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XBOX 360 Marketing Plan Marketing February 20th, 2010 Mark Lundberg

Table of Contents: Part 1: Executive Summary

Part 2: Company Description I: History of the Company II: Current Objectives

Part 3: Situation Analysis Internal Analysis Environmental Analysis Customer Analysis Competitive analysis

Part 4: SWOT Analysis SWOT Analysis Porters Five Forces Model

Part 5: Marketing Objectives & Strategies

Part 6: Marketing Strategies Primary target market & Marketing Mix Secondary markets

Part 7: Marketing Implementation

Part 8: Summary & Conclusions

Part 1: Executive Summary: The Xbox 360 is a gaming console made by Microsoft, Inc. It is in the middle of its product life, being 4 years old at the time of this marketing plan. The success of the original Xbox made the Xbox 360 a likely success for Microsoft, and it has paid off. With millions of units sold around the world, it has become a huge success. This marketing plan will go over where Microsoft currently is in its marketing efforts with the Xbox 360, and what they plan to do to conquer new markets, reach out to new customers, and expand their product line. Part 2: Company Description I: Brief history of the Company Microsoft was founded in 1975 by Bill Gates and Paul Allen. They started off with selling BASIC, which was one of the first computer language programs. Their first customer was MITS Computer. From there, Microsoft was incorporated in 1981. IBM used Microsofts 16-bit operating system on their first personal computer that same year. That is when things started to take off for the company. IBM and Microsoft later joined forces in 85 to focus on development and productivity. The next year, the company went public at $21 a share. The path to becoming one of the biggest companies in the world was being set in motion. In 1987, Microsoft produced its first CD-ROM application, Microsoft Bookshelf. This would be the first in a long line of famous programs that the company would be famous for (like MS Word, for example.) 1990 would be a landmark year for Microsoft, being the year that they passed the $1 billion mark in sales. The 90s would also bring the rise in popularity of the windows operating system, which the company is still known for these days, with the popularity of Windows Vista and the latest, Windows 7. Recently, the company has surpassed $32 billion in sales, making in by far the largest software in the world. In 2001, they entered the video gaming world by releasing the Xbox, which revolutionized the industry with outstanding gameplay and graphics, and popular game titles such as Halo: Combat evolved and Project Gotham Racing. The Xbox continued in massive popularity for a couple more years, with many more games coming out like the ever-popular Halo 2. In 2005, Microsoft launched the next-generation version of the Xbox: the Xbox 360. The Xbox 360 improved upon the first edition in many areas, including graphics, internet play, and system performance. (Microsoft Company History) II: Current Objectives: The current objectives for Microsoft concerning the Xbox 360 would be the following: Continue providing an excellent online gameplay community with dedicated and fast servers, online-capable games, and support from Microsoft. Continue to release popular titles that will gain high sales and a significant portion of the market Keep on offering our customers customer service to the best of our abilities. Compete against the Nintendo Wii and Sony PS3 by keeping prices competitive Make even more original Xbox games backwards-compatible with the new Xbox 360 system. (Eventually all of them.)

Increase the portion of family-friendly games to increase the appeal to families and kids Explore new avenues of gameplay by releasing the motion-controlled Project NATAL

Part 3: Situation Analysis I: Internal Analysis: As stated above, our current objectives are to continue providing a fun online community for our players, continue gaining market share, maintaining good customer relations, keep the competition from Sony, Nintendo and the PC markets at bay, reach out to new audiences with new family friendly games, and explore new technologies to help bring our products into new territories and new markets. These marketing and organizational objective are in sync with Microsofts mission statement, which explains the importance of having broad customer relations, understanding their needs and how they use technology, and providing support and excellence in everything they do. Also, deepening the already existing relationships we have with their customers through the quality of the products and services. The market is always changing. Consumers want the latest in technology with a fun and exciting way to experience it. Their objectives keep those changing tastes in mind, with a current team working on developing new technologies like the motion-controlled project NATAL, and the new games that will accompany them. Also, new features will be added to the Xbox 360 to keep up with consumer demand, such as a new ability to use a USB-based mass storage device, such as a portable hard-drive and handheld flash drive units, to add to the already large storage capabilities of the console. This new storage can be used to save new games, download content from the internet, and burn games onto the hard drive. (Lowensohn,2010) The Xbox 360 remains a strong force in the current market, coming in only 2 nd to the Nintendo Wii in worldwide sales. (Terdiman,2008) The industry as a whole is continuing to grow, and more and more consumers will be introduced to the gaming console world, and current consumers will continue to buy new games, new technologies, etc. Maintaining customer relationships is very important, and Microsoft has realized this. When they extended the Xbox 360 warranty for an additional 3 years to cover hardware failures, they did it keeping the customer in mind. The famous red ring of death phenomenon (the flashing red lights when an Xbox 360 has hardware issues) was an example of when they needed to deal with bad reputations from the media and general public. Many systems have been repaired, at no cost to the customer. Through it all, the product remains strong. II: Environmental Analysis: Economic Conditions: As is well known, the United States is currently going through tough economic times, and Microsoft is no exception to being affected. $60 games and $300 systems are viewed as non-essentials, and fewer and fewer people are buying them. Even in spite of the recession, sales are continuing to remain steady, even growing at a slower rate. As the country regains it financial ground, sales will likely increase. It may take some time, but Microsoft is ready to stay strong through it.

Political/Legal/Regulatory Issues: For many years, the government has gotten involved in regulating how the gaming industry does things. One famous example is when the most controversial title ever hit stores (Grand Theft Auto: San Andreas) It had to be recalled, because of a hidden sex game was found by players, and it was subsequently given an Adults Only rating by the entertainment software rating board (ESRB more on them later.) No stores would carry the game with the new adult rating, so Rockstar games, the creator of the title, had to go back and censor the game, then re-release it to the public with edited content. Grand Theft Auto also contained adult language, gratuitous violence, and other offensive material. Local legislation has tightened the rules concerning Mature rated games. Retailers are forbidden to sell those types of games to minors under 17 years of age, and proof of ID is often required to be able to purchase those kind of games. A public outcry following the Grand Theft Auto controversy has put pressure on game studios to watch what they put in games, and what they market to families and young kids. The violence and offensive materials found in games have led to the creation of a consumer advocacy group called the entertainment software rating board (ESRB). Formed in 92 after the controversy of Mortal Kombat, the ESRB has attached warning labels similar to movie ratings on the boxes of all PC, PS3, Xbox 360 and Wii games. These labels are meant to warn parents of the content of a game, and includes details of how much violence, language and sexual content there are in a given game title. These ratings can go from Everyone to Mature 17+ and Adults Only. (Gonzales, 2010) Legal battles are commonplace in the world of videogames. A famous case is Jack Thompson, who took Take 2 Interactive and Rockstar Games to court, after these games had allegedly caused some violent behavior in some of the youth that played them. Thompson continues to Rally against these companies, campaigning for more responsibility and more care in the games that are distributed. (Jack Thompson) All this outcry has made Microsoft realize the importance of clearly marking that content which some might find disturbing, to make sure they are clearly warned about what they are buying. III: Customer Analysis: After careful consideration, we can answer the following questions: Who are the firms current and potential customers? o Younger generation, male and female ages 17-30. Other markets would be children, families. What do customers do with our products? o They are entertained. They can interact with other players around the world via our online gaming capabilities. They can also play games with the latest technology and be immersed in new worlds via these games. Where do customers purchase our products? o Retail stores such as GameStop, Toys R Us, Wal Mart, Target, ShopKo, K-Mart, and many others. Also, there is a significant online market for our products via Amazon.com, and other websites. When do they purchase our products?

o When they want to discover the latest in gaming technology and excitement, or want the latest in game hardware, software, and upgrades. Why (and how) do customers select our product? o If they have had previous good experiences with Xbox-related products or even other products Microsoft has made. They might have also heard good reviews from various sources, or tried one of our in-store kiosks. Why do potential customers not buy our products? o If they have unfortunately decided to go with one of our competitors products

IV: Competitive Analysis: There are 3 other major competitors in the console gaming market. Sony, Nintendo, and PC games (various distributors). In this section, we will go over various characteristics of the competitors of Microsofts Xbox 360. Nintendo Wii:

The Nintendo Wii is the Xbox 360s #1 competitor. In recent years, it has been the #1 selling gaming console in the world, and of all time. With its innovative motion-controlled controllers and games, it has become a cultural phenomenon. It primarily focuses on family-friendly gaming and characters like Mario, which has been famous for over 20 years in the companys history. Playstation 3:

Sonys Playstation 3 has become a major success with gamers with its high-definition graphics, the ability to play Blu-ray movies, and large storage space. At first, the high price tag made it too expensive for most people to buy, and the product suffered because of that.

PC Games:

The PC and Mac computer gaming market has been established for years. With many games still being released today, and technological upgrades becoming available at a rapid pace, it is not a market we can afford to ignore. These companies are likely to be future competitors as the next generation of consoles come out in following years.

Part 4: SWOT Analysis I. SWOT Analysis: Strengths: Large fan-base (primarily younger generation, male) Established product (previous model was introduced in 2001 with critical acclaim. Xbox 360 came out in 2005 with similar responses. Fans of the original system are likely to carry over) Well-known game franchises (the Halo series, Gears of War, etc. that have been in the million-plus selling area) Modern technology (Wireless technology and High-Definition graphics) Financial strengths (made by Microsoft one of the largest companies in the world) Competitive cost (prices have dropped in recent years now matched with the Nintendo Wii and less comparable to a Playstation 3, depending on the model) Trends (This generation is known for being gamers it is considered cool and trendy to own one.) Not just a gaming system (the hard-drive and internet capabilities allow for multiple forms of entertainment to be enjoyed by this system) Optional accessories (for the gamer that wants more, we offer a large line of accessories for the Xbox 360, including larger hard-drives, steering wheels for racing games, etc.) Opportunities: Emerging technology (motion sensors, for example. with project NATAL, we will soon be able to enter a market now dominated by the Nintendo Wii) Market growth (by introducing more games that appeal to different audiences) Adding to the existing product line

Repairing damage done to the public image (from the malfunctioning consoles expanding warranties, lowering consumer costs of repairs, etc) Weaknesses: High failure rate within the existing product line (particularly the consoles with malfunctioning parts, or the red ring of death as t he public knows it as.) Costs to do repairs to the consoles (labor, shipping, etc.) Not a wide enough appeal for the product line (not enough games that appeal to kids under 12, for example) High production costs A particularly damaged public image due to the malfunctioning consoles

Threats: Competition from other consoles (Playstation 3 and Nintendo Wii) Growing technology (keeping up with trends and what people want in technology) Other forms of entertainment (Movies, for example, still being a prevalent source of competition II: Porters Five Forces Model: Threat of substitute products: Besides the competition from Sony and Nintendo, few other companies have produced similar products. And those that have produced cheaper imitations and lower costs. So far, these have been few and far between. Microsoft and its Xbox 360 has a hold on a large portion of the market. Potential New Entrants: It is expensive to develop a new product in this market, and few are likely to appear in the next few years. Bargaining power of Buyers: Considerable, with the internet offering a major outlet for retailers. Consumers can go online to try and find a better deal than those they are finding in retail stores. Also, they can find them used if possible Bargaining power of Suppliers: Minimal, there are many suppliers Rivalry among Competitors: The rivalry between competitors is extremely high. With 3 major systems on the market right now (Playstation 3, Nintendo Wii, and Xbox 360), each company is trying to tap into the market and meet gamers needs. Also worth mentioning is the PC market, who

is still going strong with the amount of games that come out per year. New technology constantly comes out for the PC that updates graphics, sound, and many other things. As far as game quality goes, consoles and PCs are about the same, but technology is changing so quickly that PC games may surpass consoles in terms of what they are capable of. This is a serious threat to Microsoft and the Xbox 360. New generations of consoles will come out in the future to rival new PC technology, but the current systems are what we have at the present time. Also, the Xbox 360 is not upgradable in many core areas such as graphics and video memory, so the public will have to wait until the next generation of consoles to come out to see what advances will come. Part 5: Marketing Objectives & Strategies: Continue providing an excellent online gameplay community with dedicated and fast servers, online-capable games, and support from Microsoft. o Strategies: Maintaining servers, keeping up with latest updates to technology. o Timeframe: continuous Continue to release popular titles that will gain high sales and a significant portion of the market o Strategies: Make sequels for the highest selling games, continue to make popular games in the genres that are most played. o Timeframe: The next 4-5 years (average lifetime of a console system) Keep on offering our customers customer service to the best of our abilities. o Strategies: Address customer needs o Timeframe: Ongoing Compete against the Nintendo Wii and Sony PS3 by keeping prices competitive o Strategies: Match the price of competitors as best as we can while still maintaining markup. o Timeframe: Ongoing Make even more original Xbox games backwards-compatible with the new Xbox 360 system. (Eventually all of them.) o Strategy: devote a good amount of time for this to happen o Timeframe: Ongoing Increase the portion of family-friendly games to increase the appeal to families and kids o Strategy: Develop games with kid-friendly characters and situations, and games that will encourage family play, and will appeal to adults (in the form of ageappropriateness for kids.) o Timeframe: Next 3-4 years (average lifetime of a console system.) Explore new avenues of gameplay by releasing the motion-controlled Project NATAL o Strategy: Release Project NATAL in Quarter 4 of 2010, just in time for the holidays. Should capture some interest from fans of the Nintendo Wii system, due to its motion-controlled games, which is a similar concept to the Wii. A major difference being that NATAL is a full-body movement system, as opposed to just a controller with the Wii. o Timeframe: Next 2 years.

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Part 6: Marketing Strategies: I: Primary Market & Marketing Mix: o Primary Target Market: Younger generation, male and female ages 17-30. o Primary Needs: Entertainment, time to spend with friends, family, needs for a source of social interaction and gathering. o Identifying Characteristics: Usually in the United States, mixed races. o Purchasing/Shopping Habits: Usually shop at retail outlets. Product: Xbox 360 Arcade:

o Major Benefits: Comes with wireless controller, 256 MB storage, High-definition graphics, everything you need to get started. Our most basic package o Price: $199.99 o Customer Service Strategy: 3-year hardware failure warranty right out of the box o Competitive Advantage: Massive selection of games, accessories on sale to upgrade the experience. o Brand name and packaging: Microsoft & The Xbox name have been around for many years, Microsoft since 1981, and Xbox since 2001. Both names are thought of with quality, service and professionalism. Packaging will list all major benefits and will have a visual description of the product and everything that comes with it. Also, there will contact information for Microsoft in case of a problem. Product: Xbox 360 Elite:

o Major Benefits: Comes with a wireless controller (or 2 if it is the bundle), comes with games (bundle pack only) HDMI port (for enhanced graphics), 120 GB storage (standard up to 250GB storage on Bundle versions), Headset, HighDefinition graphics.

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o Price: $299.99 (standard Elite) - $399.99 (Elite with games bundle) o Competitive Advantage: Massive selection of games, accessories on sale to upgrade the experience, Backwards compatibility (so you can play the original xbox games on the 360.), High-definition sound and graphics, 120-250GB of storage space (depending on bundle or non-bundle version.) o Brand name and packaging: same as above II: Pricing: Pricing Objectives: Remain competitive with our rivals while still making a substantial profit. III: Distribuition: Our distribution channels are through various retail outlets like Target, WalMart, Toys R Us, Best Buy, etc. and the internet, with websites such as Amazon.com, where customers can buy games, the system, and accessories all online. This can be done in the retail setting, of course. Distribution is based on customer satisfaction. We want our products to be in convenient locations. IV: Promotion: Promotion is done in a variety of ways. First off, there are television commercials currently running that advertise various Xbox 360-related games and accessories. Next, there is online advertising, which advertises the same things using banner ads, web sites, etc. Then we have movie advertising. Before the trailers role, commercials will be shown. This is where we can show trailers for games that will be coming out soon. All of these mediums reach a broad audience, which is our aim. Part 7: Marketing Implementation To implement our marketing strategy and objectives, we are going to need a dedicated team of specialists, managers, game developers, team leads, and other staff who are willing to go the extra mile and get the job done right. We are in the middle of the life of the Xbox 360, and if we do not continue to strive to meet the demands of the market, then we will fail. Our customers range from hardcore gamers to casual ones, but we need to be dedicated business professionals and get through these next couple years. Part 8: Summary & Conclusions In closing, the Xbox 360 has been one of Microsofts biggest success stories. With millions of units sold around the world, it has become a cultural phenomenon. Not just with young gamers, but with hobbyists, families, and hardcore gamers alike. There is something for everybody when it comes to this system. After 5 years of being out in the market, The Xbox 360 continues to impress and lead the way into the next generation of gaming. But we are not done yet. We still have many exciting things to look forward to and work hard for in our future.

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Project NATAL, future games, and upgrades for the 360 are among the things that we are working for now. It is all up to us.

Sources Cited: - Microsoft Corporation -- Company History. (n.d.). Connecting Angel Investors and Entrepreneurs. Retrieved March 21, 2010, from http://www.fundinguniverse.com/companyhistories/Microsoft-Corporation-Company-History.html - Microsoft Mission Statement. (n.d.). The World of Mack Baczynski. Retrieved March 21, 2010, from http://mbaczynski.iweb.bsu.edu/mission.html - Terdiman, D. (2008, February 18). Report: PlayStation 3 could be top-selling next-gen console by 2011 | Geek Gestalt - CNET News. Technology News - CNET News. Retrieved March 21, 2010, from http://news.cnet.com/8301-13772_3-9872827-52.html - Lowensohn, J. (2010, March 18). Report: USB mass storage coming to Xbox 360 | Web Crawler - CNET News. Technology News - CNET News. Retrieved March 21, 2010, from http://news.cnet.com/8301-27076_3-20000712-248.html - Video game controversy - Wikipedia, the free encyclopedia. (n.d.). Wikipedia, the free encyclopedia. Retrieved March 21, 2010, from http://en.wikipedia.org/wiki/Video_game_controversy - Gonzales, L. (n.d.). When Two Tribes Go to War: A History of Video Game Controversy - Page 5 - Features at GameSpot. GameSpot is your go-to source for video game news, reviews, and entertainment. Retrieved March 21, 2010, from http://www.gamespot.com/features/6090892/p-5.html - Jack Thompson.org. (n.d.). Jack Thompson.org. Retrieved March 21, 2010, from http://www.jackthompson.org/

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Year to Date Sales Comparison (Same Periods Covered)

Market Share (Same Periods Covered)

Total Sales and Market Share for Each Year