nien@MM-UGM : the assignments

CHAPTER I
PREFACE

As the people who live in the 21st century, we all fully aware that the world of technology is developing very quickly. As a result, it generally changes the world especially the business marketing style where the technology itself is as the product.

This dynamical world of technology has somehow create a new situation where every existing company will be more depending on their ability to aim their market segmentation accurately to enable them to differentiate themselves, so they could furnish their business development and having chance to survive in the market where everything will be very highly competitive and moving very fast.

Unfortunately, the current condition is worsening with the situation where technology is now can be easily duplicated. Back then, a product can be known as “The Inventor or The Innovator” for a long period since there was no competitor. But these days, it can be easily become “The obsolete” in a very short period from the time it was released.

Many companies considered that Technology is still a dominant factor for a product to win the market. But in the reality, it changed to be a potential blunder for the marketing itself. This happens due to the character of technology itself, where in the beginning it normally is valued as “innovative” but later on will always be “parity”.

The “XBOX”, was initially developed by Microsoft office within a small team which includes Seamus Blackly, a game developer and high energetic physicist.

The rumors of a video consoled being developed by Microsoft first emerged at the end of 1999 following interviews of Bill Gates. Gates said that a gaming/multimedia device was essential for multimedia convergence in the new times of digital entertainment. On March 10, 2000 the "XBOX Project" was officially confirmed by Microsoft with a press release. Some see the XBOX as a way to capitalize on the growing video game market, noting that the PC market growth was stagnating after the dot-com bust. According to the book Smartbomb, by Heather Chaplin and Aaron Ruby, the remarkable success of the upstart Sony PlayStation worried Microsoft in late 1990s. The growing video game market seemed to threaten the PC market which Microsoft had dominated and relied upon for most of its revenues. As well, a venture into the gaming console market would also diversify Microsoft's product line, which up to that time had been heavily concentrated into software. XBOX presented a standardized alternative to the near-endless variety of end-user configurations on the PC. The XBOX even brought high-end gaming technology to the mainstream, sporting a top of the line GeForce 3 equivalent graphics processor, a built-in Ethernet adapter, and Dolby Digital 5.1 sound in hardware.

Strategy that implemented by XBOX has to be unique and different from its competitors. The accuracy on identifying market segment and classifying consumers and also creating a unique positioning value are several combinations and important factors for XBOX successness on market competition.

Other factor that also important is consumer’s trust. At this point, XBOX needs to develop an extremely good marketing strategy to create the consumers loyalty. This is to anticipate when consumers start considering the XBOX innovative technology became obsolete technology, but with their loyalty the will still chose to buy XBOX instead of their competitors” XBOX minded”.

CHAPTER II
CASE STUDY

XBOX, is a product launched by Microsoft, the biggest software company in the world. Eventhough Playstation has more variety of games than XBOX, many companies compete in making games based on this product. Why ? It happens due to the more they could sell the machine the more they could sell the software itself. But then how the games can be sold a lot while the content for the games is not that much???
A Marketing strategy requires decisions about the specific customer the firm will target. Process narrows down from broad opportunities to specific strategies, such as segmentation, differentiation, targeting and positioning.
Segmentation is an aggregating process that clusters people with similar needs in market segment.[1]
Market segment is a (relatively) homogeneous group of customers who will respond to a marketing mix in a similar way.
Targeting is a fairly homogeneous (similar) group of customers to whom a company wishes to appeal.
Differentiation is the marketing mix distinct from and better than what is available from competitor.
Positioning is an approach that refers to how customer thinks about proposed and/or present brand in the market.
XBOX is Microsoft’s first venture into game console, and the company’s marketing strategy differs from that of competitors. Marketing strategy are specifies a target market and a related marketing mix[2]. XBOX have a specific target market, they are between 16 to 26 years old audience who are game addict and interest in high technology.

XBOX have a marketing mix to win a competition. Marketing mix are the controllable variables (Product, Price, Place, Promotion) that the company puts together to satisfy a target group[3].

A. Product
Product is the need–satisfactory offering by a firm, and XBOX is a consumer product. Consumer product is meant for the final consumer. Microsoft develops XBOX as their specialty product. According to an author Jerome McCarthy on his book (Basic Marketing), “specialty products are product that price sensitivity is likely to be low and consumers who want to buy it must have a strong preference”. So if we look at XBOX, it is categorized as a high technological product. Thus, XBOX customers must be the people who strongly have a preference about XBOX, so that they can use this product in a proper way. A high technology product is known as an expensive good, so this product is basically targeting people who are not really sensitive about price.
Regarding technology, no matter how high the technology owned by Sony’s Playstation, they will still hard to compete with the strategy of integrated technology of XBOX plus PC. One way for Sony to overcome this condition is by starting to expand PC media transmission on their machine. But this will require a media software that integrated on windows program. This is the current competitive advantages that XBOX experiencing.

Price
Price is the amount of money that charged for “something” of Value. As a new product in the market, XBOX implemented a price penetrating strategy, X box sell their product with lower price than Sony Playstation with hope that they could compete and win the market which is currently dominated by Sony Playstation.
As a cross subsidy to a cheap machine game, Microsoft strategy is to get more income from the XBOX software game selling. Referring to the Microsoft expecations in “XBOX360 manufacturing costs to diminish annually” (www.xb360info.com/XBOX/info/123), Microsoft pricing strategy in the long term will reduce the retail price with the hope to achieve wider market than today.

Place
Place are making goods and services available in the right quantities and location when customers want them. As we mentioned earlier, XBOX is a specialty product, this condition made need to be sale by using selective distribution. Selective distribution is a way of selling by using only a middleman who is willing to give special attention to the product. This is to give the XBOX to be an exclusive games but still easy to access by consumers.

Promotion
Promotion is communicating information from seller to potential buyer or other in the channel to influence attitudes and behavior. XBOX is a product that created for consumers who has an innovator characteristic (those people who are eager to try new idea and willing to take risk) and early adopters (They are very respected by their peers and often are opinion leaders). Therefore, XBOX uses internet to develop an XBOX community in its early existence. Afterwards, they started to use the advertising through TV, and magazine. Besides, XBOX is hoping to have publicity (unpaid form of non personal presentation of idea, good or service).
Relying promotion on the advantages of the product and benefit is a quite common strategy. Therefore, additional strategies are highly required to attract the customers if the competitor has the same features and benefits.

Chapter III
SOLUTIONS

People in the future will be spending more of their time in front of the computer and internet connected video games, rather than sitting all day in front of the TV like today.
XBOX 360 is a videogame that provides gamers an ability to play online games. And since now everybody can create the same thing, this has creating a high competition among XBOX, Sony playstation, and Nintendo.

A. Market Segmentation.
Rheinald Khasali on his book “aiming Indonesia Market; Segmentation, Targeting and Positioning”, mentioning that in the market segmentation strategy, the first priority to do is differentiating, by means (in a purpose to put two or more segment based on the consumer’s need, and every single segment will get different treatment as well.
This strategy happened to be relevant to what has been carried out by windows with their XBOX. XBOX aims the different market aimed by its competitor such as Nintendo in a way of dividing the age demography segmentation. The game console market is normally targeting the level of young age or children. But XBOX aim more to the market of teenage and adult people. Even though Sony Playstation has been also aimed this kind of market level.
It is better for XBOX if they could aim more specific market, as if they chose the teenager and adult people as their market, they should find those level of people who is from upper and middle class, innovators and early adaptors teenage and adult people.
B.Targeting.
It will be good if XBOX use the “combined target market approach strategy” (combining two or more sub markets into one larger target market as a basis for one strategy). XBOX has chosen the people in the age of 16-26years old, upper-middle, innovators and early adaptors. This entire segment is combined into one target market and using the same single strategy.

C. Differentiation.
Microsoft tries to beat its competitors, Sony PS3 and Nintendo by giving an easy and cheap access in getting the Software Development Kit to make games or SDK. Small developers are possible to create games by testing and distributing the games through XBOX Live Arcade channel (a download tools through internet access on XBOX) for only $99 per year. The existence of kits that can develop XBOX-based games enable the growth of home game developers which resulted the more games choices for the consumers.A significance product deferentiation automatically will create a new market due to the increasing consumer’s needs because they have used to any technology innovation.
Marketing strategy for technology products is closely related to communication aspects. Advertising is a form of communication to fulfill marketing functions. Running a marketing function effectively should be more than just giving informations to consumers. It should be able to build a public image to act accordingly as the company’s marketing strategy to create revenue. This is closely related to the high involvement technology product’s characteristicsdue to the fact that the consumers should be well informed about the products before they decide to purchase the goods.

CHAPTER IV
ASKED QUESTION