Special: Analysing Microsoft’s Kinect strategy kinect news special

It has become clear that Kinect is important to Microsoft. At E3 2010 they did not seem to want to hold back one bit in order to get Kinect to the gathered press. How will Microsoft go forward? And which gamers are they targeting? What is the role of Wii and PlayStation in this story? These and other questions are answered by a short analysis of Microsoft’s strategy related to Kinect by our guest writer James Foti.

Changing Markets

The video games market is currently expanding into many different segments thanks to the Nintendo Wii; no longer is gaming targeted towards the 13-40 Male consumer. There is the 60+ elderly market who love to get active by playing Wii bowling or the 30-50 range that are losing weight by using Nintendo peripheral’s such as Wii fit. Both Sony and Microsoft must applaud Nintendo for expanding a previously narrow market.  With Nintendo monopolising these market segments, Microsoft and Sony have been quick to react. Microsoft is introducing a camera that can track your body movements without the need to hold anything in your hand, whilst Sony are going down a similar path to Nintendo by offering motion controllers.

Casual all the way

There is no doubt that Microsoft is after the casual market. This newly developed market has massive potential and is worth millions to Microsoft. Microsoft revealed the Kinect brand at E3 this year, and for the first time ever, it was broadcast in Times Square for everyone to see. Furthermore, they commissioned a show by the exquisite Cirque du Soleil to show of Kinect, which was also broadcasted on MTV. These communication channels are not commonly used in the video game industry to show off new hardware. By broadcasting their E3 press conference live via Times Square, it indicates that they want Kinect to entice the casual gamer into the Xbox experience.  However, is this the  right group to target? The marketing manager of Xbox recently said “I think we know that hardcore gamers will be the first to go out and buy it, as they are with any product”. This statement underlines their intentions to push Kinect onto the hardcore game,r but the thing is, none of the software for Kinect will appeal to them. Casual games such as Kinect Sports or Kinectimals will never be a system seller for the hardcore gamer. In fact, until Microsoft releases a Kinect game that the hardcore can get excited about, then  chances are they will hold off on purchasing the product. Microsoft built its brand on offering a hardcore experience and it might be unwise to neglect them.

Pricing

The pricing of Kinect has become a hot talking point in recent weeks. Although not confirmed, it has been widely regarded that the price of Kinect will be around $150 [official now, not at the time of writing]. Compared to the Nintendo Wii ($180) the value of Kinect could seem very poor. Why would the consumer, who currently owns a Nintendo Wii, part with a significant amount of money to purchase a peripheral that is essentially a very similar product? Microsoft needs to create a value proposition that warrants the $150 price tag and controller free gaming could be the answer.

Competitive advantage

The unique selling point of Kinect is the fact that they offer a way of interacting with a game without the need to hold anything in your hands. This is something the Nintendo Wii and the Playstation Move don’t offer. Microsoft must therefore highlight this advantage when advertising this piece of hardware.  In fact, by looking at Microsoft’s marketing strategy, you could see why they are charging $150. They have to penetrate the market and get the casual market to take notice of this new product. Microsoft has already spent a huge amount on marketing Kinect through the Cirque du Soleil show and by displaying Kinect in various Macy stores. Make no doubt about it, they paid through the nose to do so. Marketing of Kinect is set to increase as they creep towards the release date and therefore costs will increase. Microsoft will aim to recuperate this cost and therefore will set the price as high as $150. However, it is doubtful that they will make a profit on every unit sold as according to ‘Develop’ it is costing Microsoft $150 to manufacture the Kinect camera.

Outlook

The casual market is here to stay, and its going to grow and grow. Microsoft is entering a market in which they are determined to gain significant market share; they are in this for the long term. Kinect is just the beginning for Microsoft. In order for Microsoft to get Kinect into homes across the world, it is expected to be bundled with the Xbox Slim when it launches. Microsoft will initially want to focus on market share rather than profit, so expect Kinect’s price to decrease and quickly. Kinect, or maybe an upgraded version, will be bundled into the next generation of Xbox consoles because this will force the consumer to use it.  Consumers are more likely to see the value of Kinect and therefore use it, if it becomes bundled with the console, rather than just on its own. Microsoft has a massive opportunity with Kinect, and if sales are slow in the first year, don’t expect Microsoft to drop Kinect. It is here to stay, and if they do it right, it could become a huge success just like the Nintendo Wii. Microsoft’s core customer is the hardcore gamer and they should not ignore them. Nintendo have currently realised their mistake of neglecting their hardcore consumer and rectified the issue by announcing numerous hardcore friendly titles. If Microsoft can maintain that balance then they could satisfy the hardcore, whilst becoming a big player in the  lucrative casual market.

James Foti
Contact me, James Foti, via e-mail.
Blog: http://gamingbytesuk.blogspot.com/

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