In marketing two of the most important things are the marketing segmentation and the marketing- mix. Even if you come up with a “gee-whiz” product, if you do not use the right marketing ingredients the result can be devastating.
Nowadays, Sony is the one of the most successfully growing electronic companies in the world but it cannot be attributed just to the technology and the innovation.
Sony’s marketing segmentation consists of four different lines: electronics (camera, computer, camcorder, TV, Walkman, MP3 players), Sony Music and Sony Pictures, digital entertainment (Play Station) and mobile phone (SonyEricsson).
One of the biggest steps in Sony’s life was when the Sony Computer Entertainment sector was set up with the Play Station 1 (PS1) concept, and later developed with the Play Station 2 (PS2) concept.
By the mid-1990s, the whole company was in a deep funk. Its profits had sunk from a high of $1,3 billion in 1992 to a loss of $3,3 billion in 1995. The solution was the Play Station division in 1993. Less than 5-years later, the Play station business had grown to achieve an incredible 40% of Sony’s $3 billion in operating profits and nowadays, it brings nearly half of the company’s profits and Sony owns the biggest share from this market in the world.
So how was this success compromised?
Sony endeavours to understand its customers as much as possible. The marketing segmentation makes the process more efficient and effective. It divides the market into small pieces and targets people who belong to the same group and feel the same desire for a product.
Sony visibly goes all out for to supply individual customers. The company concentrates its efforts in three key markets: USA, EU and Japan but it is also represented in 200 countries with support in 68 languages. Such a globally segmented market allows the organisation to focus specifically on the needs of their particular markets. The Sony Computer Entertainment America (SCEA) has been set up by Sony to focus specifically on the USA market while the Sony Computer Entertainment Europe (SCEE) cares for the European consumers.
A good example of how this has materialised is that its console and marketing of the product for the Japanese market. Sony focused on the fact that more than 20 million people have got high-speed internet connections and hence it offers PS2 with on-line function1. However, in the USA market the situation was different and they realised that the version did not have an on-line function.
Mr. Jack Tretton, vice president of SCEA says: ” Twenty per cent of customers choose the on-line PS2 and its eighty per cent buy the cheaper off-line product.”
In the European market the EU member countries dominate, especially Western Europe. The major software writers are based in London, Paris, and Vienna to supply the huge game demand.
Gender- In the beginning, most software developed was specific to the young male, like fighting and shooting games. Soon, however, Sony realised that it could benefit from the female members of society too. In 2004, it launched its innovation: the Eye Toy. It is a special camera which players can see themselves on the screen in real time and play table tennis, boxing, cleaning windows and drumming for example. This has been a success in 2003- 2.4 million pieces were sold. (Index 2004)
Age- The PS1 console technically is inferior to the PS2 that it is also cheaper. It has fewer aggressive games so it is perfect for people age between 6 and 11. PS2 is more professional both in hardware and software hence the age segmentation is between 12 and 19.
The newest Play Station console will probably be promoted in 2006 with special features. The processor might be implemented from the modernist IBM technology, which is used in the famous Power-Apple PC. It will also have internet modem so even adult players can find access the Internet playing on the network against each other.
In Japan, Sony describes the Play Station 2 as an entirely new dohyou, using the Japanese world for sumo ring. Sometimes playing a game can mean more than just fun. People like playing and winning. It can be more serious even among adults. These people with achiever and ambitious personalities like to “challenge everything” (EA GAMES- one of the biggest software producer company).
Benefit- Sony’s strategy is based on the fact that it tries to persuade consumers that its brand offers the best quality for their money and it is different from the others.
The new PS2 for example, is, super light compared to the other consoles, thus it is mobile and children can take it with them on holiday, for example. With the mobile concept, Sony tries to squeeze out Nintendo’s palm consoles.
Loyalty- The customers feel strong loyalty to the Play Station brand. First of all, it comes from the belief that the quality of the product and service satisfy the customers on a high level. Secondly, there is a correlation between the two consoles.
Compatibility-The first generation of customers who grew up on PS1 prefer to buy PS2 because they can play with their old games on the new machine. This fact and the brand loyalty ensure that in the long run people become medium or even heavy users.
Task 2 (A)
The marketing- mix is the one of the most important things in marketing. The hardest thing is to find out the best mix from the existing ingredients.
Brand name- Sony always tries to persuade consumers that its brand offers the best quality for them. The company’s goal is to build a strong brand name to capture consumer loyalty and preference. The Sony name is synonymous with quality and value, while the Play Station name suggests the concept but it is clearly identified separately from the main brand.
Hardware- The company spends huge amounts on research and development and is the first to produce products. When PS2 was first launched, Sony had made a machine, which was leading edge its features included a 128-bit processor called the “Emotion Engine” which was three times faster than a Pentium chip of the same vintage.
Sony is the only company in the entertainment market which offers so many different designs of hardware: modern silver, serious black and futuristic transparent.
The also produce more than 30 supplementary units.
Software- From the beginning Play Station was developed in alliance with the biggest software companies such as, 3DO, EIDOS, NAMCO UBISOFT and EA GAMES. It made it able to produce much more software games in the early stages. Lately it has given it a big advantage when rivals want to step into the entertainment market. The key is the range of games- PS 1 and 2 offer more than 1500 games to its new consoles while Microsoft less than 500.
Service and experience- Sony ranks customer care highly both before and after purchasing. In the main this is delivered via the Internet through their very popular www.playstation.com homepage. The customers find product and technical advice, as well as being able to link into other PS customers to discuss matters. They can order and buy hardware and software support, play in networks and if somebody is registered in the database, they will receive special offers and a lot of useful information by e-mail. It brings the customers together and adds to the experience of being part of Play Station.
Sony used captive- product pricing for its launch, tried to sell its consoles on relatively cheap and make money on video games, hence it was able to reduce console pricing and increase its profit margin on games titles – to sixty-five per cent in 2002. (Index 2002)
The PS2’s biggest rival was Microsoft’s X-Box consoles which were introduced in 2001 but it could not break into the market even though its price is $99 against PS2 which is $149. Sony reacted in 2003 with a new PS2 Satin Silver Edition and it increased sales by 15% because the new product wave was at the right time.
Microsoft’s price strategy is simple, it tries to decrease the price. On the other hand, Sony offers its consoles with 2 free games to tempt costumers to buy rather than reduce its price and follow the rivals. Sony also has not entered the market at the low cost end, which its rivals have had to do in order to compete but have relied on its “Quality” image to support such a pricing strategy. It concentrates on the fact that people often think that if something is relatively cheap, it must be poor quality (even if it is not true).
Sony presents its Play Station concept in Asia, Europe, Africa, America and Australia.
It promotes its consoles in specialist shops, supermarkets, particularly play shops and other similar places. Here costumers also can play with and test the new hardware and software with the available consoles.
Every year the Play Station truck travels around America, hence an opportunity presents that customers are able to play and test the new games free in a futuristic surrounding.
The enterprise spends a lot of money on campaigns especially in the USA to squeeze out its biggest rival from the second biggest market2.
Task 2 (A)
When first PS1 was launched in 1994, it was the right time to catch the new computer generation and create for them a new entertainment world. Ken Kutaragi dreamed up this new digital world. Kutaragi envisaged a computer business with personality, fun and emotion. After two years’ development engineers accomplished the creation of Play Station (PS1) with a totally new chip with a plastic shell. It was the first to combine a 32-bit processor, a graphics chip, and a decompression engine on the same piece of silicon, otherwise known as a system-on-a-chip. After this big step the entertainment project was launched. The whole concept was supported with product development and marketing knowledge on the highest level.
SONY COMPUTER ENTERTAINMENT GROWTH IN REVENUES AND OPERATING PROFITS AS PERCENTAGE OF CORPORATE PROFITS,
1995-1999 (IN BILLIONS OF YEN)
95 96 97 98 99
Sony Computer 35 201 408 700 760
Sony Computer n/a (9) 57 117 137
Sony Corporate (167) 235 370 520 339
(Gary Hamel- Leading the revolution (2000), p-172)
Sony has created a different world. The “Play Station” and the “See the world of Sony” slogans perfectly reflect how Sony wants people to enjoy themselves and feel something special: get an experience, win in their new life and more than that.
In the business the “consumer is the king” the golden rule is still the most important moment but in Sony’s marketing strategy it has been transformed.
Akia Morito: “Our goal is to lead costumers where they want to go before they know where they want to go.”
This is the real power of marketing, when a company like Sony owns the intellectual property to lead their customers, hence the whole process is more comprehensible and predictable, that is why the strategy is more easily controlled, defended against rivals and monitored.