What are the key elements of Microsoft's marketing strategy for the
Xbox 360? What are the similarities and differences compared to past
product rollouts within Microsoft and compared to the rest of the
industry? Could Microsoft be considered one of the best and worst
examples of marketing success in America during the 1980s and 1990s? 
Do any of the Microsoft strategies contradict future issues that
Microsoft and other technology-oriented firms should prepare to deal
with in coming years?

The key elements of Microsoft's marketing strategy for the Xbox 360
revolve around a direct to the consumer approach.  Unveiling the new
hardware to consumers on a primetime MTV special was a radical
departure from past practices, where game console manufacturers
debuted new hardware to industry insiders at the Electronic
Entertainment Expo.  Instead of relying on industry analysts to act as
evangelists for the new console until shortly before its launch,
Microsoft opted to attempt to freeze the market by making
consumers aware of its offering six months in advance.

The direct to the consumer approach is very different from past
industry practices.  Furthermore, by leading the industry into the
next generation of consoles instead of being a laggard, Microsoft is
seeking to compress the console product lifecycle and put pressure on
its competitors to innovate more rapidly.  Since Sony is currently the
category leader, but also has the oldest hardware in the marketplace,
Microsoft's strategy is especially geared toward beating Sony to the
next generation of consoles.  Microsoft has a much lower share of the
market and is much more interested in succeeding in the next
generation consoles than it is in the current one, so hurting its own
sales of the original Xbox is of little importance if it can
significantly decrease sales of PlayStation 2 and attract new
customers before the launch of PlayStation 3.

Microsoft also targeting women who live with male gamers.  By doing
this, they appear to be emulating Nintendo's strategy to broaden the
appeal of consoles to nontraditional demographics.

Microsoft was a very successful marketer in the 1980s and 1990s in
many respects because it was able to convince corporations that its
less technically capable and less innovative products than those
produced by others, such as Apple and UNIX, were nonetheless the best
choice for businesses operating personal computers.  Microsoft also
successfully convinced businesses to frequently upgrade software even
in the absence of major innovations.  On the other hand, more recently
the company has fallen into disfavor as its anti-competitive practices
became widely known and companies and consumers have become more aware
of its shortfalls.

To combat the impression that it is not an innovative company,
Microsoft is seeking to use the Xbox 360 as a means of changing the
public's impression of the company.  Whereas historically Microsoft
has let other companies develop new markets, such as Internet
browsers, graphic user interfaces, and gaming consoles, and then
entered late, the company is now seeking to lead the gaming console
industry.  The company also needs to diversify beyond PC sales into
gaming and other markets to regain its historically rapid growth.  Its
next-generation operating system has been significantly delayed, and
PC sales are growing very slowly.  Furthermore, consumers and
businesses are increasingly resisting upgrading its products every
couple of years.

Although gaming is a rapidly growing market, Microsoft's ultimate goal
is to provide the hardware and software "brains" for delivery of all
types of entertainment through consumer electronics.  Producing a
console with many capabilities that is viewed as being highly
innovative is critical to gaining consumers' trust so that they will
rely on Microsoft for more than just gaming and PC operations.  In
this regard, Microsoft's strategies fit well with the future issues it
is likely to encounter of continuing slow growth in PC sales and a
need to increase its growth through both gaming and receiving a
greater share of consumers' home entertainment expenditures.

Sincerely,

Wonko

Sources:

"Why Would Microsoft Hold Its Xbox 360 Launch Event In A Hangar the
Mojave Desert: A Little History Might Tell Us Why" by Dean Takahashi,
The Mercury News (November 10, 2005)
http://blogs.mercurynews.com/aei/2005/11/why_would_micro.html

Microsoft?s Disruptive Xbox 360 Marketing" by Vladimir Cole, Joystiq
(May 13, 2005) http://www.joystiq.com/entry/1234000703043289/

"Xbox 360 marketing repositioned for women" by Vladimir Cole, Joystiq
(October 11, 2005) http://www.joystiq.com/entry/1234000503062792/

"Gaming's Clash of the Titans" by Cliff Edwards, Business Week (May
24, 2005)http://www.businessweek.com/technology/content/may2005/tc20050524_0153_tc024.htm

The May 23, 2005 issue of Time magazine has significant coverage of
Xbox 360 (subscription required to read articles in their entirety)
http://www.time.com/time/magazine/0,9263,7601050523,00.html

Search terms: "XBOX 360" Marketing

It is hard to use the word 'Marketing' in conjunction with 'Microsoft'

MS got a license to print money from its monopoly of the PC operating
system in the 1980's
- I doubt that many people with pre-MSDOS PC experience would grudge
them that success.

This funded some alarmingly useless Applications such as MS Word for
DOS and Multiplan, also getting the Xerox Star concept right(ish)
partly due to useful learning experience on OS/2 and with Apple.

Since Windows was 'given away' on top of DOS, it needed to be
seriously bad not to become the industry standard, Win95 was a re-hash
using features of 5+ year old hardware technology.

When you appear to be giving something away for free, and the product
is just about adequate, then it is hard not to become the market
leader.
Especially if your real source of income is a tithe on all machines
produced by the main manufacturers.

Rather like airlines, MS is tempted to go for Business Class
passengers, rather than the mass in Economy Class - one could view NT
as such an attempt, also the way in which they get confused with their
own Office products.

It would be very interesting to look at the real figures - true costs
and real revenue, across their historical product range.

Eventually, I reckon, they will get mired down in backwards
compatibility problems, both software and hardware, and another
industry standard will emerge for 'light weight' machines
- we saw something like that with WinCE which MS bought and is busy
strangling to make way for its Embedded XP

The joke is, that with hardware becoming so small and cheap, future
machines will probably be 'clusters' of computers, and there is no
particular reason why MS should be running on all of them.