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Running head: Microsoft’s Marketing Plan
Microsoft’s Marketing Plan
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Running head: Microsoft’s Marketing Plan
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Executive Summary
Rising from within the dreams of two young computer ‘geeks’ to becoming one of the most
valued technological giants of our age, Microsoft has been able to dominate the software market
by coming up with innovative products an services that has actually established it as a monopoly
in the technological world. Due to the need of every company to own its market not by just
developing innovative products but also through thorough marketing and promotion Microsoft
has had to come up with a well-drawn marketing strategy.
Like any modern company Microsoft manipulates the marketing mix which is made up of the
four Ps which include Products, Place, Price and Promotion. Thus Microsoft has to come up with
products that are not only innovative but which also appeal to the market it is targeting. Secondly
Microsoft has to establish where its target market is and how the products will reach its target
market. However, each company knows the danger of distributing products at a price which the
market is not willing to pay. Thus Microsoft has to price its products strategically to ensure that
it grabs a huge share of the market. After this Microsoft has to come up with promotional tactics
and strategies that will sell its products to its target market.
After using the four Ps, with good management and proper budgeting the profitability of the
company will inevitably rise and the market share of the company will also increase.
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Contents
Article I. COMPANY DESCRIPTION ....................................................................................... 5
Article II. MICROSOFT’S MISSIONS AND GOALS ................................................................ 7
Article III. CORE COMPETENCIES ............................................................................................ 8
Article IV. SITUATION ANALYSIS (SWOT) ............................................................................. 9
Section 4.01 STRENGTHS ........................................................................................................ 9
Section 4.02 WEAKNESSESS ................................................................................................ 10
Section 4.03 OPPORTUNITIES .............................................................................................. 10
Section 4.04 THREATS ........................................................................................................... 10
Article V. COMPETITORS ........................................................................................................ 11
Article VI. TARGET MARKET................................................................................................... 11
Article VII. THE MARKETING MIX ....................................................................................... 14
Article VIII. MICROSOFT’S PRODUCTS ................................................................................ 14
Section 8.01 MICROSOFT PRODUCT DEVELOPMENT STRATEGY/PROCESS ........... 15
Section 8.02 PACKAGING OF MICROSOFT’S PRODUCTS .............................................. 16
Section 8.03 LIFE CYCLE OF MICROSOFT’S PRODUCTS ............................................... 16
Section 8.04 PRODUCT UNIQUENESS IN MICROSOFT ................................................... 17
Section 8.05 MICROSOFT’S BRANDING STRATEGY ...................................................... 17
Section 8.06 BRAND EXPANSION, LIABILITY AND SAFETY ........................................ 18
Article IX. DISTRIBUTION OF MICROSOFT PRODUCTS .................................................... 18
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Article X. PROMOTIONAL TACTICS AND STRATEGIES ................................................... 20
Article XI. MICROSOFT PRICING STRATEGIES ................................................................... 21
Running head: Microsoft’s Marketing Plan
Article I.
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COMPANY DESCRIPTION
Founded in 1975 by Paul Allen and Bill Gates, Microsoft is one of the world’s
most valuable companies with a global network and other affiliate companies that have been
obtained by Microsoft over the years including Skype and recently Nokia. In 1975 a company
known as Micro Instrumentation and Telemetry Systems manufactured the Altair 8800
microcomputer. Bill Gates and his partner Paul Allen decided that they should create an
interpreter for BASIC (a then popular programming language). MITS accepted their proposal
and this was the beginning of their career of programming and creating solutions for
microcomputers.
In the same year (1975) Paul Allen and Bill Gates formed Microsoft, a combination of
the words microcomputer and software. Their first attempt in the Operating Systems business
was the creation of Xenix which was their own version of UNIX. In 1980 Microsoft formed a
partnership with IBM in which it was to supply the a version of DOS operating system then
branded as MS DOS by Microsoft but was later rebranded by IBM as PC DOS. Although MS
DOS was a break from the normal dependency on typewriters and manual systems it also proved
difficult for many to learn MS DOS commands.
In 1983 Windows version 1.0 was launched perhaps as a response to the difficulty of MS
DOS or as a marketing strategy that actually proved useful considering that many users actually
enjoyed the new interface that Microsoft gave to the microcomputer. There were a lot of features
that would prove vital and even compulsory which would be used by every company while
creating an operating system. The creation of Windows 1.0 and its later versions had very
beautiful benefits for Microsoft. First it became an international monopoly for operating systems
and software distribution considering that Apple was only selling and marketing both its
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operating system and its hardware at the same time. Secondly Microsoft became a pacesetter in
the field of software engineering and operating systems programming.
The following years saw an improvement on the Windows operating system. New
features were introduced: new applications, better user interfaces and on top of all more publicity
for Microsoft. However the main publicity for Microsoft came in 1995 with the introduction of
Windows 95. It was the operating system that was created from scratch by Microsoft. The
operating system was created at a time when the technological world was facing a complete
change. The commercialization of the internet followed by the rise of high level multimedia
applications provided an opportunity to Microsoft to sell its new features which included the
upgraded office suite, Internet explorer, start menu, minimize and maximize buttons and the
many multimedia games that was perhaps a quite unique feature of operating system. The
creation of Internet Explorer was a market response to the threat of Netscape Navigator which
was one of the first internet browsers.
The following years was characterized with the improvements that were done on
Windows 95. Around the same time of the unveiling of Windows 95 Microsoft launched
Windows CE 1.0 for personal digital assistants (PDAs) Thus Windows 98, ME and 2000 were
all upgrades targeted on improving the usability and functionality of Windows 95. In 2001
Windows XP was launched. It also introduced the XBOX gaming console in the same year to
enter the market whose main players were Nintendo and Sony. The years that followed would be
characterized with a deep rise in technological demand and public demand on systems that were
more secure and that were private. This led to the creation of Windows Vista which contained
the first serious security features that any operating system has ever had. At this point the
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Windows line of operating systems with their complementary office suite became a favorite of
both personal and organizational use.
The rise of wireless networking and its high probability of becoming a trend in the future
encouraged Microsoft to create Windows 7. It has features that were directed towards wireless
networking and also better usability and better features that led to its adoption as an
organizational operating system even faster than Windows Vista. The rest of the story involves
the creation of the flowery Windows 8 and the attempt by Microsoft to join the hardware market
characterized by the development of the Microsoft Surface tablet computer. However, with the
purchase of Nokia the objectives that Microsoft has had for a long time to be a major
technological player in both software and hardware may be fulfilled.
Article II.
MICROSOFT’S MISSIONS AND GOALS
The Microsoft’s mission statement is “to enable people and businesses throughout the
world to realize their full potential.” Though their mission statement may seem to be completely
general it is a cleverly devised mission statement which shows the dedication of Microsoft in
coming up with solutions that work especially in the business world. This can be shown by the
number of innovations that Microsoft has come up with over the years. From MS DOS to
Windows 8 Microsoft has at one time or another led to more automation of rather monotonous
tasks and computerizing them thus increasing their accessibility and security of information at
both personal and organizational levels.
The first goal or objective of Microsoft is to be the pacesetter of the technology market. This can
be shown by all the products it has come up with. Beginning with MS DOS Microsoft showed its
desire to the set the pace in the technological world. The second aim of the company is to come
with new operating systems according to the changing needs of the public. This point actually
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needs no further explanation because the entire reputation of Microsoft has been based on the
quality and usability of the operating systems it has been developing.
The second objective is to increase its market share. Through extensive marketing and
publicizing of its products through the social media Microsoft has achieved its objective of
remaining relevant in the operating systems market. Actually it reaches a point whereby the
public can assume that the main aim of Microsoft is to become a monopoly. In fact the only two
major operating systems developers are Apple and Microsoft. The fact that Apple’s software is
proprietary i.e. it can only be sold with its hardware gives Microsoft an opportunity to be a
monopoly. Every computer manufacturing company except Apple has formed a relationship with
Microsoft that has ended up with nearly every laptop being sold with Microsoft Windows
operating systems.
The other major goal is to beat competition. This has been done in many ways. First
Microsoft has been able to form strong partnerships with computer manufacturing companies
thus eliminating competition even from freeware operating systems like Linux. The second way
has been through innovation. Most products from Microsoft have been innovative especially
considering its latest version of Windows, Windows 8. The fact that Microsoft has acquired
hardware innovations thus forming a nearly perfect brand.
Article III.
CORE COMPETENCIES
A company’s core competencies are its major attributes and characteristics that
distinguish it from its competitors and which lead to its competitive advantage. If a company has
no core competencies or in the case where its core competencies are a copy cut of another
company’s core competencies the company survival in the market may ephemeral. One of
Microsoft core competencies is innovativeness and creativity. The fact this innovation hs over
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the years characterized Microsoft has led to its growth and the growth of its brand. Thus the
second competency is its strong brand. According to Porter’s five forces model once a company
has established a strong brand it will restrict new entrants from penetrating the market thus
leading to monopolization. Monopolization, surprisingly, is the third core competency. This is
because the spread of Microsoft innovation, products and services across the globe has turned
Microsoft into a global software provider. Due to the growth of its brand, monopolization and
other factors Microsoft has been able to establish a very powerful and effective research and
development department which has come up with many competitive products which have
changed the course of technology.
Article IV.
SITUATION ANALYSIS (SWOT)
Any corporation in the technological field is aware of the risk of becoming redundant due to the
ever changing and highly innovative nature of the IT industry. Thus each company needs to use
its SWOT analysis to find a way to use its strengths and opportunities to lessen the effects or the
prospective effects of its weaknesses and threats.
Section 4.01
STRENGTHS
 Customer loyalty- this is due to the stability of Microsoft’s products especially its
Windows OS and its MS Office package. These two products have risen way above the
products of Microsoft’s competitors.
 Monopoly- as mentioned before due to the fact its products have been be able to cross
geographic borders without any restriction and also due to the stability and quality of its
products Microsoft has turned out as a global monopoly which is advantageous.
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 Brand name- with its origins in the 1980s Microsoft was born and has developed right in
front of the public eye. The revolutionary aspect of its innovations led to Microsoft
establishing a strong brand name.
 Variety of products-this spreads the risk. The products include: Windows OS, MS Office,
Xbox, MS Surface and Skype.
Section 4.02
WEAKNESSESS
 The fact that I has now become a household brand monotony have arisen making some of
its markets to shift to its competitors.
 Unlike Apple which is it major competitor it has a weak hardware brand name.
 The high prices of some of its products like the Xbox gaming console.
Section 4.03
OPPORTUNITIES
 By acquiring Nokia Microsoft has created an opportunity to outrun its competitors by
manufacturing both hardware and software. This will solve the issue of a weak hardware
brand name.
 The Windows 8 operating system has opened doors for deals with other companies which
are interested in producing smartphones with its platform e.g. HTC
 The improvement in technology in developing nations is an opportunity for Microsoft to
supply its products which are actually cheaper when compared with those of its
competitors.
Section 4.04
THREATS
 Numerous suits against Microsoft naming it as a monopoly.
 The Android platform which has taken the smartphone industry by storm.
 The improvement of Linux based operating systems which are actually free.
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Article V.
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COMPETITORS
Over the years Microsoft has accumulated competition in all the fields that it deals with.
Its major competitors in the operating systems development is Apple with MacOS, the open
source software community with Linux based operating systems like Ubuntu and Google with its
yet to become popular Chrome OS. These competitors have over the years led to Microsoft
coming up with better and more user friendly operating systems. On the sphere of gaming
consoles Microsoft faces an actually stiff competition from Sony and Nintendo. This completion
continue to be tougher each year due to the fact that Microsoft Xbox has been more expensive
that Sony’s PlayStation and Nintendo Wii U since its debut into the gaming console market.
On the level of smartphone operating systems its major competitors remain to be Apple
and Google once more with iOS and Android mobile platforms respectively. With Windows
Phone OS having recently entered the market and with Android having already taken 70% of the
market share Microsoft has to invest in better ways to make Windows Phone OS more user
friendly and available at cheaper prices to the market. Thus the major competitors that Microsoft
faces everyday are Apple and Google.
Article VI.
TARGET MARKET
Every company has a target market. This is because the entire population of men has
different needs which is actually advantageous to companies because it enables them to segment
the market into divisions which can be manipulated according to their characteristics. Microsoft
being a technological based company has an advantage especially in this age which can be
termed as the information age. This is because even continents like Africa which has many
developing nations actually becomes one of its major targets. The reason behind this is because
that developing nations offer a market which is not yet manipulated.
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The target market analysis can be divided into four areas i.e. demographics, geographic
location, attitudes and beliefs and purchasing trends. Demographics are mainly the personal
characteristics of a target market. It may include age, gender, annual income and other attributes
that makes the market to stand out from other target markets. Microsoft has many products
which actually target people with different personalities even in a certain target market.
Microsoft’s products include: Windows OS, MS Office, other applications that come with the
operating system, Xbox gaming console, MS Surface tablet PC and Windows based smartphones
due to the recent purchase of Nokia.
The Xbox gaming console targets the younger generation which has time to game.
However the company manipulates the fact that as long as person was a gamer when they were
young this behavior will last throughout the person’s life. Thus their indirect target market of the
gaming console is the older generation. The Microsoft Surface tablet which first hit the market
hit the market was targeting the market whose attitude towards the already existing android and
Apple tablets was negative. This gave Microsoft a chance to chip in with its own tablet PC
whose main selling feature was the then brand new Windows 8 operating system. This tablet also
targeted the section of the market which had a fairly good income. This is true because tablets
are mostly luxury products unlike mobile phones which can be considered to be necessity in this
generation. MS Office is however on of the few products together with Windows OS that has cut
across demographics and even geographic location. This is due to the change of the public
attitude towards manual systems. It an almost unanimous public opinion that manual systems
should be extinct regardless of the geographic location: from Africa to Europe and eve from the
Americas to Australia. This gave Microsoft a loophole to market its Office products which
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include popular software like Word, Excel, Access and PowerPoint which have all become a
necessity in the corporate world.
The other aspect of market analysis is the geographic location of the target market. This
is actually important to Microsoft as a global corporation as it gives it a way to segment the
entire global market and assigning different products to the different market segments. For
example due to the association of Windows OS, MS Office and technological advancement in
general gives Microsoft a chance to market these products internationally with no geographic
barriers at all. When it comes to smartphones, Xbox gaming console and MS Surface PC tablets
Microsoft’s target market is usually located in regions which are developed like Europe, Asia,
Australia, America and other parts of the world which are more developed. This means that a
few of these products are actually available in developing nations.
The beliefs and attitudes of a certain market segment may affect a company’s
profitability because these beliefs may reduce the market coverage of the company. For example
there are those market segments especially in the US which believe that Microsoft’s products are
inferior to Apple’s products. This gives Microsoft no choice but to find a way to improve its
products or may be to maximize its coverage on the markets that have trust on its products.
The purchasing trends of any target market influences largely how much a company
would be ready to invest in terms of supply to that market. A market with members who are
ready to spend without a limit is the ideal market for any organization. It is in this market that
products like the Xbox gaming console, the MS Surface tablet PC and high end smartphones like
the Nokia Lumia 1020 can be bought by one client. Thus Microsoft has divided its market into
segments according to how willing the clients are to spend on luxurious products. Market which
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are less willing tend to appreciate software products like Windows OS more than that they can
appreciate high end hardware products like MS Surface tablet PCs.
Article VII.
THE MARKETING MIX
The marketing mix is a term coined to describe the four main features that are needed for
any marketing to be successful. The four features are commonly referred to as the four Ps. The
four Ps are Product, Place, Price and Promotion. This means that a company has to come up with
a product which is needed by its target market and to find a way to make the product reach its
product market (place) and to price it at a rate that the target market will be comfortable with.
After doing all this the company has to promote the product so that its target market can become
aware of the existence of the product. The marketing mix thus consists of four strategies: product
strategies, distribution strategies, pricing strategies and promotional strategies.
Article VIII. MICROSOFT’S PRODUCTS
Microsoft being a software engineering company and the fact that it is a multinational
corporation gives it the ability of coming up with many products that suit different situations and
different people. The most popular of its products is its Windows operating system line with the
latest version being Windows 8.1 being an update of Windows 8 which was released in 2012. It
is actually through the development of operating systems that Microsoft has grown to become
what it is.
The other popular product is Microsoft Office. Since the introduction of MS Office into
the market no other office package software has been able to displace its unique position as the
best office software package. The latest version of MS Office is office 2013 and Office 365
which is a version of MS Office 2013 with cloud computing services. Apart from software
related products Microsoft has from the beginning been interested in smartphones which are
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running in their Windows Operating System platform. It due to this that Microsoft has acquired
Nokia. The latest smartphone running on Windows 8 platform is the Nokia Lumia 1520.
Apart from the smartphone market Microsoft has also been able to penetrate the gaming
console market with its Xbox 360 game console. It is actually one of the major competitors of
Sony and Nintendo in the gaming console market.
Since the inception of the company Microsoft has had a deep desire to design corporate
software that would enable the smooth operation of the corporations. This was actually where the
idea of MS Office came from. Yammer is a social corporate website that enable employees to be
connected to their co-workers and to their company networks.
When Microsoft knew that the age of the internet had arrived in the mid- 90s it decide to
develop Internet Explorer to compete against the veteran browser which was Netscape
Navigator. Apart from these products Microsoft has many other products that deal with corporate
issues for example Microsoft Dynamics which is a customer relationship management software
and Skype which is an online video conferencing and calling software are all applications
developed to aid those in the business world with their operations.
Section 8.01
MICROSOFT PRODUCT DEVELOPMENT STRATEGY/PROCESS
The first stage of the Microsoft product development cycle is to find an idea. To find an
idea the product team needs researches about three possible sources of ideas. The first source is
an opportunity to improve on the current available products. This was the concept of Internet
Explorer which was to improve on Netscape Navigator. The second source can be a problem in
the society that has not yet been solved. The concept of Windows 1.0 was to come up with a new
operating system that would have a graphical interface to solve the problem of the user
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unfriendly command based DOS. The third source can be a directive by the management of a
corporation for Microsoft to improve on the current software.
The second stage after the research has been done is the designing of the product. For
example the tiled design of Windows 8 hit the market even before the operating software was
released. The third stage is the scheduling stage whereby the product release is planned on a
certain day. This is important because it gives the company a chance to develop the product. The
fourth stage is the implementation stage whereby the product is developed by software
engineering teams. The fourth stage is the testing stage whereby the development team tries the
software and even releases to the software to the public as free previews to determine if it
performs as expected. For example before Windows 8 was released its preview version was
released to the public for testing. After this has been done the product is packaged and shipped to
the market.
Section 8.02
PACKAGING OF MICROSOFT’S PRODUCTS
Being an international corporation with a lot of public focus its packaging simple because
once a person sees Microsoft’s unique logo on a DVD package they immediately know that it
contains Microsoft’s software. The packaging also has few components and paperboard from
well managed forests and weighing less with each software release. This packaging is designed
this way to make it easier to recycle.
Section 8.03
LIFE CYCLE OF MICROSOFT’S PRODUCTS
Due to the fast growth of the technological industry and the introduction of new concepts
every day the life cycle of any software product is usually short. A normal product has four
stages in the life cycle i.e. introduction, growth, maturity and decline stages. However, products
in the technological industry have two stages. The introduction, growth and maturity stages are
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usually combined into one stage. The second stage is decline. For example the days that follow
the release of Windows 8 were characterized by the greatest number of purchases. A few months
later the purchase declined. However, just a few months into the decline stage Microsoft usually
announces a new product or an update to the previous. This was the case with the recent release
of Windows 8.1.
Section 8.04
PRODUCT UNIQUENESS IN MICROSOFT
Unlike the manufacturing industry the software engineering is actually based entirely on
uniqueness, creativity and thus it proves to be easy to differentiate one software firm’s product
from the next. Apart from its standing out Windows logo the general appearance of its software
is actually unique. For example when a person is given IPhone 5s and Nokia Lumia 1520 they
can easily differentiate that the IPhone is a product of Apple because of its interface and that the
Lumia is a product of Microsoft due to its interface. Apart from software and smartphones it is
actually an established fact that the Xbox 360 is entirely a Microsoft project. This is usually
achieved with advertising and knowledge of a certain brand by the public.
Section 8.05
MICROSOFT’S BRANDING STRATEGY
The truth about branding is that it is not about the company’s products or logos but about
what the customers and the general public think about the company. Since the inception of
Microsoft it has established its brand as a company that comes up with unique and problem
solving software. This consistency and knowledge of the current trends and using them to create
better solutions has been central to Microsoft’s branding strategy. For example Windows 7 was
released due to the increased trend in sue of wireless technology. Windows 8 on the other hand
was developed for the modern and improved touch technology together with the popular
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smartphone culture. Thus innovation, consistency and connecting with the public needs form the
central branding strategies for Microsoft.
Section 8.06
BRAND EXPANSION, LIABILITY AND SAFETY
One of the most quoted forms of brand expansion was Microsoft’s acquisition of Nokia.
This enabled Microsoft to develop hardware devices especially smartphones while using Nokia
well established brand. We thus can say that Nokia is an expansion of Microsoft’s brand. This is
important for any company because if Microsoft was to release smartphones under its name then
it would be faced with the challenge that every company faces before it enters a market.
When it comes to the liability and safety of Microsoft’s products its well established
brand and its previous release of safe and defect free products makes it a reliable corporation.
The readiness of Microsoft to replace any products which are bought with errors actually
increases the confidence level of its market in its products.
Article IX.
DISTRIBUTION OF MICROSOFT PRODUCTS
As stated in the previous assignments Microsoft produces a wide variety of
technological products which include software, gaming consoles, smart phones and tablet PCs.
Being a multinational company Microsoft needs to come up with different channels so that its
products can reach its many clients. The first distribution method is through a license agreement
with OEMs (Original Equipment Manufacturers) like Nokia, Samsung, HP, Acer and Lenovo
including other manufacturers. These companies being the major distributors of PCs and smart
phones buy Microsoft software and distributes it together with the devices.
The second channel of distribution is through retailers and resellers who buy the
software directly from Microsoft thus selling them physically to the customers. This is also
bound by a form of sales agreement so that the chosen retail stores will pledge to sell only
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genuine Microsoft software. The software which is sold through physical channels like retail
stores is usually packaged to distinguish it from any other software. Apart from software other
products like the Xbox gaming console and the Microsoft Surface RT tablet PC are sold and
distributed through physical channels even if they had been ordered online.
The third channel is through online cloud computing. In this case Microsoft places
its software on the internet and lets the clients either purchase or download for free. Operating
systems are sold online and can be downloaded once the purchase has been confirmed. Software
like Microsoft Security Essentials can be downloaded for free over the internet. Thus, with the
combination of the three channels Microsoft is able to reach clients wherever they are from
across the world. By just buying a laptop a person is already an indirect client of software
distributed by Microsoft through EOMs.
The costs that are associated with distribution of Microsoft products are actually few
considering that there is always a ready market for the products especially its software based
products. The costs involved are usually commission based when it comes to physical
distribution and retailers. The only costs that are incurred when it comes to online distribution of
software are the cost of maintenance of the website that hold the software and packages.
The delivery terms of Microsoft are actually not based on credit but on price and pay
terms. This is to say that the software becomes yours only when you have paid the full price of
the software. This is however only applicable to end users of Microsoft software and hardware.
When it comes to EOMs and retailers the terms of delivery are based on credit.
The delivery methods affect the time of delivery in that customers get the products
after a long period of time if the channel is physical by instantaneously if an online channel is
used. Physical methods especially retailer methods may be instantaneous but when it comes to
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buying a product like the Xbox console through online means the time frame of delivery may be
longer than if the same channel was used for downloading a software application. Thus both the
channel and product matter when it comes to the time frame of the delivery.
Microsoft products meet all packaging requirements. The first requirement is that
the net quantity of the products within the package should be declared. Microsoft does this on its
software CDs when it declares on how many PCs the single software CD in the package can be
installed. Also the product identity is usually on the package i.e. whether it is MS Office or
Windows OS or any other software application. The logo and name of Microsoft also appears
openly on the package making it easy for any interested buyer to identify the package. Thus we
can see that all Microsoft products, be it hardware or software, meet the necessary legal
packaging requirements.
Article X.
PROMOTIONAL TACTICS AND STRATEGIES
One of the best tactics that are used by companies to promote their products and services
is to come up with social media pages that allow a very personal level interaction with the
clients. Social media marketing gives the customers both real and prospective a chance to
express their attitudes towards Microsoft products. Thus the Twitter, Myspace and Facebook
pages of Microsoft exist to serve both promotional and customer service functions.
The other tactic is giving away some of the products for free. This is actually explicit
advertising although no one will force the client to purchase a Microsoft product after using the
free product. One example of Microsoft giveaways is the Microsoft Security Essentials which is
a free anti-virus software developed by Microsoft. After people purchase and use Microsoft
Security Essentials they are able to establish whether they will go back and purchase a software
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again. Thus Microsoft has to ensure that its promotional free products are high quality and that
they meet all the particular needs of the market.
Point of sale promotion takes place at the stores where Microsoft products are being sold.
At the stores new clients who have not yet experienced Microsoft products are given the chance
to explore the products. This is also a promotional strategy which most technological firms are
applying after they discovered that customers value uniqueness sometimes even over brand
identity. When Microsoft carries out point of sale promotions it does so to lure those customers
who may perceive its goods as unique.
Another promotional tactic that Microsoft should use is coming up with customer
appreciation events which focus on giving thanks to its customer for their trust and belief in their
products. This event should be mostly outdoors and should focus more on fun than on promotion
and advertisement. It should be an event whereby both the clients and employees of Microsoft
interact thus leading to an exchange of opinion and advice.
Although we have mentioned many promotional strategies that Microsoft uses to ensure
that its products reach its audience, one of the most important strategies is the collaboration with
manufacturing companies. When Microsoft collaborates with HP, Samsung, Dell, Lenovo, Acer,
AsusTek and other major PC manufacturing firms it enables its products to spread with little
advertising. This collaboration has actually led to the establishment of Microsoft as a giant
monopoly with most of the world using Microsoft Windows OS.
Article XI.
MICROSOFT PRICING STRATEGIES
Any company which is in a dynamic and highly competitive market needs to come up
with a logical and profitable pricing strategy which will only earn it profits but also give it the
desired proportion of the market share. Before a company comes up with a price for its products
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it needs to look at some factors that could lead to the failure or success of the good at that price.
These are the factors that determine how companies like Microsoft come up with their prices.
The first pricing strategy employed by Microsoft is the premium pricing strategy which is
determined by the uniqueness and ‘class’ of the product. When Microsoft comes up with a
product that no other manufacturers or software companies can come up with it tends to charge
high prices for it. This pricing thus depends on the inelasticity of demand considering the fact
that no other clear substitutes exist. For example, for many years Microsoft has been charging
premium prices for its operating systems because of the lack of a powerful substitute (Apple’s
Mac OS is proprietary and is no well supported by other hardware except Apple’s leaving
Microsoft as the only major player). However, due to changing market factors and the rise of
other players like Google who have ventured in the market, Microsoft, for the first time, reduced
the price of an operating system by launching Windows 7 at $200 in 2009 which was $40 less
than its predecessor Windows Vista. The premium marketing strategy also works well with the
Nokia Lumia high end smartphones because most people associate high prices with high quality
products.
Most of the time premium pricing cannot be said to be completely reasonable because its
aim is to show that the product is premium and can thus be bought by those who appreciate class.
The Xbox One priced at $499.99 is actually the most expensive of all gaming consoles with
PlayStation 4 at $349 and Nintendo Wii U at $299.99. Thus we can conclude that the Xbox One
is a high end premium product. As it is evident from the prices Microsoft also utilizes
psychological pricing whereby the prices of its products are not given absolute round figures but
are given decimal figures like $499.99. The price is thus competitive when considering the
market it targets, which is a market that is only quality sensitive and which has little worries
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about the pricing of a product. Actually, the other reason why the Xbox One is more expensive
than its competitors, besides the premium gaming experience, is that its production costs is
higher than the production costs of others – such as $90 more than the production cost of PS4 to
be precise. The return on investment has actually been low if we take the Xbox as the main
example of this pricing strategy. Microsoft has lost $3 billion since the launch of Xbox 360. If
Microsoft fails to reduce the price of the gaming console it may not get negative return on
investment considering the rise of powerful smartphones which can support games with high
graphics.
The second pricing strategy is penetrative pricing. Unlike premium pricing, penetrative
pricing aims to capture the market share of a saturated market or rather an unfavorable market
with high quality products priced lowly. This has been the recent approach that Microsoft has
had on the Chinese market considering the almost 100% rate of Microsoft software piracy in the
nation. 95% of the nation’s installed MS Office software packages were pirated. Microsoft has
decided to drop its prices so that the Chinese market can get the same products, (which were
previously pirated) but with extra features like after-sales services and updates, at a cheaper
price. Some products as sold Microsoft are sometimes free although this is actually a marketing
strategy aimed at attracting new clients. Once Microsoft penetrates the Chinese market it may
decide to increase the prices or maintain them depending on the profitability of either of the
methods.
With Microsoft launch of its penetrative pricing campaign in China it received an 800%
rise in purchase of original software with 80, 000 copies of its original software being purchased.
The strategy was thus competitive. Due to the extra benefits of buying original software the
Chinese clients were able to forsake the pirated copies of software. However, if Microsoft had
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tried to win the Chinese market with a premium pricing strategy most probably it would have
achieved a significantly lesser percentage of penetration into the market. This pricing strategy
takes into consideration the costs of production that would be lost if the product continues
making losses if sold at a higher price. Thus reducing the price to penetrate the market favors
both the company and the market. The company gets profits due to a surge in market share while
the market enjoys the same high quality services but at cheaper prices.
The return on investment of this pricing strategy is actually high due to the fact that the
cost of investment reduces with time while the gain from investment increases with time. When a
company tries to penetrate a market the cost of investment is high due to the need for marketing
and the need to come up with competitive products to outdo those available in the market
currently. Microsoft reduced it prices to outdo Google and other Manufacturers that had
penetrated the Chinese market. With time, due to an increased purchase of its products,
Microsoft will be able to apply its premium pricing strategy. Thus at this stage the gain from
investment will be greater than the cost of investment thus increasing the ROI (return on
investment).
Microsoft also uses the product bundle pricing strategy. This strategy is usually important
because it gives the user a perspective of value addition on the products. A product bundle is a
collection of different products into one package or bundle so that the company can sell the
bundle together that the market will perceive to be fair. The MS Office package is actually a
product bundle. When Microsoft sells Windows OS and MS Office at an inclusive price they are
also applying this strategy. When it comes to the considerations that surround this strategy we
can conclude that Microsoft sees it fit to sell most of its products as a bundle due to its
economies of scale and the fact that the market can purchase product bundles more than it will be
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25
willing to purchase individual software products. Actually it is this fact of market perception and
economies of scale that makes this strategy competitive and profitable. The ROI of this strategy
depends on the number of product bundles purchased. If fewer product bundles are bought the
cost of investment will remain to be higher than the gain from investment and thus a lower ROI.
However, if the number of product bundles bought is high then the gain from investment is
higher than the cost of investment and thus a greater ROI.
Another strategy which is used by nearly every multinational corporation is the
geographical pricing strategy which manipulates the fact that different geographical locations
have different economic conditions and different restrictions on international products. Thus the
pricing of products in a first world nation would be different from the pricing in a third world
nation. Actually the nations which have high rates of piracy can attribute this to the lack of
geographical pricing whereby software corporations declare a uniform price for the entire the
world. This strategy if used well is competitive enough to earn Microsoft profits in those regions
which were previously pirating the software instead of purchasing the original copies of the
software. Thus Microsoft might not gain that much ROI using this strategy but it will gain the
great market share that would have been lost if it continued using uniform prices for all its
products in all nations.
BUDGET, SCHEDULE AND MONITORING OF MARKETING ACTIVITIES
Due to the increased completion in all sectors of production Microsoft has decided to
increase its marketing budget from approximately $1.6 billion in 2012 to $2.5 billion in 2013.
This has been motivated by Samsung’s major marketing budget of nearly $4.0 billion per annum
and the comparison of its budget and its major share in the smartphone market. Thus Microsoft
wants to aggressively market its products to the global market with an intention to increase its
Running head: Microsoft’s Marketing Plan
share in the smartphone and tablet market.The scheduling of the aggressive promotion falls
during the festive period when most of the target market are in strategic places where the
promotion can take place.
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References
Company Information (2013, June). Retrieved from
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Microsoft (n.d.). Retrieved from http://www.microsoft.com/enable/microsoft/mission.aspx
A History of Windows (n.d.). Retrieved from http://windows.microsoft.com/enus/windows/history
Pricing Strategies (n.d.). Retrieved from http://www.marketingteacher.com/lesson-store/lessonpricing.html
Burrows, P. (2009, July). Microsoft’s Aggressive New Pricing Strategy. Retrieved from
http://www.businessweek.com/magazine/content/09_30/b4140051491507.htm
Rogowsky, M. (2013, November). Microsoft’s New Strategy Doomed by Contradictions.
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Microsoft Products and Services (n.d.). Retrieved from
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Guthrie. S (n.d.). The Microsoft Software Development Process. Retrieved from
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Product Life Cycle Stages (n.d.). Retrieved from http://productlifecyclestages.com/