (Lancaster and Withey, 2007:160). In relation to Xbox, they are primarily sold in specialised gaming shops where they will reach their desired customer from their primary segment. However in recent years more products in this industry have begun to move into less specialised locations, the most popular new place being supermarkets.With Xbox moving into supermarkets it broadens their segments to include families and adults who would not usually go to the specialised gaming shops.
As they are browsing the supermarket for food they will see the Xbox and may be tempted to impulse buy or be persuaded by their children. With supermarkets becoming a kind of superpower when it comes to selling goods it is a wise move for Xbox to be placed here. When making a move into a new place it is important to get the distribution and quantity correct. If Xbox didn’t send enough and the supermarket sold out they would be losing sales and hurting their brand image, especially around peak times such as Christmas, where the buyer may just switch to a competitor that’s in stock.It is also important to make sure the deliveries are there on time to keep the supermarkets happy and willing to sell the Xbox, constant late deliveries could lead to them discontinuing the product.
The final point in place is quality upon delivery; if a product is damaged during transit it cannot be sold and is a loss for the company. One way for Xbox to efficiently manage and control all the factors of place is to sell on the internet on their own website, they can then control all the aspects themselves and also take full profit on the item.3.4.
Promotion.Finally in the marketing mix is promotion. Promotion is the most communicative element in the mix and is comprised of at least five main strategic elements. These elements include; advertising, publicity, sales promotions, personal selling and packaging or display (Baker et al,1990:116-117). At Xbox it is important to manage each of these aspects to get a rounded promotional campaign that will attract all target market segments, starting with advertising.
Advertising costs money and is placed in media devices such as television, magazines, etc. Xbox need to manage where they want to spend the money budgeted to advertising wisely, to gain the greatest viewing figures from their potential market segments.Using market research, which we will cover later, Xbox should try and work out which type of media appeals most to their target markets, for example finding out what TV programmes their segments watch and placing adverts in the breaks, or putting adverts in magazines they would read. Publicity is different to advertising in the fact it is free and is delivered within the news media; if Xbox can get good publicity they are gaining good press and will attract customers for free. Publicity can however also be bad and could damage the company’s image causing alienation of customers.
It is important for Xbox to make sure no bad publicity is leaked, only good publicity. Sales promotions are a good way for Xbox to attract customers, especially within the current economic climate. Sales promotions are basically adding value to the product and making it more appealing to customers by offering a special deal. Xbox could do this by offering a specific new game for free when an Xbox is bought, by doing this with a variety of different games they can appeal to different segments with each different game.Personal selling is not of vital importance to Xbox and is used better on high priced products such as cars. Finally in promotion is the packaging; the packaging must appeal to the buyer.
A way in which Xbox could do this is to add game characters to the box of special promotional consoles. This would attract buyers loyal to specific games rather than the Xbox itself.A further three P’s can be used, these are; people, processes and physical, originally proposed by Booms and Bitner (1981)(cited in Groucutt, 2005:159). These three relate more to a service over a product and so are not as important to Xbox as the original four.4.Market Research.
Market Research is the process of designing, gathering, analysing and reporting information that may then be used to solve a specific marketing problem, such as the market for a new product or why an existing product has lost its edge (Burns and Bush, 2000). At Xbox market research should be used to find the preferences of its consumers, helping them keep up to date, and draw in new customers. With the console market being so competitive, without accurate and current market research, Xbox could drift away from the wants and needs of their market and lose out to a competitor. It is essential to develop new and better ideas that fit in with trends, whether it is in the form of new games, or devices, such as the Kinect.There are three main types of research that can be used, exploratory, descriptive and predictive (Brassington and Pettitt,2006:233-237).
Exploratory research is a starting point to identify the scope of the problem it is not a way of solving the marketing problem. At Xbox this can consist of looking at secondary data relating to the market segments Xbox wish to appeal to. As mentioned when talking about the market segmentation earlier, the categories they are looking to market to have publicly available research, this could help Xbox chose which segments to target with which ideas based on current figures and data already collected. Exploratory research is a cheap and quick method as it is primarily based on secondary research with very little primary.Descriptive research gives a more detailed range of findings that can be used to make decisions in the future. It is conducted using both qualitative and quantitative methods.
Xbox should use this method when considering new games to launch; using surveys on a large scale or focus groups they could collect qualitative data, such as what the customer likes in a game and any features they wish existed, and also quantitative data containing game genres that have high sales figures. Primary research is used in descriptive research making it an expensive process.Predictive research focuses on cause and effect relationships, so if Xbox where to do something how would the customer react. It should be used at Xbox when trying to decide whether to lower their prices to gain market share. They can try it in sample stores and see how the consumers react before openly changing the price in all stores. Another way in which Xbox could identify the preferences of its consumer is to have a survey on the Xbox itself, using the online function, that if completed gives the customer access to new levels on games.
This incentive would encourage customers to complete it and benefit Xbox greatly.5.Conclusion.It is shown that it is very important for Xbox to manage its marketing mix effectively in order to keep an advantage in its extremely competitive market and also to respond to the needs of the segments they are marketing to. Defining their market segmentation accurately and using strong market research methods in order to react quickly is vital. Once the segments have been defined and Xbox knows what the customer is looking for, using the appropriate market research, they can adjust the four P’s accordingly.
The Xbox as a product needs to be flexible to all segments and value must be added in order to draw each segment towards Xbox over competitors. The Brand name is already a very strong draw but with new technology appearing all the time they must also keep the product up to date. When pricing the product is has to be attractive to lower incomes especially during the current economic climate however they must be careful not to lose the feel of quality while doing this, this should be achieved using predictive research.The place and promotion should be within sight of all market segments and draw them in using advertising and sales promotions together efficiently.
Since their launch in 2001 Xbox have gained a good market share, this achievement shows that with the correct marketing mix Xbox can stay relevant in this competitive market.