1 EXECUTIVE SUMMARY
The overall purpose of this marketing plan is to increase the sales of PS2. This aim will be met through the fulfillment of the following objectives:
- Increase awareness of casual customers;
- Create greater appeal to casual gamers by adjusting marketing mix elements to market requirements,
- Increase the overall sales of PS2 in UK,
- Counterbalance the possible drop of sales due to the release of new generation consoles
The plan undertakes situational analysis which helps to identify further potential of sales growth. The situational analysis covers such areas as the review of macro factors, the investigation of the current consumer tendencies with regards to both gaming and entertainment experience and the impact of these factors on sales. The analysis shows that in order to increase sales Sony Europe need to take into account price sensitivity of casual gamers and fashion consciousness of today’s customers. The review of technological factors showed the threat of the release of new generation consoles and the opportunities stemming from the use of online distribution channels and the development of MMO (massive multiplayer online) games. Sony Europe needs to take into account both legal factors in terms of piracy threat and compliance to health and safety standards.
On the basis of situational and competitors’ analysis the plan undertakes SWOT analysis which shows that Sony Europe shall advance its Product Mix component to increase the appeal to potential customers. The price and technical inferiority were recognized as one of the major current weaknesses which might alienate potential casual gamers and incur the cost of lost customers.
The plan develops a marketing strategy which incorporates the findings of situational and competitors’ analysis and SWOT and suggests a specific plan of actions designed to meet the set objectives. The plan of actions suggests the way Sony Europe can develop the right mix of 7Ps’ tools to appeal to target customers and increase customer yield. In terms of Product Mix the plan suggests the introduction of new console design to create appeal for fashion conscious gamers, develop further network capabilities to increase the overall experience from using the product. The Price Mix is suggested to be adjusted making PS2 competitive against same generation consoles. The plan emphasizes the importance of Promotion Mix to communicate the advantages of PS2 to target customers. At the same time the specific attention shall be paid to maintaining strong relationship with distributors to maximize the availability of PS2 hardware and software products. In terms of process, people and physical evidence elements, the paper suggests the development of C2C activities which are expected to enhance the emotional benefits from using the products.
The monitoring section provides the guidelines for monitoring of the results of the marketing campaign.
2 TERMS OF REFERENCES
This marketing plan exercise is focused on determining the marketing objectives, target market and product mix strategies for Sony PS2. To achieve this aim, this plan will encircle the business mission of Sony, external marketing audit through analysis of macroeconomic and microeconomic environment and internal marketing audit, and lastly SWOT analysis. Based on these analyses and SWOT analysis, this marketing plan will finalise marketing objectives specific to PS2, its core strategies and product mix strategies
3 BUSINESS MISSION
The company’s mission is to design products that improve user experience with both work and entertainment technology.
3.1 Mission Statement
To become the company most known for changing the worldwide poor-quality image of Japanese products.
3.2 Core Values
Elevation of the Japanese culture and national status
Being a pioneer – not following others; doing the impossible
Encouraging individual ability and creativity
3.3 Core Purpose
As each Sony’ product is based on these mentioned parameters, PS2 will be very much focused on core value of ‘Being a pioneer-not following others; doing the impossible’ and its core purpose.
4 EXTERNAL MARKETING AUDIT
4.1 The analysis of the macro environment
4.1.1 Economic factors
Before launching PS2, it is imperative to analyze macroeconomic and micro economic audit to analyze key strategic issues, problem areas, and opportunities. The economic factors determine the nature of the competition within local and global markets.
- Macroeconomic stability – Macroeconomic stability is the major factor that affects the potential of console sales and console game sales. Low interest rate creates a strong stimulus for consumer spending, whereas high interest rate creates a strong stimulus for saving. The case of UK consumer trends shows that long term macroeconomic stability created a strong consumer confidence and was one of the major sales drivers (Mintel, 2004). The gaming industry depends on economic state as it affects inflation rate, interest rate and disposable income of the consumer. In terms of marketing strategy the economic factors determine the future market value and might influence the budget allocation for promotion activities and new product development. According to Mintel (2005) in recent years, the UK economy has been among the strongest in Europe.
4.1.2 Socio- Cultural Environment
- Price sensitivity – Mintel (2004) believes that at the moment the price has become the key determinant of purchase choice. Various consumer groups are used to various offers and always look for the best price opportunities.
- MMO games – The recent vast development of Massive Multiplayer Online games shows that games become the new communication media. At the same time, both game publishers, PC and console hardware companies might use various opportunities to maximise sales and increase the customer loyalty.
- Fashion – according to Mintel (2004) research the large number of UK consumers are fashion conscious. Their choice of product strongly depends on the appeal of product mix and its congruence with their self-concept.
4.1.3 Political/ Legal Environment
- Industry regulation – the UK, despite being Europe’s business leader, has the least restricted business environment within the EU (British High Commission, 2005).
- Censorship regulation– the recent serious problems of Rockstar with regards to Hot Coffee mod of GTA San Andreas showed the importance of adherence to video game parental control standards. Since Playstation 2 consoles are usually sold with the free chart game included in the product box, the company shall be very serious about its game selection.
- Piracy regulation– the strong tendency of importing pirated products from China shall be traced by Sony Europe. Though, various PR initiatives were undertaken by government to persuade people into buying genuine products, the anti-piracy legislation is not yet very effective.
4.1.4 Technological factors
- Next generation consoles – The introduction of new generation consoles will change the preferences of different customer segments. At the same time, Mintel (2005) is certain that it will require certain time till the proper market adoption of new generation consoles will take place. Not only will it have to do with the process of market adoption of new product, but with mere availability of sufficient range of games for new consoles.
- New distribution channels – The continuous technological development, especially in the area of digital and communication technologies create new operating opportunities such as new marketing mix channels, new service encounter environment (online sales) and new market research tools. According to Mintel (2004) more and more retailers switch to new cost-saving distribution channels.
- Internet usage– The current penetration of Internet creates the stimulus for the increase use of Internet as information and transaction zone. The major issue is the current tendencies towards Internet consumption which vary respective of a country of operations. For instance Internet transactions in EU countries account for 10%, while in US it is 30%. It means that with the further increase of Internet as transaction area distributors with well-developed e-capabilities will have increased sales and market coverage.
- New information requirements– The introduction of new technologies have changed the nature of customer’s expectations, creating new zones of tolerance. Today, customers expect more flexibility, speed and dependability from retailers, than before the introduction of web-based technologies.
4.1.5 Ecological Environment
Two environmental concerns are commonly associated with console games:
- Health related concerns – First is a general perception of the impact of frequent gaming on young people’s health. Players have complained of eyestrain, headaches, chest pain, fatigue and mood swings (Tazawa et al. 1997). However this perception may subject to change as research shows contrasting outcomes that there is the view that considers such side-effects to be ‘relatively minor or temporary’ (Griffiths 2002) and that finds playing computer games is comparable to a mild intensity exercise: with normal use, playing may neither improve nor harm physical fitness (Emes 1997).
- The compliance with safety requirements– Sony Europe shall resolve the issue regarding the possible threat of fire hazards and overheating of PlayStation 2 Adapters. Sony plans to counter this ecological factor by not only ensuring heat resistant technology but also continuous recalling of complained adapters all from everywhere possible to assess the potential effects and respond to this problem effectively by renewing adapter technology.
4.1.6 Key macro success factors
On the basis of the macro environmental analysis the following key macro success factors can be defined:
- The importance of price as the important determinant of the positive sales decision,
- The importance of fashion trends for Product Mix,
- The impact of Internet in terms of MMO games as Product and Promotion Mix, and the importance of new distribution channels for Place Mix,
- The compliance with censorship regulations especially when doing co-marketing activities with leading game publishers,
- The consideration of ecological issues when developing both Product and Promotion Mix. Sony needs to make sure that it products comply with the health and safety standards and that consumers are aware about that.
4.2 Micro environment analysis
4.2.1 Market
4.2.1.1 Market development
According to Mintel (2004) the market of console games is growing with PS2 accounting for the major share of the overall sales, reaching 5 million units target in 2004. Mintel analysts believe that the major sales drivers of the video games were the rise of the disposable income of the consumers due to the change of gamers’ socio-economic status.
The other important factor was the introduction of the network capabilities and the development of the online gaming solutions. New technical capabilities increase the impact of Product Mix both for hardcore and casual gamers.
4.2.1.2 Distribution
According to Mintel (2004) the UK video games distributors can be divided into three groups: specialist chains, non-specialist retailers and online retailers. Among the specialist retailers the dominant role is played by the Game Group and Gamestation ltd. GAME operates 360 sites in the UK. Alongside its standalone outlets, GAME operates concessions in Debenhams, House of Fraser and Fenwick department stores. Being the brand of BlockBusters, Gamestation Ltd works through 150 stores. Mintel (2004) claims that Gamestation Ltd is the only real challenger to GAME in the specialist sector.
Among the non-specialist retailers there are such distributors as Dixons Stores Group, PC World, Curry’s, HMV, Virgin Megastores, Comet, MVC.
Online retailers group is represented by Amazon.co.uk, Simply Games, Kays and GameSeek. The distinguishing feature of online distributors is that they created strong pressure on other distributor groups. The use of various discounting offers and price cutting techniques created intense rivalry between distributors with the use of bundling offers to drive sales.
4.2.2 Competitors
4.2.2.1 New entrants
The deregulated state of the market provides certain opportunities for new entrants to start the business. The company operates in a mature market, divided between existing large companies. The continuous change of life style preferences create various opportunities for a new gaming experience. At the same time, the current industry enjoys strong cooperation with game developers and publishers who affect the final gaming experience of consumers.
4.2.2.2 Substitutes
There is a wide range of various entertainment substitutes that can directly compete with video games. PC games, MMORPG PC games, portables consoles, mobile phones – all these entertainment alternatives can directly affect the retention of existing customers and the conversion of new ones.
4.2.2.3 Buyers
In the light of the fierce competition and wide variety of substitutes consumers enjoy strong bargaining power. At the same time, Game Industry specialists claim that the development of specific game communities might create strong consumer attachment both to a specific game title and to a game platform.
4.2.2.4 Industry competitors
The market share of Sony is far ahead of all other market players of the game console industry in UK.
This chart clearly indicates that Sony is market leader by huge margin where its main competitors Microsoft (Xbox) and other miscellaneous player (mainly dominated by Nintendo -Pear shaped for Cube & Handheld heaven) and PC games however even in combined form t are far behind PS.
This market share is ideal to launch Sony Playstation2 as current market share suggests that customers are more tilted towards Sony brand name in games market.
The market analysis indicates that although there are PC games that contributes to market, but main competition for PS2 will be from Xbox and Nintendo.
Xbox
Considerable analysis suggests that PS2 will not be facing immense competition from Microsoft Xbox. The main reason behind this fact is ‘reactive’ nature of Microsoft rather than ‘proactive’ one in UK market. Historical evidence suggests that Microsoft launched Xbox in UK after long time when PS had already succeeded in market. Similarly as this PS2 will be launched, there are no immediate plans evident from Microsoft to launch any newer version of Xbox to compete PS2.
Nintendo
To compete with PS from Sony, Nintendo launched ‘Pear shaped for Cube’ in May, 2002, UK. So despite Nintendo being old player in game industry, but in UK console industry, it is still considered as a new entrant as compared to Xbox and PS. It is general perception that its UK position is the third most popular games console and lagging some way behind the Xbox in the UK software and hardware market (Eurogamer, 2004). So at the moment, Nintendo is trying to compete current version of Xbox and PS1 and with new features, PS2 is focused to give ‘ family image’, that means console is not for kids and youth to play games, but it also has features to provide home entertainment through DVD option.
The presence of powerful competitors with established brands create a threat of intense price wars and poses s strong requirement for product differentiation.
4.2.2.5 Key micro success factors
- Due to high level of consumer bargaining power the importance for console manufacturers to cooperate with game developers in developing game related communities as the part of differentiation strategy,
- Due to the high pressure of substitutes the importance of creating value added components within Product Mix to switch the potential consumers for the substitute offers
- The high bargaining power of retailers necessitate console manufacturers to use cost effective distribution channels as well as leading ones to maximize sales of consoles.
5 INTERNAL MARKETING AUDIT
5.1 Operating Results
According to annual report, despite the global decline of hardware sales, Sony Europe generates the steady revenue streams from the sales of the software products. These figures show that irrespective of the current UK maturity and declining sales, Sony Europe might generate profits by selling software solutions and each customer contribution margin.
p>5.2 Strategic Issues Analysis
5.2.1 Segmentation approach
According to GameIndustryBiz and recent marketing campaign launched by Sony Europe the current marketing objectives of Sony entertainment is to persuade casual buyers to buy PS2 consoles. The major objective is to attract late majority and laggard adopters to buy consoles. Hence target customers are segmented not only on the demographic basis, but also on the basis of adoption basis.
5.2.2 Competitive advantage of PS 2
Comparing to same generation consoles the major competitive advantage of PS 2 is its Product Mix advantage in terms of Emotion Engine capability which creates unique gaming experience. Besides, due to very strong third party support and html/java compatibility of PS2 consoles, the owners might browse web sites, use e-commerce capabilities, chat and send e-mails, download music, software and video data.
5.2.3 Core competences
The major core competence of Sony as console manufacturer is its ability to blend advanced technological capabilities of PS2 consoles with the efforts of game developers, licensed to develop the games for the market. Grant (2005) claims that Sony managed to develop strong beneficial relationships with wide range of leading game developers and publishers including such industry giants as Electronic Arts, Capcon, THQ and Ubisoft.
5.2.4 Positioning
Sony positions its console as entertainment centers and as unique gaming experience. Both positioning statements are duly supported by Product Mix elements and the efforts of software developers.
5.2.5 Market attractiveness and of the product strength
The strong relationships with third parties make Sony very attractive for the wide range of consumers. According to Electronic Gaming Monthly (2005) the wide game titles library with a large number of AAA games makes PS2 a real value for consumers. Hence, despite certain inferiority of PS2 against Xbox in terms of technical specifications (see appendix I), the strong titles makes it more appealing to casual gamers, who are not as sophisticated as hardcore gamers.
Though Sony was one of the first movers when it introduced network adapters it did not place particular focus on the development MMO games. The analysis of macroeconomic factors showed that the development of online game opportunities, especially with regards to both gaming and socializing experience is an important competitive prerequisite. After unsuccessful to port Everquest from PC to PS2 Sony did not invest in the development of this direction.
5.3 Marketing mix effectiveness
5.3.1 Product
Both technical capabilities of PS2 as video game console and its options for consumers to use it as multimedia centre, supported by wide range of powerful software products create unique overall experience for casual consumers. The console is not already appealing for innovative type hard core players who look for the most sophisticated solutions. At the same time, the casual gamers get the access to wide range of entertainment opportunities. Provided the large number of appealing titles PS2 is still competitive against new generation consoles which can not offer the similar software titles depth.
5.3.2 Price
At the moment PS2 is more expensive then its direct competitors: Nintendo and Xbox. Provided the price sensitivity of casual gamers, the price is a competitive weakness of PS2.
5.3.3 Place
Sony Europe collaborates with all leading distributors from all groups which creates maximum availability for a mass market. Hence, in case of a positive purchase decision a consumer has wide range of opportunities to get PS2 console.
5.3.4 Promotion
Due to wide range of software titles, the console is regularly promoted via different media channels. According to Mintel (2004) one of the most advantageous promotion channels is the word of mouth communication and community building. At the same time, Mintel (2004) claims that TV, magazines and other promotion media are very important in term of creation awareness regarding new game titles.
5.4 Marketing structure and systems
Sony Europe’ marketing department collaborates with the departments of game publishers in order to track the effectiveness of the use of various marketing tools. This type of collaboration which includes information exchange, joint marketing planning and co-marketing activities increases the effectiveness of marketing expenses. Having POS data on the sales of game titles and consoles, the marketing department gets the access to relatively precise information regarding sales potential, customer trends, upcoming events and seasonal limitations.
6 SWOT ANALYSIS
6.1 Strengths
- Third party support – One of the major advantages against both same and new generation consoles is the wide range of gaming titles.
- Online capabilities – The html/java capability along with the support of various online applets create various value added opportunities for end-users
- Distribution – The strong collaboration with leading UK distributors maximise the availability of consoles and games for customers.
6.2 Weaknesses
- Inferior technical specifications – PS2 is inferior to Xbox and new generation consoles.
- Price Mix – The fact that PS2 is more expensive than its direct same generation competitors might alienate casual gamers.
- The underdevelopment of MMO solutions – having failed to port ” Everquest ” on PS2 Sony did not develop MMO solutions.
6.3 Opportunities
- The Product Mix appeal to mass market – The wide range of famous titles, wide range of online capabilities and strong market reputation create a strong opportunity to attract mass market consumers. According to Rogers (1995) both late majority and laggards, who might constitute more than 35% of the overall sales during the product life cycle are very attractive customer segments.
- Increase of customer yield – the development of network solutions might bring various opportunities to increase each customer’s contribution margin into overall revenue stream.
6.4 Threats
- The entry of new generation consoles – The entry of new generation consoles is very likely to attract innovators and early adopters. Though, it will take certain time for game developers to create sufficient game choice for new generations, PS2 sales might be affected by the further penetration of new products on the market.
- The further rise of MMO popularity – – The further rise of MMO popularity might affect the appeal of PS2 for casual players. Though, this type of games are still perceived as ” geeky “, the further market adoption of MMO games might reduce the PS2 software and hardware sales.
7 MARKETING STRATEGY
7.1 Strategic Thrust
The table 1 shows three directions of strategic thrust:
- The further development of multimedia capabilities to maximize the penetration onto existing markets
- The development of Product Mix for existing customer segments to match the current popularity of MMO games
- The development of fashionable PS2 (slim type, new colors and design elements) to maximize mass market appeal
7.2 Strategic objectives
- Retain existing customers;
- Create appeal for casual gamers and increase the turnover;
- Attract new customers;
- Maintain long-term mutually beneficial relations with patrons;
- Facilitate positive word-of-mouth promotion.
8 CORE STRATEGY
8.1 Target markets
Gaming experience
- Casual gamers who would like to explore video gaming experience,
- Hard core gamers who do not have sufficient cash to buy expensive new generation consoles
Behavioural aspects
- Prefer to play famous game titles;
- Enjoy community and online environment;
8.2 Customer Buying Criteria and customer switching tools
The potential customers will choose the pub based on the following criteria:
- Price – Casual gamers are price sensitive and bargain–seekers (Mintel, 2004).
- Range of available titles – The product depth will create a strong ” pull ” effect once a customer decides to buy a console.
- Emotional benefits – Kotler (2004) claims that emotional benefits are one of the key elements that create emotional attachment of patrons to a particular product. The quality of game related communities might create various emotional benefits for casual gamers.
9 MARKETING MIX
The section above showed that potential and existing customers will use the set of salient quality attributes to assess the overall value proposition of the PS2. In this relation to insure that all the available benefits are properly communicated, the pub needs to understand customer preferences, define the sources of information that shape consumers expectations and develop the marketing mix elements that will communicate the required benefits.
9.1 Product
The environmental analysis revealed the importance of Product Mix as a strong appeal to customers. Casual gamers are looking for enhanced gaming experience. At the same time, the influence of fashion trends set specific requirements for the development of new designs. To attract casual gamers, Sony Europe shall strive to maximise overall customer experience by offering attractive bundles and enhancing entertainment capabilities of the PS2 console. Additionally, the development of MMO games will attract hardcore gamers and might enable certain gamers to switch from other consoles.
9.2 Price
The SWOT analysis revealed that the price is one of the weaknesses. Hence, to attract casual gamers Sony Europe needs to make the Price Mix of PS2 be competitive against direct competitors.
9.3 Place
Pratten & Scoffield (2003) name location as one of major competitive strengths. Sony Europe shall maintain the strong relationships with major distributors to secure the availability of PS2 products.
9.4 Promotion
According to Kotler (2002) promotion decisions encompass the range of communication and motivation instruments needed to raise awareness and precipitate purchase of the product. Sony Europe shall use various mass media tools, including celebrity endorsement and events to increase the overall PS2 hardware and software sales. Mintel (2004) stresses the importance of POS promotions such as price reductions, special offers and special editions and the importance of word of mouth communication.
9.5 People & Process & Physical evidence
Provided that the PS2 products are mostly goods rather than services it is very hard to define Process Mix, People Mix and Physical Evidence Mix components. At the same time, C2C online activities and gaming experience create various opportunities for Sony Europe to manage People Mix and Process Mix. Using Game mastering, holding tournaments and online competitions, supported by game communities Sony Entertainment can make use of People Mix, Process Mix and Physical Evidence Mix. In this case the involvement of other gamers will create additional emotional benefits for customers and create the tangible advantages of PS2 services.
10 BUDGET
The present marketing campaign will require the investment of 6 million British pounds. As the table two shows 2 million pounds will be spend on increase of PS2 software and hardware sales. As the table shows the promotion activities will include celebrity endorsement with the use of TV advertising and events, radio advertising, online promotions and POS promotions, cover mounts and software reviews in the leading console and lifestyle magazines.
| Activity | Cost (pnd) |
| TV celebrity endorsement | 600 000 |
| Events | 400 000 |
| Magazines | 600 000 |
| Internet promotions | 100 000 |
| Flyers | 100 000 |
| POS promotions (price reductions, referral schemes) | 100 000 |
| Monitoring activities | 100 000 |
| Porting of MMO games | 3 000 000 |
| Promotion of MMO games | 1 000 000 |
100 000 British pounds will be spend on monitoring the effectiveness of the implementation. 4 million pounds will be spent on porting MMO games on PS2 and its promotion for hard core gamers.
11 MONOTORING THE EFFECTIVENESS OF THE CAMPAIGN
Monitoring and evaluation will take place throughout the campaign. Amount of £100 000 have been allocated to control the performance of the campaign. The monitoring activities will collect the information about the use of various promotional channels, whereas evaluation phase will deal with identification of the most efficient promotional channels that shall be further kept in top priority. Sales and revenue figures will be tracked on the daily basis. This will help to determine the effectiveness of the campaign.
The collection of the feedback information will be done on the monthly basis to evaluate the effectiveness of the suggested marketing strategy. In case no or flat response to promotional activities, contingency measures will be employed.
12 REFERENCES
British High Commission (2005), ‘ Economy and Justice ‘, British High Commission, Canberra, Australia. Also Available on http://bhc.britaus.net/About_the_UK/aboutukdefault.asp?id=372 (30.11.05)
Electronic Gaming Monthly (2005) ” PLAYSTATION 2 “, Electronic Gaming Monthly, Aug, Iss. 194, pp. 20-21
Eurogamer, (2004), ‘UK Charts: 2003 Annual Report Round Up( Article )’, Eurogamer . Also Available on http://www.eurogamer.net/article.php?article_id=54707 (30.11.05)
Grant R. M. (2005) Contemporary Strategy analysis, 5th edn, London: Blackwell Publishing
Mintel (2004) ” Video, Computer and Internet Games – UK “, Mintel International Group, September
Mitchell, A & Smith, C., S., (2004), The use of computer and video games for learning- A review of the literature, London, LSDA. Also Available on http://www.lsda.org.uk/files/PDF/1529.pdf (30.11.05)
Tazawa Y, Soukalo AV, Okada K, Takada G (1997), ‘ Excessive playing of home computer games by children presenting unexplained symptoms’, The Journal of Pediatrics, 130(6), 1010–1011.
13 APPENDIX I – COMPARISON OF 128 BIT CONSOLES
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