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Running head: Microsoft’s Marketing Plan Microsoft’s Marketing Plan Student’s Name College Affiliations 1 Running head: Microsoft’s Marketing Plan 2 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. Running head: Microsoft’s Marketing Plan 3 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 Running head: Microsoft’s Marketing Plan 4 Article X. PROMOTIONAL TACTICS AND STRATEGIES ................................................... 20 Article XI. MICROSOFT PRICING STRATEGIES ................................................................... 21 Running head: Microsoft’s Marketing Plan Article I. 5 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 Running head: Microsoft’s Marketing Plan 6 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 Running head: Microsoft’s Marketing Plan 7 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 Running head: Microsoft’s Marketing Plan 8 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 Running head: Microsoft’s Marketing Plan 9 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. Running head: Microsoft’s Marketing Plan 10 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. Running head: Microsoft’s Marketing Plan Article V. 11 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. Running head: Microsoft’s Marketing Plan 12 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 Running head: Microsoft’s Marketing Plan 13 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 Running head: Microsoft’s Marketing Plan 14 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 Running head: Microsoft’s Marketing Plan 15 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 Running head: Microsoft’s Marketing Plan 16 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 Running head: Microsoft’s Marketing Plan 17 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 Running head: Microsoft’s Marketing Plan 18 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 Running head: Microsoft’s Marketing Plan 19 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 Running head: Microsoft’s Marketing Plan 20 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 Running head: Microsoft’s Marketing Plan 21 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 Running head: Microsoft’s Marketing Plan 22 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 Running head: Microsoft’s Marketing Plan 23 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 Running head: Microsoft’s Marketing Plan 24 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 Running head: Microsoft’s Marketing Plan 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. 26 Running head: Microsoft’s Marketing Plan 27 References Company Information (2013, June). Retrieved from http://www.microsoft.com/about/companyinformation/en/us/default.aspx Microsoft (n.d.). 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