A Critical Analysis of Late Market Entry
Strategies: A Case study of Microsoft’s
Xbox Game Console
By
Geoff Blaber
September 2002
Dissertation submitted to the University of Leicester in
partial fulfilment of the requirements for the degree of
Master of Science in Marketing
Contents
List of Figures
I.
List of Tables
II.
Acknowledgements
IV.
Executive Summary
V.
1 Introduction
1
1.1
An Entertainment Revolution
1
1.2
An Emerging Player
1
1.3
The Xbox
2
1.4
Market Entry Strategy
3
1.5
Methodology
3
1.6
A fore note
4
2 Literature Review
5
2.1
Introduction / What is a Market Entry Strategy
5
2.2
The Entry Strategy Performance Model
6
2.3
Entry Timing – First Mover Advantages?
7
2.4
Effective Targeting / The Diffusion of Innovation
10
2.5
The Role of the Product and Positioning
12
2.6
Pricing
15
3 Methodology
19
3.1
Literature Identification
19
3.2
The Research Approach
20
3.3
Quantitative Research
21
3.31 Choice of technique
21
3.32 The Sample
21
3.33 Questionnaire Format
23
3.34 Analysis
24
3.35 Problems Experienced
24
Qualitative Research
25
4 Data Analysis / Findings
27
3.4
Quantitative Research
4.1
The Sample Makeup
27
4.2
“How has Microsoft’s entry timing influenced the performance of the Xbox?”
29
4.21 Has the fact the PS2 has been available for 18 months prior to Xbox’s
release meant consumers are demonstrating greater commitment to that
console and games, OR have consumers waited for the Xbox and it’s
newer technology?
29
4.22Consumer’s perspectives on the effect of the PS2 being the first new
generation console to market
4.23Has the later introduction had a positive effect
32
i.e. is the Xbox now
perceived as the most desirabe and dominant technology?
4.24 The effect of the fact Microsoft is new to the console market
35
41
4.25 Is entry timing irrelevant, are people purchasing more than one console?
42
4.3
“How Effective has Microsoft’s targeting strategy been?”
43
4.31 Has the intended initial audience of 16 – 26 yrs males been reached? / Is
there evidence of the Xbox progressing through the diffusion of
innovation as intended i.e. from the 16 – 26 yrs males to a wider
audience including females and older users?
4.4
43
4.32 What is the perceived target market among consumers?
47
“How has the Xbox been received by consumers?”
47
4.41 What is the relative opinion of the Xbox compared to other consoles, has
its greater specifications had a substantial impact?
47
4.42 How important has the accompanying games line up been in the
purchase decision, what is the opinion of Xbox games compared to the
competition?
51
4.43 What effect has the Microsoft Brand Name had on consumer’s intentions
to purchase?
56
4.44 To what extents do non-Xbox owners intend to purchase the console? 56
4.5 “How has Microsoft’s advertising influenced the performance of the Xbox” 58
4.51 Has Microsoft’s desire to position the Xbox as a more inclusive machine
than the PS2 meant a wider demographic is adopting it?
58
4.52 What do consumers think Microsoft is trying to achieve with their
advertising / do they think the advertising will attract a broader audience
than PS2?
61
4.53 Do consumers feel the advertising has created widespread awareness of
the Xbox?
4.6 “How has Microsoft’s pricing strategy influenced sales / market share?”
63
64
4.61 What was consumer opinion of the original £300 retail price and who
purchased before the reduction?
64
4.62 What effect has the reduction to £199 had, are consumers now more
likely to purchase / what do consumers think of the price compared to
other consoles?
66
Qualitative Research
4.7 The Magazine Interview
69
5 Discussion / Interpretation
74
5.1
“How has Microsoft’s entry timing influenced the performance of the Xbox?”
74
5.2
“How effective has Microsoft’s targeting strategy been?”
76
5.3
“How has the Xbox been received by consumers?”
77
5.4
“How has Microsoft’s advertising influenced the performance of Xbox?”
78
5.5
“How has Microsoft’s pricing strategy influenced sales / market share?”
6 Conclusions
6.1
79
82
“How has Microsoft’s entry timing influenced the performance of the Xbox?”
82
6.2
“How effective has Microsoft’s targeting strategy been?”
82
6.3
“How has the Xbox been received by consumers?”
83
6.4
“How has Microsoft’s advertising influenced the performance of Xbox?”
84
6.5
“How has Microsoft’s pricing strategy influenced sales / market share?”
84
6.6
Looking Forward
85
Recommendations
86
Reflections
88
References
APPENDIX I
The Questionnaire
APPENDIX II
Interview Transcript
List of Figures
1.
A Graph to show the age of respondents (Pg 27)
2.
A Graph to show the sex of respondents (Pg 28)
3.
A Graph to show the time respondents spend playing video games (Pg 29)
4.
A Graph to show the owners of PS2 (Pg 30)
5.
A Graph to show the owners of Xbox (Pg 30)
6.
A Graph to show the owners of Gamecube (Pg 31)
7.
A Graph to show the owners of other consoles (Pg 31)
8.
A Graph to show the importance to consumers of the fact the PS2 was the
first new generation console (Pg 33)
9.
A Graph to show whether respondents are less likely to purchase an Xbox
or GameCube if they had already bought a PS2 (Pg 34)
10.
A Graph to show respondents favourite console (Pg 36)
11.
A Graph to show PS2 owners favourite console (Pg 37)
12.
A Graph to show Xbox owners favourite console (Pg 38)
13.
A Graph to show GameCube owners favourite console (Pg 39)
14.
A Graph to show owners of other consoles favourite console (Pg 41)
15.
A Graph to show whether respondents are less likely to buy an Xbox
because Microsoft are new to the console market (Pg 42)
16.
A Graph to show the sex of Xbox owners (Pg 44)
17.
A Graph to show the age of Xbox owners (Pg 44)
18.
A Graph to show the time Xbox owners spend playing video games (Pg
45)
19.
A Graph to show consumers perception of the Xbox target market (Pg 47)
20.
A Graph to show the mean consumer considerations in console purchases
(Pg 48)
21.
A Graph to show the mean consumer ratings of the PS2 (Pg 49)
22.
A Graph to show the mean consumer ratings of the Xbox (Pg 50)
23.
A Graph to show the mean consumer ratings of the Gamecube (Pg 50)
24.
A Graph to show the ratings of Xbox’s games selection (Pg 52)
25.
A Graph to show the ratings of the Xbox’s games quality (Pg 52)
26.
A Graph to show whether respondents would purchase an Xbox just to
play particular games (Pg 53)
27.
A Graph to show the effect of the Microsoft brand name on consumer’s
intentions to purchase an Xbox (Pg 56)
28.
A Graph to show the intentions of respondents to purchase an Xbox (Pg
57)
29.
A Graph comparing respondents intention to purchase and favourite
console (Pg 58)
30.
A Graph to show the sex of PS2 owners (Pg 59)
31.
A Graph to show the age of Xbox owners (Pg 60)
32.
A Graph to show the time PS2 owners spend playing video games (Pg 61)
33.
A Graph to show the image respondents felt Microsoft are trying to present
with the “Play More” campaign (Pg 62)
34.
A Graph to show whether respondents thought Microsoft’s advertising
would attract a broader audience than PS2 (Pg 63)
35.
A Graph to show how successful respondents think Microsoft’s
advertising has been in raising awareness (Pg 64)
36.
A Graph to show whether respondents felt the Xbox launch price was too
high compared to other consoles (Pg 65)
37.
A Graph to show those Xbox purchases before and after the price cut (Pg
66)
38.
A Graph to show whether respondents felt the present price is reasonable
compared to other consoles (Pg 67)
39.
A Graph to show the mean rating respondents gave the PS2, Xbox and
GameCube prices (Pg 68)
List of Tables
1.
A Table to show the importance of console popularity (Pg 34)
2.
A Table to show the Chi-square tests for Xbox owners favourite console
(Pg 38)
3.
A Table to show the Pearson’s Correlation for Xbox owners favourite
console (Pg 39)
4.
A Table to show the Chi-Square Tests for GameCube owners favourite
console (Pg 40)
5.
A Table to show the Pearson’s Correlation for GamCube owners favourite
console (Pg 40)
6.
A Table to show the Owners of PS2 * Owners of GameCube Cross
tabulation (Pg 42)
7.
A Table to show the Owners of PS2 * Owners of Xbox Cross tabulation
(Pg 42)
8.
A Table to show the Owners of Xbox * Owners of GameCube Cross
tabulation (Pg 43)
9.
A Table to show the Chi-Square Tests for the time Xbox owners spend
playing video games (Pg 46)
10.
A Table to show the Pearson's Correlation for the time Xbox owners spend
playing video games (Pg 46)
11.
A Table to show whether particular Xbox games would tempt PS2 owners
to purchase an Xbox (Pg 54)
12.
A Table to show whether particular Xbox games tempted Xbox owners to
purchase an Xbox (Pg 54)
13.
A Table to show whether particular Xbox games would tempt GameCube
owners to purchase an Xbox (Pg 54)
14.
A Table to show whether particular Xbox games would tempt other
console owners to purchase an Xbox (Pg 54)
15.
A Table to show chi-square tests regarding whether Xbox owners were
tempted to purchase an Xbox by particular games (Pg 55)
16.
A Table to show Pearson’s Correlation regarding whether Xbox owners
were tempted to purchase an Xbox by particular games (Pg 55)
Acknowledgements
Many thanks to my supervisor, one Mr M. Higgins who expertly guided me in a
project that at one stage I felt was going to end up in another 4 years work in the
shape of a PhD. Similarly, thank you to Mr John Booth without whose knowledge on
all things video games and proximity to the industry, I would have failed to complete
the work to the same standard. I would further like to thanks the shops “Another
World”, “GameStation” (Leicester) and “The Video Games Centre” (Bournemouth)
who kindly agreed to distribute the questionnaire and all those respondents who took
the time to complete it. Thank you also to Mr Dave McCarthy of “Edge Magazine”
who kindly accepted the invitation and took the time out to be interviewed. Finally
thank you to all those who put up with the indirect consequences of such an
undertaking, my family, friends and girlfriend Allana I’m sure will all understand
what I’m talking about.
Executive Summary
This study critically analyses the European market entry strategy of the Microsoft
Xbox, which was launched on 14th March 2002. This is achieved by examining
consumer opinion via the means of a survey and through a supplementary interview
with Dave McCarthy, News Editor of “Edge Magazine”. The study focuses
specifically on the areas of the effect of entry timing, segmentation / targeting
including the diffusion of innovation, the importance of product content, positioning
through advertising and pricing. These factors were felt to offer the most
comprehensive analysis possible of Microsoft’s entry strategy.
Conclusions established that in terms of Microsoft’s entry timing, 18 months
following the launch of Sony’s PS2, there existed no entirely positive or negative
outcome, the later introduction resulting in advantages and disadvantages. In regards
to segmentation the initial target demographic appeared to have been successfully
reached although evidence of this progressing to a wider audience was limited.
Similarly whilst general consumer opinion of the Xbox rated it lower than the PS2 or
GameCube, good ratings were attributed to the console’s specifications and the
quality of games, suggesting the Xbox has succeeded in the vital domains of console
performance and software quality thus aiding long-term prospects. In respect of
positioning the Xbox as a more inclusive machine than the PS2 however, there
appeared to be limited success and evidence drew my conclusion that confusion exists
over the message Microsoft are trying to communicate. Similarly the initial pricing
strategy was concluded inappropriate considering Microsoft’s strategic objective of
penetrating the market.
Chapter 1:
1.1
Introduction
An Entertainment Revolution
In 1990 an American survey published the finding that one virtual Italian plumber
called “Mario” was recognised by more children than Mickey Mouse. Just five years
later Mario games had sold over 120 million copies worldwide (Poole, 2000, Pg 159).
Indeed annalists predict such trends will increase as
“Games unify into a single mass market… contrasted with the prevailing trend
in entertainment, which, particularly with TV, is splintering.” (Takahashi, 2002,
Pg26)
Video games are thus growing to become a direct competitor to the cinema
experience with greater financial reward. Nintendo’s “Legend of Zelda: Ocarina of
Time” for example grossed $160 million over Christmas 1998 which far over
shadowed the popular box office title “A Bug’s Life” (Poole, 2000, Pg23).
Furthermore, the industry is expected to grow explanatorily over the next few years.
Forrester Research predicts the industry to triple between 2000 and 2005 and
International Data Corp estimate console penetration to double to 70%. Such growth
is largely explained by the broadening of the market, which has expanded (and still is)
from a children’s market in the 1990’s to one where 16 – 26 yr olds are the largest
segment (Curtis, Marketing, 7/3/02). Unsurprisingly therefore, the industry is a highly
attractive sector with the potential to supply significant rewards to the victors both in
financial terms and in providing a long-term strategic foothold in living room
entertainment.
1.2
An Emerging New Player
The broadening video game demographic has largely been down to Sony who
introduced their “Playstation” in 1995. Since then Sony have grown to define video
games establishing an installed base of 79.61 million PS1units worldwide (Jan 2001)
and over 25 million units of their new generation PS2 (March 2002) (Sony press
release). Such consolidation at the announcement of the PS2 alerted Bill Gates and
Microsoft to the fact that
“The PS2 was going to be more than a TV set-top or game box. It was going
to be a direct threat to the PC” (Takahashi, 2002, Pg 14).
The new console was likened to a “Trojan horse” by 3DO’s Trip Hawkins, purchased
as a games machine but used as an entertainment hub that usurps the roles of the TV
set top box and PC (Takahashi, 2002, Pg 17). The tightening of Sony’s stranglehold
on this growing entertainment medium further concerned Microsoft due to the current
slowdown of the PC market that was becoming a “replacement industry”.
“PC users may only buy a new copy of Windows or Office every four or five
years, but console owners could buy four or five new games every year” (The
Guardian Online Supplement, “Gates Pulls the Trigger”, 7/3/02)
For Microsoft therefore, the decision to compete head on with Sony had largely been
decided for them but the question remained whether to compete with a pure games
console or “come up from the appliance world via Web TV” (Takahashi, 2002, Pg
104). It was decided the response would be the former, and the “Xbox” was
announced at the “Game Developers Conference”, San Jose on March 10th 2000.
1.3
The Xbox
The Xbox was thus launched in Europe on March 14th 2002 featuring an Intel
Pentium III chip, nVidia Graphics card, 8GB hard disk, DVD and broadband
connections for online gaming making it by far the most superior console,
specifications wise, available. Its PC based development also means it’s a “developer
friendly” platform, games easier to produce for the Xbox compared with the PS2 or
GameCube. Microsoft thus aim to grow the overall market, rather than stealing
customers from Sony and Nintendo and therefore establish
“Twin pillars with the PC in the den and the Xbox in the living room”
(Takahashi, 2002, Pg 180).
Whilst the short-term intention is to penetrate the console market therefore,
Microsoft’s strategy evidently has the long-term intention to develop an
“entertainment hub”, cast in a similar mould to Sony’s “Trojan Horse”, which handles
everything from e-mail to video recording (www.CNETNews.com, “Xbox May
Spawn Entertainment Hub”, 15/1/02). However before embarking on this Microsoft
need to emulate Sony’s success 7 years earlier at establishing themselves as a
newcomer in a highly cyclical market characterised by a handful of dominant brands
– since the demise of Sega’s console namely Sony and Nintendo, both wielding huge
user bases, developer support and customer loyalty.
1.4
Market Entry Strategy
Market entry strategy has been the subject of significant investigation in the context
of many products and services due to its importance in the eventual success of the
product. Furthermore, the volume of considerations that can be labelled relevant to
“entry strategy” means the subject is one of particular complexity as studies can differ
greatly in their area of focus and in establishing what constitutes the vital components
of an effective entry strategy. In the context of the Xbox therefore I found this subject
highly interesting. As I investigated the literature I found the nature of the console
market seemed to question many of the conventional theories of entry strategy and I
identified no study that had explored this rapidly expanding market. Furthermore, the
entry strategy Microsoft implemented was going to play a crucial role in attempting to
penetrate a market already dominated by Sony and Nintendo. Consequently I decided
that investigation in this area could prove a valuable piece of research.
1.5
Methodology
An initial problem however was that most studies used information from within a
company to evaluate their entry strategy. This was not possible so after more research
I decided the primary means of investigation would be from the consumer’s
perspective. This appealed to me for two reasons: Firstly, the consumer is the ideal
person to evaluate an entry strategy as they are the ultimate receiver and are unbiased.
Secondly, I had identified no study that had used this approach so would be an
original means of execution. A questionnaire was thus used to investigate consumer
opinion, which was supplemented by an interview with a leading figure in the
industry – Dave McCarthy, News Editor of Edge Magazine.
It should be appreciated however that there were limitations in carrying out
this study. Firstly, due to the scope of entry strategy, only factors that I felt important
following my research were formulated into research objectives. This is evidently
value laden and will inevitably mean some issues of importance will not be covered
but time was a significant restriction. Similarly time constraints meant the entry
strategy could only be evaluated up until the end of August 2002. It would have been
desirable however to evaluate after Christmas 2002 which is approaching the first
year of the Xbox’s lifecycle. My sample was also largely waited towards people
living in the Leicester area and older frequent game players, which may not be
representative of the UK as a whole. Furthermore, although this study focuses on
Microsoft’s European market entry strategy, as the UK is included within that, my
research only reflects UK opinion. It would have been interesting to compare that
with other European countries but wasn’t possible in the time frame.
1.6
A fore note
This study analyses the Xbox’s market entry strategy up until early August 2002.
Days before completion (28/8/02) price cuts were made to the PS2 (to £169.99) and
the Xbox (£159.99). This typifies the very competitive nature of the console market
and reinforces my belief that this project could remain incomplete come the launch of
Xbox2. A cut off point has to be installed however and thus this study does not
include these or subsequent events.
Chapter 2:
2.1
Literature Review
Introduction / What is a Market Entry Strategy?
Analysis of literature regarding market entry strategies in the context of the Xbox
demonstrates the highly specific nature of the console market. A number of examples
exist where evidence refutes conventional theories or approaches simply cannot be
applied. As Asakura (2000) states,
“If Sony had followed a traditional business model in the game market, it
could not have dreamed of such remarkable success”. (Pg 91)
Furthermore I have identified no studies that evaluate entry strategies from a
consumer perspective. This review thus seeks to identify such weaknesses and
develop opportunities for research.
Prior to exploring the literature however it is necessary to appreciate the
substantial scope of the topic,
“No study encompasses enough variables to provide a complete picture of the
set of decisions which constitutes a launch strategy” (Hultink, et al 1998, Pg 270).
Market entry strategies are important therefore due to their significant influence on a
products long-term success. Copper and Kleinschmidt (1988) found 54% of all new
product development (NPD) expenditures are spent on the launch compared to 34%
on product development itself. They also suggest poor consideration of entry strategy
partially explains high product failure rates (Green, Barclay & Ryans, 1995). Defining
what constitutes an entry strategy however is problematic. Green et al (1995, Pg 1)
suggest this is firstly because no consensus exists concerning which managerial
decisions constitute an entry strategy and secondly, many external factors to strategy
are said to influence product success e.g. competencies, experience and structural
characteristics of the market.
Recent studies however identify two broad categories of decisions that form
market entry strategies: “strategic” and “tactical” (Hultink et al 1998). Strategic
launch decisions are made early in the process that “set the strategic context into
which the new product will ultimately be launched” (Hultink et al 1998, Pg 271).
Elements of product strategy, market strategy and the firm’s strategy are thus
addressed. The latter includes what Cooper (1993) calls the “protocol” and Biggadike
(1979) the “posture”, i.e. the what, where, when and why to launch questions. This
encapsulates the overall orientation towards NPD, the nature of the new product, the
structure of the target market and its competitive position (Hultink et al 1999). These
decisions influence which of the tactical launch decisions are most likely to maximise
profitability over a products lifecycle (Hisrich and Peters, 1991).
Tactical launch decisions directly relate to the commercialisation of the
product and reflect traditional elements of the marketing mix such as price, product,
distribution and promotion. A greater degree of flexibility accompanies such
decisions, which can be modified as launch nears. The success of the product depends
on the implementation and alignment of both these decision sets as the new product
launch is “based on a mix of elements which should be mutually reinforcing” (Wind,
1982).
2.2
The Entry Strategy Performance Model
Green et al (1995) have developed a comprehensive view of market entry with the
“Entry Strategy Performance Model”. An appreciation of this is central in
understanding the extensive variables internal to the company (the strategic and
tactical launch decisions) and external that influence and operate within a market
entry strategy.
The model consists of three core managerial decision components. Firstly
“Timing of Entry” concerns the decision of when to enter a market. Secondly is the
“Magnitude of Investment at Entry and During the Entry Period” which concerns
aspects such as promotional activities and distribution decisions. Finally is the “Area
of Competitive Emphasis” which details where investments will be made. These
components establish a platform upon which the products future success will be built.
The ESPM thus moots that these decisions create a competitive positioning for the
product, resulting in positional advantage, manifested in superior customer value
and/or lower relative costs. The more effective the positioning therefore, the better the
performance outcome is likely to be.
Besides managerial decisions, external factors beyond immediate control also
influence the selection of entry strategy and product success. The first of these are
“Sources of Advantage” (Day & Wensley 1988) which includes particular skills like
marketing or production, prior entry experience and resources such as capital,
production facilities, distribution access and brand name. It is interesting to note
however that Xbox is attempting to position itself away from Microsoft due to
concern that gamers are petered by the monopolistic position achieved in the PC
software market. Secondly are “Product-Market Characteristics” which includes
concentration, growth rate, market potential, entry barriers and the number of
competitors. All these variables contribute to the products ultimate performance,
which may be evaluated by criteria such as profitability, market share, customer
satisfaction, return on investment and market growth etc. Evidently the criteria by
which performance is evaluated will depend upon the company’s objectives for the
product.
2.3
Entry Timing – First Mover Advantages?
A key managerial decision regarding entry strategy in the ESPM was the timing of
market entry, an issue of particular relevance to Microsoft as the X-box is entering a
market containing the highly established brands Sony and Nintendo. Traditionally
therefore,
“It is widely held that first to market products enjoy competitive advantages
over later arrivals”. (Hart and Tzokas, 2000, Pg 389)
Stigler (1981) thus considers pioneers acquisition of market knowledge as greatly
advantageous as it allows fine-tuning and second-generation products to be introduced
before competitors. Sony have capitalised on this by ensuring they are first to
introduce their new generation console, the “Playstation2” (PS2), building on the
success of the “Playstation”. Dumaine (1989) also argues that freedom to charge a
premium price until the arrival of competitors ensures greater initial profitability and
substantial market share. Bond and Lean (1977) reinforce this,
“Early followers can expect to achieve at most a market share that is no
greater than 60% of that achieved by a pioneer”.
The shortening length of PLC’s in modern markets further assist pioneers as early
market entry gives the product maximum sale time (Cordero, 1991). This also has the
advantage of installing a significant customer base. By X-box’s March 14th European
release, the PS2 had sold over 2 million units in the UK and 25 million worldwide
(Curtis, “Playing at the next Level”, Marketing, 2002). Sony also has the advantage of
a “large installed base of 64 bit customers” (Merrill Lynch – Console Wars,
26/3/2001).
Carpenter and Nakamoto (1989) further emphasise such advantages by
illustrating how a preference structure is established that favours the pioneer making it
difficult for later entrants to “compete away a pioneers advantage”. Consequently the
pioneer becomes strongly associated with the product category, therefore becoming
the “standard” against which later entrants are judged. Sony’s “Playstation” has
arguably achieved this by establishing a user base through sales of over 79.61 million
units (January 2001, Sony press release). Carpenter and Nakamoto would thus suggest
“Xbox” position themselves close to the PS2 to try and compete away their advantage
rather than differentiate which they deem less successful as consumers perceive a
substantial difference between the new product and the pioneers original.
However, significant counter arguments exist. First movers are subject to a far
higher risk of failure as the market is yet unknown (Kalyanaram & Urban, 1992).
Furthermore, particularly with radical innovations, the high level of uncertainty
regarding market acceptance can moderate the effect of early entry (this wasn’t the
case with Sony however as they continued the established approach adopted with the
Playstation, the name “PS2” reflecting this). Hart and Tzokas (2000, Pg 393) thus
suggest superior skills can be amounted for the market being developed at
considerable expense by pioneers, later outplaying with their own offering. Bowman
and Gatignon’s (1996, Pg 240) study found that although the main affects of late entry
are minimal, responses in a brands marketing mix are critical. Shankar and Carpenter
et al (1998) argue beyond this however by demonstrating how an
“Innovative late mover can create a sustainable advantage by enjoying a
higher market potential and a higher repeat purchase rate” (Pg 54).
This can be achieved in two ways. The first is to understand the preferences that
define the category (see earlier discussion of Carpenter and Nakamoto 1989) then
identify a superior but overlooked product position, undercut on prices or out
advertise. The second opportunity is to overtake through innovation via the product or
strategy. “High technology” markets such as video games are particularly open to this.
Despite being the first home console for example, the “Magnavox Odyssey” only sold
100,000 units over its 2-year life before being ousted by Atari’s “Video computer
system” in 1977. Similarly Atari itself lost its market dominance in the mid 1980’s,
unable to compete with the improved specifications and software of Nintendo and
Sega (Kent 2001).
George Harrison
(Vice President of Marketing, Nintendo USA) also
downplays the importance of being first to market insisting, “chronology has little or
nothing to do with ultimate consumer acceptance” (Brandweek, “First to Market is
Good, But not always Best”, 12/4/95). He insists consumers view “content” and thus
the technology as important. Ironically however, when “NeoGeo” introduced a
handheld console in 1999 of better specs and quality than any rivals, Nintendo’s own
product “Gameboy” having already sold 80 million units, meant it failed
spectacularly. Microsoft will thus have to tackle PS2’s first mover advantages i.e. an
established user base and consolidated support from software developers. However I
feel the speed of innovation / development within the console market means
opportunities arise for late movers with attractive hardware and software to
outmanoeuvre established players. Sony’s Playstation achieved this by utilising the
hardware benefits (CD-ROM) by ensuring comprehensive software support (as it was
an easier platform to produce games for than cartridge) and revolutionising
distribution (by buying software from developers for resale by Sony meaning stock
could be more effectively controlled, and replenished efficiently as CD’s took less
time to manufacture than cartridges). This resulted in a substantial installed base
(Asakura 2000).
The first research objective is therefore:
“How has Microsoft’s entry timing influenced the performance of the Xbox?”
? ? Has the fact PS2 has been available for 18 months prior to Xbox’s release
meant consumers are demonstrating greater commitment to that console and
games, OR have consumers waited for the Xbox and its newer technology?
? ? What are consumer’s opinions of the effect of Microsoft’s entry timing?
? ? Has the later introduction had a positive effect i.e. is the Xbox now perceived
as the most desirable and dominant technology?
? ? Has the fact Microsoft is new to the console market influenced adoption?
? ? Is entry timing irrelevant, are people purchasing more than one console?
2.4
Effective Targeting / The Diffusion of Innovation
Defined by Piercy (1997) as the process of “dividing a market into groups of buyers
who make coherent targets” (Pg 154), segmentation is central to entry strategy. Piercy
has thus made important contributions by rethinking conventional approaches that fail
to fully implement segmentation to it’s full strategic potential as “segmentation is a
fundamental issue of market strategy with far reaching effects” (Pg 155). He suggests
that collecting large volumes of statistical information misses the point of the power
of creativity to establish competitive segments and competitive differentiation.
Conventional approaches thus focus on operational aspects and ignore strategic
issues. Consequently an “Extended Model of Segmentation” is suggested. Firstly,
strategic and operational organisational levels must be distinguished and secondly, to
address the issue of implementation it’s necessary to examine the internal
organisational context as well as the external market place. Therefore, segments aren’t
screened just in terms of market attractiveness, but also in terms of internal
compatibility, vital if the entry strategy is to be effective. Piercy then denotes that the
key, through effective segmentation, is creating a strong position in the consumers
mind.
Hultink et al (1999, Pg 159) further suggest that effective segmentation
involves
“Careful targeting, avoiding head-on clashes with competitors and placing
the product into growth markets”.
This supports Piercy’s notion of clear strategy guiding segmentation. To remain
successful however it is important to appreciate that the process is dynamic rather
than static in nature, requiring consistent review.
It is also important to be aware of the “diffusion of innovation”. Diffusion is,
“The process by which an innovation is communicated through certain
channels over time, among the members of a social system… and begins when
innovators, who have a higher propensity to engage in trial, adopt an innovation”
(Rogers, 1995, Pg 5)
As a new product is accompanied by a degree of uncertainty Rogers proposes new
market offerings are initially targeted at innovators who serve as opinion leaders.
Consequently,
“The opinion leaders interpersonal networks allow him or her to serve as a
social model whose innovative behaviour is imitated by other members of the social
system”. Pg 28
The rate of diffusion is therefore accelerated and a greater mass of consumers is
attracted more efficiently. The product then “takes off” when it passes from the
“introduction” to the “growth” phase in the PLC and “early adopters” and the “early
majority” adopt the innovation. Investigation into “product related conversations” by
Arndt (1967) supports this by finding that exposure to favourable word of mouth
increases the probability of purchase. Saeki (Director, Advertising Division at SCEI)
demonstrates this importance in the launch of the “Playstation”,
“Occasional users are strongly influenced by core users. For this reason it
was important to target core users first”. Asakura (2000, Pg 128)
Microsoft is also following this approach.
“We want to sell it to everyone. The initial buying group will be very heavy in
men from 16 – 26. These initial buyers will demonstrate Xbox to other people and
word of mouth will get it to people of every age”. (Bill Gates, 4/16/01, www.amo.net)
Xbox are thus attempting to capitalise on the fact that the gaming market
demographic is broadening (www.brandrepublic.com, Curtis, Marketing 7/3/02).
Montaguti et al’s (2002, Pg 26) “Conceptual Model” and discussion of “network
externalities” reflects this diffusion. They argue technology based innovations require
a critical number of adopters for take-off to be significant. This is because consumers
ascribe value to the number of subscribers and are thus likely to prefer a dominant
technology. This is certainly true with games consoles and thus Xbox will want to
attract a significant proportion of innovators at launch. The Xbox’s plans for, and
future industry moves towards online gaming will serve to reinforce this imperative.
The second research objective is therefore:
“How effective has Microsoft’s targeting strategy been?”
? ? Have they reached the intended initial audience, i.e. age 16-26 males?
? ? What is the perceived target market among consumers?
? ? Is there evidence of the Xbox progressing through the diffusion of innovation
as intended i.e. from age 16-26 males to a wider audience including females
and older users?
2.5
The Role of the Product and Positioning
Cooper (1998) defines positioning, as “how the product will be perceived by potential
customers”. The product specifications and it’s value offering are intertwined with the
concept of positioning, together influencing the customers perception and intention to
purchase. It is thus important that strategies incorporate these variables as this
provides the customer’s first contact and initial impressions of the product. Therefore
as Reis and Trout (1982) observe
“Positioning is not what you do with a product, but what you do in the mind of
the prospect, and therefore a new products intended relative position in the market
has to reconcile the competitive advantage designed into the product with the
expectations of the target market”. Pg 2.
A harmony has to be achieved between the product, targeting and positioning thus
communicating the product advantage, i.e. unique benefits, the extent to which
customer needs are better satisfied, the products relative quality and the extent to
which it solves customers problems (Cooper, 1979).
Darling (2001) goes further in analysing positioning, arguing that customers
buy a total bundle of values constituting a “market offering” composed of elements
including the product, services, brand, package, price etc. Matching these elements is
central in developing a successful competitive position. The difficulty however is that
consumers minds are “limited, dislike confusion, are insecure and hard to change”.
Indeed Microsoft faces a market characterised by high brand loyalty (Mintel 8/2000).
Darling thus suggests new products generate higher interest than established offerings
in order to penetrate consumer’s mindsets, proposing “Competitive positioning” as a
means to differentiate the product in ways consumers find meaningful. This involves
establishing the product in the consumer’s minds then differentiating from
competitors. Using the marketing mix, each element can then provide opportunities to
competitively differentiate its position.
A number of studies demonstrate this importance. Green and Ryans (1990)
found superior positioning at entry positively affects performance and in Green et al’s
(1995) study it was found the higher the perceived value of a product is, the greater
was a products long-term performance. Reflections in positioning however need to be
supported in practice by the product through quality and value. This importance is
emphasised by Hart and Tzokas (2000) findings that product advantage accounts for a
high percentage of variance in performance, particularly in mature or declining
markets. In terms of the console market it’s the accompanying software that will form
the basis for the hardware’s success. As Kent (2001) states
“Had it not been for the runaway success of Donkey Kong, Nintendo might
never have carved a niche in the U.S. market”. Pg 281.
Microsoft has thus put considerable effort into seeking software developer support
and acquiring smaller companies. Ed Fries (Vice President of Games, MS) efforts to
acquire “Bungie” on the reasoning that their “Halo” game could be a propelling
influence in “inspiring people to choose Xbox over other consoles” (Takahashi 2002,
Pg238), illustrates Microsoft’s understanding of this importance. Furthermore, this
importance is reinforced by the fact royalties from software constitutes the chief
source of revenue as hardware is often sold at a loss, Microsoft thus aiming to
“garner about 30 % of the revenues for titles sold for the Xbox” (Takahashi 2002,
Pg180). Similarly, Microsoft intends the Xbox’s superior specifications and online
gaming potential to further serve to differentiate the console from Sony and
Nintendo’s offerings. As UK divisional director for Xbox retail stated “we are twice
the power of PS2” (www.computerandvideogames.com, “Xbox price slashed in
Europe”, 18/4/02). There is a fear however that the Microsoft brand name will negate
all such product advantages as
“Many hardcore gamers despise them and equate supporting Microsoft with
succumbing to the darke-side” (www.computerandvideogames.com, “5 reasons why
it might not succeed”, 13/06/00).
The third research objective is therefore:
“How has the Xbox been received by consumers?”
? ? What’s the relative opinion of the Xbox in relation to other consoles, has its
greater specifications had a substantial impact?
? ? How important has the accompanying games line up been in the purchase
decision, what is the opinion of Xbox games compared to the competition?
? ? What effect has the Microsoft Brand Name had on consumer’s intentions to
purchase?
? ? To what extents do non-Xbox owners intend to purchase the console?
In order to explore the nature of Microsoft’s positioning I felt the most
effective means was to investigate consumer’s impressions of Xbox advertising which
itself is an important component of entry strategy and highly visible to the consumer.
Reinforcing the targeting strategy Neil Thompson (Xbox European Marketing
director) states the aim of the positioning “is to build a more inclusive appeal beyond
the core gaming community” (Curtis, Marketing 7/3/02). He insists, “Playstations
edgy and dark brand positioning”, encapsulated by the “Third Pace” campaign
presents “a dark club culture” that portrays the brand as too exclusive. Thompson
thus insists that the “Play More” campaign; positioning Xbox “as an inclusive and
social experience” (Campaign UK “Cowen on Xbox 22/3/02, Pg 23) can seize the
initiative. The advertising agency “Bartle Bogle Hegarty” is thus responsible for the
European communication of Xbox’s strategy, presenting “play” as natural, important
and open to everyone.
The fourth research objective is therefore:
“How has Microsoft’s advertising influenced the performance of Xbox?”
? ? Has Microsoft’s desire to position Xbox as a more inclusive machine than
PS2 meant a wider demographic is adopting it?
? ? What do consumers think Microsoft is trying to achieve with their advertising
/ do they think the advertising will attract a broader audience than PS2?
? ? Do consumers feel the advertising has created widespread awareness of
Xbox?
2.6
Pricing
The most flexible and visible mix component, pricing, is arguably the most
problematic to execute. As Piercy (1997) comments, “pricing is a messy problem”
(Pg 326). This complexity is characterised by the volume of variables requiring
consideration, demonstrated by Krishamurithi (In Urban’s “Design and Marketing
New Products, 1993). He suggests that to be effective pricing should reflect strategic
objectives, the target customer, product positioning, competitive positioning, costs,
channels and an understanding of the product life cycle. Central to pricing policy must
be the company’s strategic objectives however as this exercises great influence on the
price position. Hanna and Dodge (1995, Pg 81) thus describe five broad “major goals
of pricing” of achieving a specific target return on investment, maintaining or
enhancing market share, meeting or preventing competition, maximising profits and
stabilising prices, each requiring very different pricing actions.
In terms of Xbox, analysts predict that money will initially be lost on every
Xbox sold and will be at least five years before profit is realised. Consequently,
“Given that it will take about 5 years for the Xbox to break even – which is
about the average lifespan of a console – Microsoft is clearly thinking long-term”.
(Darren Waters, www.bbc/news.co.uk, 14/11/01)
Short-term profits are thus being forfeited to achieve widespread penetration.
Microsoft’s strategic objective for the Xbox is therefore to maximise market share.
Dean (1950) provides the basis of theory on pricing policies for new products.
He argues that
“The strategic decision in pricing a new product is the choice between a) a
policy of high initial prices that skim the cream of demand and b) a policy of low
prices from the outset serving as an active agent for market penetration.” (Pg 147)
“Skimming” is thus recommended for highly innovative products. Prices are initially
high and accompanied by a significant promotional budget then gradually reduced to
encourage wider adoption. This is advantageous as demand is likely to be more
inelastic in terms of price in the early stages of a products lifecycle. Furthermore
launching with a high price is an effective device to segment markets around people’s
price sensitivity. If a markets response to a product is completely unpredictable (e.g. if
its highly innovative) its also considered a “safer” approach as price reductions are
easier than increases. Finally, many firms can’t “finance the product floatation out of
distant future revenues”.
The alternative is “Penetration”, using low prices to gain mass-market
acceptance. This is likely to be effective when the market is characterised by high
price elasticity in the short run and a strong threat of competition. In addition it will
become increasingly viable if a large experience curve results in cost savings (Holden
and Nagle, 1988). However although this policy can hold significant advantages due
to the fact sales are spread across various segments, caution must be exercised and
thorough research and planning is required. Holden and Nagle (1998) warn of the
dangers of blindly adhering to a penetration strategy. They argue “Kamikaze pricing”
is frequently embarked upon where the justification for penetration is flawed and it is
incorrectly assumed lower prices will increase sales. Monroe and Della Bitta (1978)
suggest however that caution should be used in selecting either of these strategies
arguing they shouldn’t be used as “either / or” alternatives, instead as representing
two opposite ends of the spectrum. A particular strategy can thus be tailored to
particular needs within this framework.
Microsoft’s launch price of £300 can thus be broadly labelled a skimming
strategy. This is particularly surprising considering Microsoft’s ambitions to penetrate
an established market and is reinforced by the fact Nintendo’s new generation console
was introduced at £129 in May considerably undercutting Microsoft and Sony.
Furthermore the Xbox price cut to £200 on 26th April following rumours of poor sales
and (among others) pressure from the chief executive of game publisher THQ
(www.news.bbc.co.uk by Reuters, 16/4/02) suggests the launch price was too high
(which my research objectives will aim to identify). The fact Xbox has the financial
backing of Microsoft to support losses from the high production costs (higher than
Sony’s or Nintendo’s), to ensure consumer acceptance makes the launch price
decision even more questionable.
There is evidence therefore that Microsoft have merely imposed conventional
business principles onto the games market. This is in contrast to principles Sony have
learnt as Kutaragi (Vice President at SCEI) comments
“The business structure and margin structure of the game business is
different… with game machines you draw up a combined profit portfolio from
hardware and software”. (Asakura 2000, Pg 189)
Economies of experience are thus central to success in the console market which
Microsoft, as newcomers are yet to achieve. Again therefore, established principles
are not strictly transferable to the console market. Kutaragi reinforces this,
“A game business should be structured so that the hardware is distributed free
of charge and profits are derived from software sales”. (Asakura 2000, Pg 193)
This is effectively “complimentary pricing” whereby low profits from the sale of one
product are covered by profits from the sale of a complimentary product (Duke 1994).
The fifth research objective is therefore:
“How has Microsoft’s pricing strategy influenced sales / market share?”
? ? What was consumer opinion of the original £300 retail price, who purchased?
? ? What effect has the reduction to £199 had, are consumers now more likely to
purchase?
? ? What do consumers think of the price in relation to other technologies?
Chapter 3:
Methodology
This chapter discusses and justifies the methodology adopted to undertake the
research. This includes explanations exploring why particular methods were used,
how the research was undertaken / analysed and particular problems that were
encountered.
3.1
Literature Identification
The process of searching for relevant literature on “market entry strategies” was the
first significant step in formulating a suitable approach and refining the research area.
The depth of the subject meant this was a particularly time consuming task but also
highly important as an understanding of the numerous variables involved was
essential before a relevant approach in the context of the Xbox could be applied.
Searches were initially made for articles solely on the subject of market entry
strategies using BIDS, Emerald and Firstsearch in particular. A significant number of
articles were identified, the “International Journal of Market Research” in particular
proving a vital resource. Another journal that contained useful articles was “The
Journal of Product Innovation Management” but despite trying other Universities
including Bournemouth and Loughborough and inter-library loans, access to this
couldn’t be established. With the insight gained from these articles (and using their
references) I then broadened my search to specific components essential to market
entry strategies such as segmentation, pricing and first mover advantages thus
providing further detail on particular variables around which my research objectives
were finally structured.
In addition to the collection of academic literature it was necessary to review
sources of direct relevance to the console market and Xbox. Prior to and after the
March launch therefore, I regularly reviewed a number of sources such as
computerandvideogames.co.uk, bbc/news.co.uk, http://forum.edge-online.com/ and
guardian online. My industry contact also provided me with useful materials such as
industry reports. These provided a wealth of secondary information useful for the
literature review and later discussion / comparison of my results with secondary
sources. “Google” was further used to find specific articles, for example on Xbox’s
target market. Two texts I identified purely on the history of video games also
provided a useful background to the subject and a book documenting the making of
the “Playstation” proved invaluable as a means to challenge academic thought.
Released late into the project was a text called “Inside the Xbox” that provided further
background to the launch of the Xbox itself.
3.2
The Research Approach
The literature thus helped “Define the Marketing Research problem and develop an
approach” (Malhotra and Birks, 2000, Pg 96). However, I identified no sources that
specifically related to my area of interest, many of the articles simply identifying
general strategies for fast moving consumer goods. Whilst these provided a sound
background and consolidated a good understanding of market entry strategy, due to
the very different nature of the console market it was necessary to adopt these
principles and approaches in my own approach. The common disadvantage with
secondary sources was thus demonstrated as the accuracy and relevance to my interest
was limited.
A key drawback was that many studies evaluated market entry strategies from
a perspective with access to the companies in question. This simply wasn’t possible as
access to relevant individuals and information within Microsoft would be impossible.
Indeed three months after launch Microsoft remain reticent in confirming sales
figures. It was thus necessary to approach the subject from a different angle. Due to
the consumers inherent importance in the overall success of an entry strategy I
decided I would use the consumer as the medium to perform my research. Microsoft’s
entry strategy could then be evaluated from a consumer perspective, arguably a highly
effective means due to the consumer’s objectivity and experience of the competitive
market (it was surprising therefore that no articles adopted such a perspective). This
formed the body of the research and was complimented by an interview with “Edge
Magazine’s” News Editor so as to achieve a balance between consumer and industry
opinion.
The research objectives were thus developed from an understanding of the
literature and formulated in a way that provided the most comprehensive picture
possible of Microsoft’s entry strategy in the time available. Timing of entry, targeting
/ segmentation, positioning, product content and pricing were thus decided as the
areas of focus which would provide the reader with a sound understanding of market
entry strategy in the Xbox context. This enabled an exploratory focus from which
particular conclusions and recommendations could be made.
3.3
Quantitative Research
3.31
Choice of technique
The investigation of consumer’s opinions regarding Microsoft’s market entry strategy
was performed by means of a quantitative approach with a structured survey using
fixed response alternatives. This explored all areas of the research objectives, the
questions specifically focussed to each research objective as section 3.33 discusses. I
felt this was most suitable for the research purposes as a large sample would be
required if my findings were to be considered statistically valid and firm conclusions
could be drawn with confidence on the effectiveness of Microsoft’s strategy.
Particular trends could also be easily identified. Furthermore, the use of fixed
response alternatives was essential, as questions needed careful wording and precise
presentation / instructions to avoid confusion. Market entry strategies are inherently
complex thus questions required careful consideration in order to present a particular
issue in terms consumers could understand and answer with certainty. A qualitative
approach, using interviews for example, would therefore not have been suitable as the
sample wouldn’t have been large enough to draw firm conclusions and time limits
would have prevented the discussion of all the necessary issues.
3.32
The Sample
Due to the fact the Xbox is in a highly specific market, standard sampling techniques
such as random sampling (Malhotra and Birks, 2000, Pg 357), performed by asking
random consumers in the high street to complete a survey, would not have been
appropriate as many consumers wouldn’t possess the requisite knowledge to answer
questions regarding the console market. Therefore, it was necessary to target video
games consumers who had the appropriate knowledge. Printed questionnaires were
thus given to two large independent video games shops in Leicester on the 20th June,
“Another World” and “Game Station”. Questionnaires were also given to another
outlet in my hometown Bournemouth, “Video Games Centre”, on the 25th June. All
three stores were given 130 questionnaires each, which kindly agreed to distribute to
customers purchasing any consoles, games or peripherals. This was effectively a form
of “Judgemental sampling” therefore as I, the researcher, selected population elements
based on my own judgement and requirements (Malhotra and Birks, 2000, Pg 354).
This also meant that data would be collected more efficiently both in terms of time
and quantity, as I wouldn’t be personally interviewing respondents. This simply
wouldn’t have been possible in the time available due to the sample I required and
length of the survey. I further felt that consumers would be more likely to complete
the survey if asked by shop staff they were acquainted with and trusted, rather than a
stranger in the street.
Although this meant a particular type of consumer was targeted however, there
was the disadvantage of not being in control of the questionnaires distribution, instead
relying upon the staff of the shops. Queries couldn’t be answered personally and I
didn’t get a first hand impression of responses, as I would if the survey had been
conducted in an interview format. However a number of reviews of the questionnaire
format by my supervisor and a final pilot study on five friends ensured that scope for
misunderstanding was minimised. Questionnaires were then collected on 5/8/02 (this
ensured they remained available in the first two weeks of the school holidays when
younger consumers were more prominent) and a sample of 72 was achieved.
To maximise the sample size and to vary the sampling technique I also
advertised
the
questionnaire
on
the
“Edge”
games
discussion
forum
(http://forum.edge-online.com/) during the week beginning 22/7/02 and e-mailed the
questionnaire to interested parties. This avoided the above problems, as I was able to
control distribution and answer particular queries. A sample of 31 was achieved in
this way and thus the total sample size was 103.
The method I finally decided upon differed somewhat from that suggested in
the proposal therefore. Whilst I originally intended to distribute the survey from
independent shops I didn’t intend to use the edge online forum. This was decided
upon partly for fear of a small sample size and in order to vary the sample make-up.
Furthermore, I originally considered using just Internet resources to execute the
research but decided it could prove too unreliable in terms of the quantity and quality
of data that would be received. This was a compromise therefore that would also
serve to illustrate the viability of the Internet as a research tool.
3.33
Questionnaire Format
The questionnaire was designed in consideration of all the research objectives. As
already discussed fixed response alternatives were used to limit confusion and as far
as possible efforts were made to avoid such problems as leading questions and
overcoming respondents unwillingness by not asking sensitive questions (Malhotra
and Birks, 2000, Pg 324). Three drafts were also undertaken before a final design was
distributed, consultation with my supervisor initially highlighting particular problems
with aspects such as question wording, structure and clarity.
The final format (a copy is provided in Appendix I) is thus of a simple design
due to the fact different sections weren’t required for particular replies. Respondents
thus answered the same questions apart from those who noted in Q1 that they owned
an Xbox who were directed to Q2. This made the construction process relatively
simple and meant less effort was required of the respondent as they simply needed to
progress through the survey rather than jumping between questions. The questionnaire
is thus split into two sections, the first section purely containing questions on the
Xbox etc and the second focusing on personal information. This was purposely placed
at the end so it appeared less obtrusive than if among the first questions answered.
Similarly I attempted to make the first few questions as unobtrusive and simple as
possible to try and gain “the confidence and cooperation of respondents” (Malhotra
& Birks, 2000, Pg 332).
The format also used a combination of different question types. Multiplechoice questions were used where a number of potential responses existed (such as
Q1). This was also used by displaying different statements (such as Q8), the
respondent then asked which they felt best applied to them. This proved effective in
uncovering consumer’s feelings on subjects. Dichotomous questions with only two
limited options (such as Q2) were also used where appropriate. The majority of
questions however used the “Likert scale” (Malhotra & Birks, 2000, Pg 296) where
respondents indicated their degree of agreement on particular subjects (such as Q4),
which again proved useful in identifying feelings and opinions. Questions 16–19 used
a separate rating system however, firstly for considerations when purchasing a
console and then rating the PS2, Xbox and GameCube individually. This enabled
effective comparison between consoles and identified the consumer’s perceptions of
the Xbox’s strengths and weaknesses. Using a variety of techniques thus meant that
the respondent’s interest was maintained and the most suitable means was used to
gather information for each question.
3.34
Analysis
The collected data was inputted into a database using the SPSS computer programme
and codified to aid analysis. Frequency distribution was then used to present
particular questions / variables and Cross-tabulation to compare results between
variables, for example the number of Xbox owners and those who purchased before /
after the price cut. Where appropriate the strength of the relationship between
variables was then tested using Chi square and Pearson Correlation analysis. Due to
the nature of the research however there were a limited number of occasions when
from the Chi square analysis it could be deduced with confidence that two variables
were related (the lower the value the less likely variables are independent, 0.00
indicating variables are related) and it was especially rare when the nature of that
relationship was significant and the correlation particularly strong (i.e. above 0.5 or –
0.5, 1.0 indicating a perfect correlation).
3.35
Problems Experienced
The largest problem was respondent apathy, many consumers unwilling to complete
the survey. This could have been due to the length of the questionnaire thus in
hindsight I would shorten the structure. However I was surprised at the response
considering the incentive provided. A consequence of this was that it was largely the
keen, older gamer that completed the survey with very few respondents under 15yrs.
This was even more prominent with the “Edge forum” sample, as users are real game
enthusiasts and employees from the industry. This had a significant impact on results
as will be seen in the data analysis. The fact I had little control over the survey’s
distribution in shops may partly explain this however thus a different approach may
have been more appropriate.
Once the questionnaire had been distributed I also noted a number of structural
errors that could have hindered respondents. Q17 for example, had the question on
one side and the answers overleaf whilst Q11 had another answer option on the next
page meaning it probably received less consideration. Revision of this would have
been desirable prior to distribution.
3.4
Qualitative Research
The interview with Dave McCarthy, “Edge Magazine’s” News Editor thus served to
support the quantitative research by exploring opinion on the Xbox from within the
industry and using a more qualitative approach.
A semi-structured format thus allowed a greater insight into the subject, as the
interviewee was able to discuss in detail issues stemming from the topics that I raised.
This had the advantage that whilst I maintained control over the general areas for
discussion, the interviewee still had a high degree of freedom to talk on issues he felt
relevant to the subject. Consequently this structure allowed the opportunity to
discover thoughts / opinions that the questionnaire wouldn’t reveal. Furthermore, due
to the interviewee’s position within the industry, I was more likely to receive a far
more informed opinion than that from consumers.
A structure and outline of questions was thus produced prior to the interview,
which took place on 1/8/02. Although the most desirable position would have been to
conduct the interview face to face, this wasn’t possible, as a meeting could only have
been arranged for early September, which was too late considering the Dissertation
submission date. Consequently it was performed over the phone and recorded to aid
the analysis of the interview (see Appendix II for transcript). Although a structure was
implemented this changed during the course of the interview due to the interviewee
covering particular areas that needed further probing or answering an intended
question unprompted. As noted by Malhortra and Birks (2000, Pg 180)
“The specific wording of the questions and the order in which they are asked
is influenced by the subjects replies”.
Following the interview a transcript was produced from the recording and
analysis was undertaken in line with my research objectives. Information of specific
interest and relevance was identified in this way. Unlike the questionnaire however it
is not possible to draw firm conclusions from the interview, as it is evidently just a
single opinion. Rather, it serves to support the quantitative findings as another source
of reference enabling comparison between sources and proving a useful material to
draw upon in the discussion chapter.
Chapter 4:
Data Analysis / Findings
This chapter will analyse the data and present the findings from the primary research
questionnaire, and then from the supplementary qualitative interview with the News
Editor of “Edge Magazine”. The questionnaire analysis will address the research
questions set out in Chapter 2 and follow the same structure of presentation. Relevant
findings from the interview will then be addressed and discussed in relation to those
research objectives.
Quantitative Research
4.1
The Sample Makeup
Before exploring the findings from the survey it is desirable to consider the
demographic spread of the sample (n=103). Graph 1 thus shows the ages of
respondents.
Graph 1: Age of Respondents
40
36
30
29
23
Frequency
20
10
9
6
0
11 - 14 yrs
Age
15 - 19 yrs
20 - 24 yrs
25 - 34 yrs
35 - 44 yrs
This identifies the primary floor of the sample in that very few consumers’s under the
age of 15 yrs are present, most respondents being between 15 and 34 yrs. This is
perhaps unsurprising however as Sony has established this segment as the greatest
purchaser of video games.
Graph 2 shows a similar picture for the sex of respondents with just 15
females included in the sample compared to 88 males, which is somewhat surprising
due to the fact the games market is supposedly broadening.
Graph 2: Sex of Respondents
100
88
80
60
Frequency
40
20
15
0
Male
Female
Sex
The final graph here shows the time respondents spend playing video games every
week.
Graph 3: Time Respondents spend playing
video games
30
25
24
20
20
19
15
Frequency
10
0
0 - 3 hrs
4 - 6 hrs
7 - 9 hrs
10 - 12 hrs
13+ hrs
Time spent playing video games
As can be seen the spread is fairly even but most respondents play for over 13 hours a
week. This reinforces my observation in the methodology (Section 3.35) that a large
proportion of the respondents are older, avid / “hardcore” gamers which is a reflection
on my data collection and sampling techniques.
4.2
“How has Microsoft’s entry timing influenced the performance of the Xbox?”
4.21
Has the fact the PS2 has been available for 18 months prior to Xbox’s
release meant consumers are demonstrating greater commitment to that console
and games, OR have consumers waited for the Xbox and it’s newer technology?
The four graphs below thus show the ownership of consoles among the sample of
103.
Graph 4: Owners of PS2
60
50
51
52
Yes
No
40
30
Frequency
20
10
0
Owners of PS2
Graph 5: Owners of Xbox
70
66
60
50
40
37
30
Frequency
20
10
0
Yes
Owners of Xbox
No
Graph 6: Owners of GameCube
70
64
60
50
40
39
30
Frequency
20
10
0
Yes
No
Owners of GameCube
Graph 7: Owners of Other Consoles
60
55
50
48
40
30
Frequency
20
10
0
Yes
Owners of Other Consoles
No
The PS2 is clearly the most widely owned console with 51 of the respondents stating
they possess that machine. Penetration of the other new generation (NG) consoles
appears somewhat lower however with a fairly equal number of users for each
technology, the Xbox owned by 37 and GameCube 39 of the respondents. Of further
interest is the fact 55 of the 103 respondents stated they own an “other console” thus
serving as a reminder that the market for earlier generation consoles, such as PS1, is
yet to reach the end of its lifecycle. In terms of ownership therefore it appears that the
PS2’s longer time in the market has secured a substantial user base over the Xbox and
GameCube. However despite the Xbox being available for 6 weeks before the
GameCube’s 3/5/02 launch, the data shows that the Xbox is marginally behind
Nintendo’s machine.
4.22
Consumer’s perspectives on the effect of the PS2 being the first new
generation console to market.
Consumer perspectives however, illustrate a different picture to that presented by
console ownership.
Graph 8: Importance of the fact PS2 was
the first NG console
60
50
48
40
30
27
24
Frequency
20
10
0
4
Very Important
Fairly Unimportant
Important
Completely Unimporta
Level of Importance
In response to the question “How important was / would be the fact that the PS2 was
available before the Xbox or GameCube in your purchase decision?” (Graph 8 above)
just 4 respondents felt it was “very important” as opposed to 48 who stated it was
“completely unimportant” in their purchase decision. However, when asked the extent
to which they agree with the statement “Individuals were unlikely to purchase an
Xbox or GameCube if they had already bought a PS2”, 43 said they “agreed”, 20
“strongly agreed”, 39 “disagreed” and just 1 “strongly disagreed” (Graph 9 Below).
Graph 9: Whether less likely to purchase
Xbox or GC if had already bought a PS2
50
43
40
39
30
Frequency
20
20
10
0
Strongly Agree
Agree
Disagree
Strongly Disagree
Level of Agreement
The low importance in the purchase decision of the fact the PS2 was the first new
generation console is perhaps partly explained by the importance attached to the
perceived popularity of a console (Table 1 below).
Table 1: Importance of Console popularity
Frequency
Percent
Valid PercentCumulative
Percent
Valid
Very
6
5.8
5.8
5.8
Important
35
34.0
34.0
39.8
Fairly
32
31.1
31.1
70.9
30
29.1
29.1
100.0
103
100.0
100.0
Important
Unimportant
Completely
Unimportant
Total
Surprisingly just 6 respondents felt the popularity of a console was “very important”
in their purchase decision with 35 saying it was “important”, 32 “unimportant” and 30
“completely unimportant”. The fact the majority of respondents were not concerned
by popularity thus suggests a consoles large user base, a characteristic advantage of
first to market products, would influence few potential purchasers. Despite the
ownership figures confirming the traditional notion that first movers are more likely
to realise greater advantages therefore, the evidence from the consumer’s perspective
largely refutes theories on this subject as will be seen in Chapter 4. This could be a
reflection of my sample however or denial exercised by respondents, gamer’s culture
would thus have to be studied before a conclusion could be reached.
4.23
Has the later introduction had a positive effect i.e. is the Xbox now perceived
as the most desirable and dominant technology?
To identify any positive effects of Microsoft’s entry timing Graph 10 displays
respondent’s answers to the question “If you could only own one of these consoles,
which would you choose?”
Graph 10: Consumer's favourite console
40
36
30
34
33
Frequency
20
10
0
PS2
Xbox
GameCube
Consumer's favourite console
Although the spread is relatively even the GameCube is considered the most desirable
console, followed by the Xbox and then the PS2. Whilst a larger sample would be
needed to further test accuracy, the data suggests that the later introduction of the
Xbox and GameCube has indeed had some positive effect, as both consoles are
deemed more desirable than the PS2. Using cross tabulation and comparing
ownership with favourite console can further test this. Graph 11 thus shows that the
majority of PS2 owners (22) indicated the GameCube as their top choice console
followed by the PS2 itself (18) and the Xbox (11).
Graph 11: PS2 Owners * Favourite
Console
24
23
22
22
20
18
18
16
Consumer's favourite
15
14
14
PS2
Count
12
10
Xbox
11
GameCube
8
Yes
No
Owners of PS2
This contrasts with Graphs 12 and 13, which demonstrate that the majority of Xbox
and GameCube owners indicated those consoles as their favourite with the PS2
appearing the least desirable.
Graph 12: Xbox Owners * Favourite
Console
40
30
31
25
24
20
Consumer's favourite
PS2
Count
10
11
10
Xbox
0
GameCube
Yes
No
Owners of Xbox
Graph 12 thus shows that the majority of Xbox owners indicated the Xbox as their
favourite console followed by the GameCube. The chi square analysis in Table 2
confirms the relationship between these variables with a value of 0.00. The strength of
this relationship is not particularly strong however (-.196, Table 3) and so it can’t be
said with confidence that Xbox owners largely identify the Xbox as their favourite
console.
Table 2: Chi-Square Tests for Xbox owners favourite console
Value
df
Asymp.
Sig.
(2-
sided)
Pearson
Chi- 30.985
2
.000
Square
Likelihood Ratio
33.912
2
.000
Linear-by-Linear
3.918
1
.048
Association
a 0 cells (.0%) have expected count less than 5. The minimum expected
count is 11.85.
Table 3: Pearson’s Correlation for Xbox owners favourite console
Value
Asymp. Std. Approx. T
Approx. Sig.
Error
Interval
by Pearson's R -.196
.083
-2.009
.047
Interval
a Not assuming the null hypothesis.
b Using the asymptotic standard error assuming the null hypothesis.
c Based on normal approximation.
Graph 13 shows a similar picture for the GameCube whereby most owners (24)
identified the GameCube as their favourite console followed by the Xbox (12) and
just 3 respondents indicating a preference for the PS2.
Graph 13: GameCube Owners *
Favourite Console
40
30
30
24
22
20
Consumer's favourite
Count
10
12
12
PS2
Xbox
0
3
GameCube
Yes
Owners of GameCube
No
Furthermore the chi square analysis (Table 4) again demonstrates that the two
variables are related as the 0.00 value is displayed.
Table 4: Chi-Square Tests for GC owners favourite console
Value
Pearson
Chi- 24.402
df
Asymp. Sig. (2-sided)
2
.000
Square
Likelihood Ratio
26.575
2
.000
Linear-by-Linear
24.101
1
.000
Association
a 0 cells (.0%) have expected count less than 5. The minimum expected
count is 12.50.
Compared to Xbox owners however the relationship between variables appears
stronger as the correlation of -.486 (Table 5) is far closer to –0.5, which indicates a
strong, negative correlation. Although not above the –0.5 level, for practical purposes
it is sensible to interpret a strong correlation and thus it can be said that GameCube
owners are likely to indicate the GameCube as their favourite console.
Table 5: Pearson's Correlation for GC owners favourite console
Value
Asymp. Approx. Approx. Sig.
Std.
T
Error
Interval Pearson' -.486
by
.078
-5.590
.000
sR
Interval
a Not assuming the null hypothesis.
b Using the asymptotic standard error assuming the null hypothesis.
c Based on normal approximation.
These cross tabulations demonstrate therefore, that whilst the PS2 has the largest user
base, the Xbox and GameCube are characterised by higher levels of user loyalty. This
suggests therefore that the later introduction has had a positive effect in that the Xbox
is seen as a more desirable machine than the PS2.
In addition, the Xbox is also deemed the most desirable console among
respondents indicating ownership of “other consoles” as Graph 14 displays.
Graph 14: Other Consoles *
Favourite Console
24
23
22
20
19
18
18
17
16
14
Consumer's favourite
15
PS2
Count
12
11
10
8
Xbox
GameCube
Yes
No
Owners of Other Consoles
As many respondents not owning any of the NG consoles indicated ownership of
“other consoles” this could prove beneficial to the Xbox in the long-term.
4.24
The effect of the fact Microsoft is new to the console market
Regarding the influence of Microsoft’s newness to the console market Graph 15
presents respondent’s answers to this issue. The majority of respondents indicated this
wouldn’t influence their purchase decision. However over 30% said they were less
likely to purchase an Xbox for this reason thus perhaps suggesting Microsoft will
have to establish itself in the market before it is perceived by all as a viable contender
to Sony and Nintendo.
Graph 15: "I'm less likely to buy an Xbox
as MS are new to consoles"
60
53
50
40
30
Frequency
20
22
19
10
9
0
Strongly Agree
Agree
Disagree
Strongly Disagree
Importance of fact MS is new to console market
4.25
Is entry timing irrelevant, are people purchasing more than one console?
In exploring this question Tables 6-8 thus establish the number of respondents who
own two of the three NG consoles.
Table 6: Owners of PS2 * Owners of GameCube Crosstabulation
Owners of
GameCub
Total
e
Owners Yes
Yes
No
27
24
51
12
40
52
39
64
103
of PS2
No
Total
Table 7: Owners of PS2 * Owners of Xbox Crosstabulation
Owners of
Total
Xbox
Owners Yes
Yes
No
18
33
51
19
33
52
37
66
103
of PS2
No
Total
Table 8: Owners of Xbox * Owners of GameCube Crosstabulation
Owners of
Total
GameCub
e
Owners Yes
Yes
No
20
17
37
19
47
66
39
64
103
of Xbox
No
Total
Evidently the largest number of respondents owning two consoles is 27 possessing the
PS2 and GameCube whilst the lowest is 18 with the Xbox and PS2. Around 20% of
respondents, on average, thus owned 2 of the NG consoles. However, the sample is
weighted heavily with older respondents over 15 yrs who are likely to have a larger
disposable income compared to younger gamers. Conclusions on this issue thus
cannot be made with confidence but 20% remains a fairly low proportion thus entry
timing would appear to remain significant.
4.3
“How Effective has Microsoft’s targeting strategy been?”
4.31
Has the intended initial audience of 16 – 26 yrs males been reached? / Is
there evidence of the Xbox progressing through the diffusion of innovation as
intended i.e. from the 16 – 26 yrs males to a wider audience including females and
older users?
Graph 16 (below) shows the gender distribution among Xbox owners. Unsurprisingly
users are largely male with just two females professing to own an Xbox. It should be
noted at this point however that just 15 females are included in the sample.
Graph 16: Xbox Owners * Sex
60
53
50
40
35
30
20
Sex
13
Count
10
Male
0
Female
Yes
Owners of Xbox
No
The ages of Xbox owners are somewhat more diverse than expected however, as
Graph 17 displays.
Graph 17: Xbox Owners * Age
40
30
30
Age
20
11 - 14 yrs
16
15 - 19 yrs
13
10
12
11
20 - 24 yrs
Count
9
25 - 34 yrs
6
4
2
0
Yes
35 - 44 yrs
No
Owners of Xbox
Ownership is strongest among the 15 –19yrs age group whilst just 6 respondents from
the other key demographic, 20 – 24yrs, own an Xbox. Despite this however it is
evidently older gamers who are likely to own an Xbox as a total of 15 respondents
aged between 25 and 44yrs stated they owned the console compared to 0 from the 11
– 15yrs category. It must be remembered however that very few respondents in this
age range are in the data set.
Another effective indicator of the users of a console is the time an individual
spends playing video games, indicated by Graph 18.
Graph 18: Xbox Owners * Time Spent
Playing Video Games
20
19
18
18
16
Time spent per week
14
14
0 - 3 hrs
12
12
11
10
7 - 9 hrs
9
8
4 - 6 hrs
Count
8
10 - 12 hrs
6
6
6
13+ hrs
4
Yes
No
Owners of Xbox
The graph illustrates perfectly that Xbox owners spend far longer playing video
games compared to non-Xbox owners. This is reinforced by the chi-square value of
0.00 that demonstrates a relationship between the variables (Table 9).
Table 9: Chi-Square Tests for the time Xbox owners spend playing video
games
Value
df
Asymp. Sig. (2-sided)
20.196
4
.000
Likelihood 26.112
4
.000
1
.000
Pearson
Chi-Square
Ratio
Linear-by- 17.923
Linear
Association
a 0 cells (.0%) have expected count less than 5. The minimum expected
count is 5.39.
Table 10: Pearson's Correlation for the time Xbox owners spend playing video
games
Value
Asymp. Approx. Approx. Sig.
Std.
T
Error
Interval Pearson' -.419
by
.079
-4.640
.000
sR
Interval
a Not assuming the null hypothesis.
b Using the asymptotic standard error assuming the null hypothesis.
c Based on normal approximation.
Again the Pearson’s Correlation value (-.419) (Table 10) is just below–0.5 but for the
purposes of analysis it is sensible to assume a fairly strong negative correlation. It can
thus be said with confidence that Xbox owners are more likely than owners of other
consoles to spend more time playing video games.
In regard to the initial target demographic therefore it is evident that it has
indeed been reached successfully. Users are largely male, above age 15 and tend to be
“hardcore gamers” devoting significant amounts of time per week to the activity.
However it was unexpected to see such a low level of owners in the 20 – 24yrs age
range, which if consistent when investigating with a larger sample, would prove
worrying to Microsoft at failing to reach a key user age group. Evidence of the Xbox
progressing through the diffusion of innovation is limited however as very few
females and none under the age of 15 appear to have adopted the console. However
some over 26yrs now own an Xbox, which could be an indicator of the diffusion
beginning to occur following the targeting of the innovators but further progress into
other age ranges such as the under 15’s, and females would be needed before it could
be considered to have reached a “wider audience”. It is still early in Xbox’s lifecycle
however so time remains for it to progress from the innovators and early adopters.
4.32
What is the perceived target market among consumers?
Graph 19 (below) confirms the above findings, illustrating that 80 of the respondents
correctly identified that Microsoft were initially targeting the male, 16 – 26yrs
demographic.
Graph 19: Consumer's perception of the
Xbox target market
100
80
80
60
Frequency
40
20
11
0
Mostly males 6 - 15
Mostly males, 26+
Mostly males 16-26
Males/Femal all ages
Consumer's perception of the Xbox target market
4.4
“How has the Xbox been received by consumers?”
4.41
What is the relative opinion of the Xbox compared to other consoles, has its
greater specifications had a substantial impact?
To some extent this has already been done in Section 4.2 whilst investigating the first
research objective. However analysis here is performed by consideration of a number
of factors important to the purchase of a console. Prior to assessing the ratings
ascribed to various Xbox attributes therefore, it is necessary to consider the relative
importance consumer’s attach to these factors.
Graph 20 thus displays the mean score ratings of each consideration when
purchasing a console.
Graph 20: Mean Consumer considerations in console
purchases
Level of Importance (1 low, 5 high)
5.0
4.5
4.6
4.7
4.0
3.9
3.5
3.8
3.0
2.5
2.4
2.5
2.0
2.5
2.4
2.0
1.5
ity
bil
pa
Ca
D
DV
ity
lar
pu
ing
Po
am
G
ne
nli
O
ice
Pr
e
m
na
d
es
an
am
Br
G
of
es
lity
am
ua
Q
fG
o
n
ce
tio
an
lec
ar
pe
Se
Ap
ole
ns
s
ec
Co
Sp
ole
ns
Co
Considerations
This identifies that it’s games, both in terms of selection and quality of titles available,
which are most important in the console purchase decision. This is followed by price
and the console specifications. These factors thus constitute the top four
considerations, the remaining factors appearing to be of significantly lower
importance. This understanding of consumer motivations will thus be used to evaluate
the ratings ascribed to the Xbox in comparison to the PS2 and GameCube.
Graphs 21 – 23 below thus present the mean score ratings for each factor
granted by respondents for the PS2, Xbox and GameCube respectably.
Graph 21: PS2 Mean Consumer ratings
4.5
4.2
4.0
Rating (1 poor, 5 Excellent)
3.5
3.4
3.0
3.2
3.4
3.4
3.2
2.7
2.5
2.0
1.8
1.5
D
DV
2
ing
m
PS
ga
ne
nli
O
2
ls
PS
ra
he
rip
Pe
2
PS
ice
Pr
lity
2
ua
PS
Q
es
am
n
G
tio
2
lec
PS
Se
es
am
G
2
ce
PS
an
ar
pe
Ap
s
2
ion
PS
at
ific
ec
Sp
2
PS
3.5
3.4
4.1
4.0
3.1
3.0
2.9
2.8
2.9
2.7
2.5
2.3
2.0
Rating (1 poor, 5 Excellent)
Graph 22: Xbox Mean Consumer ratings
4.5
D
DV
ing
ox
m
Xb
ga
ne
nli
O
ox
ls
Xb
ra
he
rip
Pe
ox
Xb
ice
Pr
lity
ox
ua
Xb
Q
es
n
am
tio
G
lec
ox
Se
Xb
es
am
G
ox
ce
Xb
an
ar
pe
Ap
s
ox
ion
Xb
at
ific
ec
Sp
ox
Xb
Graph 23: GameCube Mean Consumer ratings
4.5
4.3
Rating (1 poor, 5 Excellent)
4.0
3.5
3.6
3.5
3.6
3.4
3.0
3.1
2.5
2.0
2.0
1.5
ing
m
ga
ne
nli
O
C
ls
G
ra
he
rip
Pe
C
G
ice
Pr
lity
C
ua
G
Q
es
n
am
tio
G
lec
C
G
Se
es
am
G
C
ce
G
an
ar
pe
Ap
s
C
ion
G
at
ific
ec
Sp
C
G
From a comparison across the three graphs it is evident that regarding all factors, the
GameCube narrowly has an edge over the PS2 whilst the Xbox, in most categories is
behind both other consoles. In Graph 20 games were the most important consideration
so this category will be analysed in detail regarding the Xbox later. However the
graphs show that in terms of games selection, the PS2 has a considerable lead (4.2)
followed by the GameCube (3.4) and the Xbox trailing with a mean rating of just 2.9.
With regard to games quality however the PS2 and Xbox are even on 3.4 whilst the
GameCube has the highest score of 3.6.
Specifications were indicated as the third priority however and the Xbox does
have a clear advantage in this category with a mean rating of 4.1 compared to the
PS2’s 3.2 and the GameCube’s 3.5. The consoles greater specs were heralded at
launch as an advantage over other consoles thus the unique selling point that
Microsoft have established does appear to be an important one.
Although price was indicated as the fourth most important consideration, due
to it’s key role within a market entry strategy, it has its own specific research
objective and thus will be discussed in Section 3.5. The remaining attributes are thus
those that were indicated as receiving considerably less attention. In terms of
appearance the Xbox is again rated lower than the PS2 and GameCube with a score of
just 2.3 compared to 3.2 and 3.6 respectably. Similarly the Xbox’s peripherals were
rated as the lowest which is perhaps a reflection of the widespread criticism of the
size and shape of the controller. The Xbox’s DVD facility was rated higher than the
PS2 however (no such facility on the GameCube) as was the Xbox’s online gaming
capability / potential. However Microsoft have made online gaming a priority in the
Xbox, considerably adding to its cost, and will be disappointed that whilst it received
the highest rating compared to other consoles, consumers rated the facility as
receiving the lowest consideration of all the factors suggesting few gamers consider
this as important as Microsoft.
4.42
How important has the accompanying games line up been in the purchase
decision, what is the opinion of Xbox games compared to the competition?
The mean rating of the selection and quality of Xbox games has already been noted
above but the precise distribution is shown in Graphs 24 and 25.
Graph 24: Xbox Games Selection
50
47
40
32
30
20
Frequency
15
10
0
5
3
Poor
Fair
Xbox Games Selection
Average
Good
Excellent
Graph 25: Xbox Games Quality
50
46
40
30
24
20
Frequency
17
13
10
0
Poor
Fair
Average
Good
Excellent
Xbox Games Quality
These illustrate that whilst the selection of games available is widely considered
“average” or lower with just 20 respondents considering the selection “good” or
“excellent” the overall quality of games appears fairly high. Just 15 respondents
considered the quality “fair” or “poor”, the majority indicating the quality as
“average” (46) or “good” (24).
Evidence of the perception among consumers of the high quality of Xbox
games is reinforced by Graph 26, which illustrates respondent’s answers to the
question “Would you consider purchasing an Xbox just to play a particular game/s?”
Graph 26: Would you purchase an Xbox
just to play particular games?
60
50
50
40
33
30
Frequency
20
20
10
0
Yes
No
Unsure
Particular games
Over 30% of respondents indicated positively to the question, games frequently cited
including Halo, Jet Set Radio Future and Dead or Alive 3. The Tables below also
confirm that it is not solely Xbox owners who answered affirmative to the question.
Table 11: Particular games * Owners of PS2
Crosstab
Count
Owners
Total
of PS2
Particula Yes
Yes
No
16
17
33
27
23
50
12
20
52
103
r games
No
Unsure 8
Total
51
Table 12: Particular games * Owners of Xbox
Crosstab
Count
Owners
Total
of Xbox
Yes
No
23
10
33
7
43
50
Unsure 7
13
20
66
103
Particula Yes
r games
No
Total
37
Table 13: Particular games * Owners of GameCube
Crosstab
Count
Total
Owners
of
GameCu
be
Particula Yes
Yes
No
19
14
33
14
36
50
14
20
64
103
r games
No
Unsure 6
Total
39
Table 14: Particular games * Owners of Other Consoles
Crosstab
Count
Owners
of Other
Total
Console
s
Particula Yes
Yes
No
26
7
33
20
30
50
11
20
48
103
r games
No
Unsure 9
Total
55
Whilst relatively few PS2 owners (16) said they would purchase an Xbox just to play
a particular game/s, 19 of the 39 GameCube owners said this was the case. Table 12
also illustrates that unsurprisingly most Xbox owners said this to be the case, just 7
respondent’s indicating to the contrary. The chi-square value of 0.00 demonstrates
this in Table 15 below, highlighting the existence of a relationship between the
variables.
Table 15: Chi-Square Tests showing whether Xbox owners were tempted to purchase
an Xbox by particular games
Value
df
Asymp. Sig. (2-sided)
Chi- 26.801
2
.000
Likelihood Ratio 27.633
2
.000
Linear-by-Linear 10.753
1
.001
Pearson
Square
Association
a 0 cells (.0%) have expected count less than 5. The minimum expected
count is 7.18.
Table 16: Pearson’s Correlation showing whether Xbox owners were tempted to
purchase an Xbox by particular games
Value
Asymp. Approx. Approx. Sig.
Std.
T
Error
Interval Pearson' .325
by
.101
3.450
.001
sR
Interval
a Not assuming the null hypothesis.
b Using the asymptotic standard error assuming the null hypothesis.
c Based on normal approximation.
The correlation value of .325 (Table 16) is not significant enough however to assume
a strong relationship. Table 14 also shows that over half of those owning “other
consoles” (26) said a particular game would tempt them to purchase an Xbox. As
many such respondents don’t own a NG console this demonstrates the potential
importance of the games line up. Although consumer opinion reflects a low opinion of
the present games selection therefore, the quality of titles available is perceived as
fairly high with particular games seemingly able to drive demand for the console
given the importance that consumer’s attach to the games available (shown in Graph
20).
4.43
What effect has the Microsoft Brand Name had on consumer’s intentions to
purchase?
This is also of importance in establishing how consumers have received the Xbox, and
is illustrated by Graph 27.
Graph 27: Effect of MS brand name on
Consumer's intention to purchase an Xbox
80
70
60
Frequency
40
20
14
12
7
0
More likely to purch
Less likely to purch
Makes no difference
Would not purchase
Effect of MS brand name on purchase intention
Despite fears that the Microsoft association would be a negative influence, this shows
that most consumers (70) are indifferent to the fact with just 7 respondents suggesting
they would not purchase an Xbox due to it’s father company. Conversely more
respondents (12) were positive about the association.
4.44
To what extents do non-Xbox owners intend to purchase the console?
Consideration of this question illustrates the longer-term prospects of the Xbox,
presented by Graph 28 below.
Graph 28: Intention to purchase an Xbox
40
38
30
20
Frequency
14
10
8
6
0
I intend to purchase
I don't plan to purc
I would consider pur
I would never consid
Intention to purchase an Xbox
This shows the majority of respondents (38) don’t plan to purchase an Xbox with just
6 indicating that they will do so within the next 6 months and 14 respondents
indicating they “would consider purchasing an Xbox”. Graph 29 further demonstrates
the extent of this by comparing intention to purchase and consumers favourite
console. Although this graph obviously doesn’t include Xbox owners and thus the
numbers indicating the Xbox as their favourite console are lower, it illustrates that just
2 respondents who don’t own an Xbox but highlighted it as their top choice of
console, plan to purchase one within the next 6 months compared to 4 who said they
don’t plan to purchase the console.
Graph 29: Intention to Purchase *
Consumers Favourite Console
20
Intention
19
I intend to purchase
15
an Xbox in the 6 mon
I would consider
10
purchasing an Xbox
I don't plan to
Count
5
5
purchase an Xbox
5
4 4
3
0
2
2
PS2
2
Xbox
I'd never consider
purchasing an Xbox
GameCube
Consumer's favourite console
Whilst Xbox was indicated as the second most desirable console (Graph 10) and over
30 respondents said particular games would tempt them to purchase an Xbox (Graph
26) therefore, it appears the majority of respondents either already own the machine
or despite their preference, don’t plan to purchase one. This does not project a
favourable scenario for the Xbox’s long-term prospects therefore.
4.5
“How has Microsoft’s advertising influenced the performance of the Xbox”
4.51
Has Microsoft’s desire to position the Xbox as a more inclusive machine
than the PS2 meant a wider demographic is adopting it?
The Xbox’s user base has already been analysed in Section 4.3 so comparisons with
the PS2 will refer back to that section to aid discussion.
Graph 30 below thus presents the gender distribution among PS2 owners.
Graph 30: Owners of PS2 * Sex
50
47
40
41
30
20
Sex
10
11
Count
Male
4
0
Yes
Female
No
Owners of PS2
Comparing this with that among Xbox owners (Graph 16) reveals very little
difference with very few females possessing either console, just 4 owning the PS2 and
2 the Xbox. A wider of survey of females would thus be needed to identify if either
console was more inclusive but evidence suggests the Xbox has thus far not
succeeded in attracting a larger female audience than the PS2.
A greater difference does exist between the consoles regarding the age of users
however.
Graph 31: Owners of PS2 * Age
20
19
17
16
14
13
Age
10
11 - 14 yrs
9
15 - 19 yrs
6
20 - 24 yrs
Count
4
3
25 - 34 yrs
2
35 - 44 yrs
0
Yes
No
Owners of PS2
Graph 31 illustrates a broad range of users for the PS2 ranging from 11yrs to 44yrs,
the key user group aged between 15yrs and 34 yrs with the highest penetration among
20 – 24 yr olds. The Xbox however appears more prominent among older users
(Graph 17). Unlike the PS2 the Xbox has no users in the 11 – 14yrs age group whilst
the 15 – 19yrs age group is the strongest closely followed by the 25 –34yrs group.
Despite a smaller user base, the Xbox also has more users over 35yrs. It appears
therefore that rather than being more inclusive in terms of age, the Xbox has a
narrower audience than the PS2.
Furthermore, the time users spend playing video games reveals a similar
picture. Graph 32 shows that the time PS2 owners spend on their consoles is fairly
fragmented but with most users occupying their time with 4 – 6hrs play a week.
Graph 32: Owners of PS2 *
Time spent playing video games
30
Time spent playing
20
0 - 3 hrs
4 - 6 hrs
10
Count
7 - 9 hrs
10 - 12 hrs
13+ hrs
0
Yes
No
Owners of PS2
Graph 18 however, shows that compared to PS2 owners; Xbox users spend more time
per week playing video games with no respondents playing under 3hrs and the
majority playing for over 13hrs. This suggests therefore that it is more the “hardcore”
gamer / enthusiast that has so far purchased the Xbox rather than the casual games
player. It does not appear therefore that Microsoft, as yet, has managed to reach a
wider audience than the PS2. It should be remembered however that it is still early in
the consoles life-cycle so time remains for Xbox’s demographic to broaden.
4.52
What do consumers think Microsoft is trying to achieve with their
advertising / do they think the advertising will attract a broader audience than PS2?
Graph 33 shows the image consumer’s felt Microsoft was trying to achieve.
Graph 33: Image thought MS are trying
to present
50
46
40
42
30
Frequency
20
15
10
0
For the hardcore
Most powerful consl
Play is natural/imp
Image thought MS are trying to present
This demonstrates that 46 respondents correctly identified the message that “play is
natural / important and so open to everyone”. However a high proportion (42) felt that
“the Xbox is the most powerful console” was the advertisings key message and 15
that “the Xbox is strictly for the hardcore gamer”. The fact a significant proportion of
respondents didn’t identify the true message of the advertising thus may partly explain
why the Xbox so far hasn’t reached a broader audience than the PS2.
Supporting this is the fact most respondents felt Xbox advertising would not
attract a broader audience than Sony’s PS2, illustrated by Graph 34.
Graph 34: Will MS advertising attract a
wider audience than PS2
70
60
61
50
40
Frequency
30
31
20
10
10
0
Strongly Agree
Agree
Disagree
Strongly Disagree
Level of Agreement
Only 32 respondents felt this would be achieved compared to 61 who “disagreed”
with the statement and 10 who “strongly disagreed”.
4.53
Do consumers feel the advertising has created widespread awareness of the
Xbox?
In regards to this sub-objective the answers present a similarly negative picture for the
Xbox (Graph 35 below).
Graph 35: How successful has MS's
advertising been in raising awareness?
50
45
40
36
30
20
Frequency
20
10
0
Very Successful
Fairly Unsuccessful
Fairly Successful
Completely Unsuccess
How successful MS been in raising awareness
Although answers were fairly well distributed, 45 respondents indicated the campaign
to have been “fairly unsuccessful”. Whilst the majority (56) felt it had been either
“very successful” or “fairly successful” however, the fact such a large proportion of
consumers felt this to be the case given the significant Xbox marketing budget,
possibly reflects why the Xbox, despite its earlier launch is already trailing the
GameCube and hasn’t reached the broader audience desired.
4.6
“How has Microsoft’s pricing strategy influenced sales / market share?”
4.61
What was consumer opinion of the original £300 retail price and who
purchased before the reduction?
Graph 36 illustrates consumer’s responses to the question: “Was the launch price of
£300 overpriced compared to the PS2 and GameCube?”
Graph 36: Was the launch price too high
compared to the other consoles?
50
46
40
42
30
Frequency
20
13
10
0
Strongly Agree
Agree
Disagree
Strongly Disagree
Level of Agreement
This clearly shows that respondents overwhelmingly thought the Xbox was indeed
overpriced compared to the PS2, which was already available at £199, and the
GameCube, which was soon to be released at around £170 lower. No less than 46
respondents “strongly agreed” and 42 “agreed” compared to just 15 in total who either
“disagreed” or “strongly disagreed” with the statement.
Surprisingly however this is not strongly reflected in the purchasing of the
Xbox, shown by Graph 37.
Graph 37: Xbox Purchase Before or
After the Price Cut?
20.5
20.0
20.0
19.5
19.0
18.5
18.0
Xbox purchase before
Count
17.5
Before price cut
17.0
17.0
After price cut
16.5
Yes
Owners of Xbox
Just 3 more respondents indicated that they purchased after the price cut. This is
particularly surprising as Graph 38, as will be seen, indicates most respondents felt
the present price of £199 was “reasonable”. One possible explanation for this could be
related to the demographic that has so far purchased the Xbox. As we have seen,
evidence suggests the user base demographic is yet to broaden from those targeted at
launch. Due to users largely being the “innovators” or “early adopters” therefore,
purchase was more likely to occur early in the lifecycle when the original price was
still in place.
4.62
What effect has the reduction to £199 had, are consumers now more likely
to purchase / what do consumers think of the price compared to other consoles?
Graph 38 below shows respondents opinions of the price of £199 compared to the PS2
and GameCube following the price cut.
Graph 38: Is the present price reasonable
compared to other consoles?
70
60
63
50
40
Frequency
30
35
20
10
0
Strongly Agree
Agree
Disagree
Strongly Disagree
Is the present price reasonable compared to other consoles?
This demonstrates that whilst consumers overwhelmingly felt the launch price was
too high, the present price of £199 is considered “fair” compared to the PS2 and
GameCube with 63 respondents “agreeing” with the statement, 35 “strongly agreeing
and just 3 in total “disagreeing” or “strongly disagreeing”. However as Graphs 28 and
29 showed earlier, despite opinion that the present price is reasonable, few consumers
intend to purchase an Xbox. This perhaps is partly explained by Graph 39, which
shows respondents mean ratings for each console’s price.
Graph 39: Mean rating of the PS2
Xbox and GameCube Prices
4.5
4.4
4.0
3.5
Mean Rating
3.4
3.0
2.9
2.5
PS2 Price
Xbox Price
GC Price
The Xbox’s rating is clearly significantly lower than the PS2’s or GameCube’s, which
conflicts with Graph 38. The question didn’t specify which price was to be assessed
but instead just directed the respondent to give a general rating. This perhaps suggests
that whilst the price is now considered reasonable, the initially high price point has
had a highly negative effect on consumer opinion.