Well, it has happened again. A marketing lesson taught about who owns brands. This time, the pupil was a corporate behemoth, Microsoft. The company first made a splash last week at the E3 show with its upcoming Xbox One gaming console. The splash was followed by waves that developed after Microsoft announced stringent rules on selling and sharing games and regular connection to the Internet to check for updates as well as any new games added to a user’s system. Xbox fans were not impressed, and the decision to become more controlling over gamers’ access to content could not have come at a worse time. Sony is preparing to bring the PlayStation 4 to market this fall and will compete with Xbox One for next generation console dominance. Microsoft is at a decided price disadvantage, with planned pricing for Xbox One at $499 compared to $399 for the PS4. The combination of consumer angst and price differential does not bode well for Microsoft. A poll conducted on Amazon.com to gauge preference for Xbox One versus PS4 was running 18 to 1 in favor of Sony at one point.
Same Song, Different Brand
As I prepared to write this post, I could not help but feel I had written it before… and I have- more than once. In fact, less than a month ago I wrote about how Nutella had to reverse course and give its blessing to a user-created World Nutella Day event. Why does this subject keep coming up? Because brand marketers lose sight of who the real owners of their brands are. Of course, the business legally owns the rights to the tangible brand assets- name, logo, maybe even a slogan or package design (think contour bottle of a Coca-Cola). But, that is where the seller’s control stops. Brands are images in our minds, experiences in our daily lives, and relationships that add value. Brand as image, experience, and relationship is constructed by customers and communities of people who form a connection with a brand. We ascribe meaning and significance that brands hold; those feelings are not dictated to us by marketers (though they often try). Microsoft’s stringent digital management rights policies seemed odd because they came off as rules imposed by the seller rather than a model that benefits users in some way.
A Recoverable Gaffe?
Sony was quick to pounce on Microsoft’s user-unfriendly plans for the Xbox One. However, Sony did not have to say a word as gamers torched Microsoft on social media. Below is an example of the treatment Microsoft’s planned policies received from the gaming community:
No wonder PS4 enjoyed an 18 to 1 preference in the Amazon poll mentioned earlier. Microsoft had little choice but to rethink its DRM policies for Xbox One and make them more compatible with the experience gamers are accustomed to enjoying. But, it seems that Microsoft could have saved itself from being skewered online if it had been more customer-centric in the first place. The Xbox brand sits in the enviable position of market leader in video game consoles. Even a $100 price premium might be feasible given its brand equity and consumer trust of the brand. However, that trust was eroded quickly when Microsoft forgot its customers made the Xbox brand valuable and attempted to enact policies that favored only one side of the buyer-seller relationship. There is still time for Microsoft to recover from its missteps; hopefully the company will keep the customer front and center in its marketing strategy as it brings Xbox One to market.
News that Microsoft may discontinue its Zune music player may be denied by the company, but it seems to be only a matter of time before it will happen. Launched in 2006 as a competitor to Apple’s iPod, Zune has done little to derail the iPod’s dominance. Microsoft faced an uphill battle given that iPod was established as the dominant music player in the market, but it is too easy to chalk the failure of Zune to being a late market entrant.
Portable music player is not the first category that Microsoft entered late; the company was far behind Nintendo and Sony entering the video game console category. It would seem that Microsoft faced a more daunting challenge taking on two entrenched brands, both with loyal customers. And, there were times when it looked like the Xbox could ultimately face a fate similar to the one Zune is staring at today.
However, Xbox has solidified itself as a force in video games. According to data from NPD Group for the period March 2010 to February 2011, Microsoft’s Xbox 360 had 38.3% share of the 18 million video game consoles sold. Microsoft’s share was just behind Nintendo Wii (38.6%) and Sony PlayStation 3 (23.1%). Microsoft’s market share jumped 12 percentage points in the past year, taking most of its gain from Nintendo (down 11.6 percentage points).
What is the difference between Zune and Xbox 360? Borrowing my favorite marketing book title, it is another case of “differentiate or die.” Zune has never successfully differentiated itself as being unique or superior to iPod. Granted, Microsoft faced an uphill battle given iPod’s icon status as a lifestyle brand. But, Apple successfully used marketing to get to that point. In contrast, marketing for Zune did not resonate with consumers.
Microsoft faced a similar uphill battle competing against Wii and PS3 yet has proven to be a formidable competitor in the video game category. The difference- Xbox has been able to differentiate itself from Wii and PS3. Its Kinect sensor, inspired by the motion-activated gaming experience of the Wii, has been popular with existing Xbox players and attracted new users. And, Xbox Live enhances the gaming experience by letting players connect with friends and fellow gaming enthusiasts online.
Being late to market is not a liability, it is an excuse. Failure to deliver a differentiated experience compared to the status quo is the real issue that dooms most failed products. “Differentiate or die” is not just a clever book title; it is a mantra by which marketers should live when it comes to developing product strategy.