MKT10007 Fundamentals of Marketing Assignment 3: Marketing Strategy PlayStation 4 Console (500GB/1TB editions)

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1 MKT10007 Fundamentals of Marketing Assignment 3: Marketing Strategy PlayStation 4 Console (500GB/1TB editions)

2 Executive Summary This report will provide an in depth analysis on the Playstation 4 Console (PS4) 500gb and 1TB models, and provide foundations for the creation of a marketing strategy. As part of the analysis on the marketplace and influencing factors, this report explores the industry, consumer segmentation, segmentation attractiveness and identifies questions which, with research, could help further the understanding of the PlayStation 4 market. The research in this report focuses on the types of people that play video games, and the way they can be marketed towards. Console hardware is seen as being in the declining stage, and though it s unlikely new brands will enter the market due to the dominance of the three home console brands, competition continues as these companies continue to release new hardware and software every year. This leads to Sony continuing to innovate with its consoles and peripherals, as well as acquiring exclusive software rights to draw in customers. Our consumer segmentation found that all types of gamers are worth advertising to, but in different capacities. Casual gamers were found to have the highest chance at growth, as the company s mission and the consoles varied uses can appeal to this market if marketed correctly. Finally, our research suggests that more research should be done into the non-gamer group, as this is a largely untapped group in regards to console marketing. If research is able to find why they don t use the PS4 console, marketing can be adapted to suit these users needs. It is recommended that: - Heavy gamers need to be marketed to for continued brand loyalty. - There should be a focus on creating marketing that outlines the differences between PS4 and its competition. - Casual gamers are marketed towards heavily to influence a large growing market to our console instead of the competition - Further research be put into finding out how to appeal to non-gamers, as they are a large segment of the market 1

3 Table of Contents Executive Summary... 1 Introduction The Marketplace and Influencing Factors 1.1 The Micro Environment Industry Overview and Summary Competitor Analysis Analysis Of Other Micro-Environment Players The Macro-Environment Other Environmental Factors Influencing The Company Attractiveness of Consumer Segmentation 2.1 Consumer Segmentation Creating Consumer Segmentations Profiling Elements Defined Justification of Segmentation Base Segment Attractiveness 3.1 Segment Comparison Size and Growth Structural Attractiveness Company Objectives and Resources Additional Information Market Factors Recommendations for Additional Research 4.1 Additional Research Primary Research Research Design.. 13 Conclusion and Recommendations. 15 Reference List. 16 2

4 Introduction Our marketing group, MKT Marketing, were commissioned by Sony Corporation marketing team to research and analyse the markets in which Sony s PlayStation 4 console is currently being advertised in and prepare a report for the company. This report looks at the various aspects of the current market, as well as the broader gaming market which the console is trying to market to and compares the products currently available. It also considers different segments of the market and how to appeal in effective ways to different potential consumers. Then, after looking at the current market environment, we give our recommendations on what could be further researched to help the company expand its marketing effectiveness for the PlayStation 4 console. The main limitation of this report was that, due to time and money constraints as well as no access to the PlayStation user network, we were unable to conduct our own primary research and had to rely on publicly available information, adapted to suit our needs. 3

5 1. The Marketplace and Influencing Factors 1.1 The Micro-Environment Industry Overview and Summary Sony Corporation is based in Tokyo, Japan. It is one of the leading manufacturers of audio, video, imaging, game, communications, and information technology products for the consumer and professional markets (John Carpenter House 2017, p. 3). They sell a wide range of products in different electronic markets, and this report will be focused on the gaming market, looking at their Playstation 4 Console released in A tree diagram has been provided in Figure 1a to define the scope of the industry in which Sony s gaming branch operates in. Figure 1a - Tree Diagram of Sony s PS4 industry scope. As seen in figure 1a, Sony s Playstation is part of a large market of electronics, many with Sony branded products available. According to Cloutman (2016, p. 9), the Sony PS4 is part of the video game, dvd and music retail industry which is in decline. However, gaming consoles are not the profit makers - Segundo (2013) reports that the US retail of $399 for the console only nets them an $18 profit. Online retailing is where the gaming industry is headed, with online video game sales growing over the 10 years through , (and the) industry's contribution to the economy (industry value added) is expected to rise by an annual rate of 13.1% (Magner 2016, p. 10). New consoles often struggle with finding developers to make games for them to stay relevant, such as 2015 s Ouya (2017) console which despite having a hugely successful Kickstarter, flopped and has been bought by Razer who has not retaining interest in OUYA hardware (Razer 2015) The digital game market is dominated by three companies - Sony, Microsoft and Nintendo. In terms of home consoles, current results discussed by Sun (2017) suggests the PS4 is winning in regards to 4

6 the home console market. President and CEO of Sony Company Kazuo Hirai has said that (PlayStation) VR would become increasingly influential across the Sony group (Smith 2017, p. 25). Currently, Sony s Playstation is leading the market for home consoles, though not for video game consoles as a whole, with Sun (2017) reporting that they are still being beaten by the portable Nintendo s 3DS worldwide. As Harrison (2016) reports, the PlayStation Portable (PSP) was a worldwide success, but it s successor PlayStation Vita underperformed and is no longer being supported by Sony Competitor Analysis According to Statista (2017), the PlayStation 4 is the current leader in console sales against its two major competitors, Microsoft and Nintendo. The Xbox One is the most similar product to the PlayStation 4, offering a pre-built gaming system with controller, Blu-ray player, exclusive games and made for a gaming audience. Nintendo is the other home console competitor, though it has much less processing and graphics power than PlayStation 4 and Xbox One, being focused on accessible gaming for all audiences. Alien Alpha has been selected to represent PC gaming, as it has similar specifications to the PlayStation 4. PC s are compatible with numerous software, while consoles are exclusively compatible with games made by the company and their 3rd parties. A product comparison table has been included to highlight the differences between PlayStation 4 and its competition. P PlayStation 4 Console Microsoft Xbox One S Nintendo Switch Alienware Alpha Brand Positioning For the players, edgy and fresh Cool, inclusive brand Family friendly For professionals and hardcore players, but not just for gaming Product Specifications AMD Radeon GPU, 500GB/1TB internal storage, 8GB RAM, Blu-ray player, wireless controller AMD Jaguar GPU, 500GB/1TB internal storage, 8GB RAM, Bluray player, wireless controller NVIDIA Custom Tegra GPU/CPU, 32GB internal storage, 4GB RAM, wireless controller AMD Radeon R9 GPU, 1TB internal storage, 4GB Ram Place Video Game Retailers Online Video Game Retailers Online Video Game Retailers Online Online Price $339 $379 $469 $999 5

7 Promotion Bundles, TV adverts, Conventions Bundles, TV Adverts, Conventions Bundles, TV adverts, YouTube channel Online Sales Web ads Advantages & Disadv c/w our Brand and Sub- Brand Exclusive games Well known Not upgradeable Exclusive games Well known Not upgradeable Lacks games Well known Not upgradeable No exclusive games Niche Market Upgradeable Other factors important to prospective buyers Trusted innovative brand Cross platform games for pc Family friendly Best performance Data was current as of 01/05/17 Sources; Electronics Boutique Australia Pty Ltd (2017) Dell (2017) Sony Interactive Entertainment Europe Limited (2017) Nintendo (2017) Microsoft (2017) Table 1a - Product Comparison Table of Sony, Microsoft, Nintendo and Alienware Analysis Of Other Micro-Environment players A key player for the industry is the public, which includes gamers, media persons, local people and families. As reported by Kerr (2017, p. 154), these consumers played a huge role in the PlayStation 4's success which was said to have sold more than 1 million units in the first 24 hours of sales. If the relationship between the public and Sony's PlayStation 4 broke, it could threaten the company's stocks, revenue and sales which, as reported by Lee (2016), recently happened with the Samsung Galaxy Note 7. The positive view the public have towards Sony's previous products helps promote its existence, increase the number of potential buyers and the company is able to continue to profit. According to Chand (2014), Sony s overall success is affected by how the public view their activity. 6

8 1.2 The Macro-Environment Other Environmental Factors Influencing The Company Factor Trend Explanation What does this mean for our strategy? Demographic Population growth Increase There has been more overseas migration as well as births. (Australian Bureau of Statistics 2017a) The increase in population growth means that there will likely be some more potential consumers. Average family size Decrease The average family size has decreased due to reasons such as divorce, people choosing not to marry, marrying later or simply not choosing not to have children (Australian Bureau of Statistics 2010) Sony has to consider the fact the decrease average family size would affect what games their audience would buy and how that will affect their sales. They would have wider target market and want to focus on young families. Economic environment Unemployment rate Increase The unemployment rate has increased because there are simply not enough jobs for the growing population. Patty (2016) also suggests that companies might downsizing to reduce costs. More unemployment means people can t afford video games so Sony would have to provide cheaper alternatives. 7

9 Average Disposable Income Increase There have been variations in the number of full-time, part-time, casual and junior employees; variations in the occupational distribution within and across industries; and variations in the distribution of employment between industries (Australian Bureau of Statistics 2017b) A higher average disposable income means the more people would be willing to spend their money on the PlayStation 4. Technological environment Technology in competitor s product Increase Roser (2016) reports that the technology industry continues to advance, increasing product quality for a decreasing price. Sony will have to adopt new technology into their product to rival with their competitors. Internet Access Increase A lot of technology nowadays require internet to maximize their use (Australian Bureau of Statistics 2016). Products such as laptops and smartphones are examples of these products. More and more households are getting access to the internet and even NBN. Sony might want to take advantage of that by releasing more games digitally and other content that require internet access. Table 1b - The macro-environment of Sony s PS4. From Table 1b, we see there are many external factors in the environment that directly affect the marketing approach Sony s PlayStation 4 needs to utilise. It is important to note that the table shown above is not static, as it is possible for many of the aspects included to change in a matter of days. Some of these key aspects identified in the table is the identification of an increase in disposable income and increased internet access for households. As reported by Jericho (2014), the higher disposable income makes consumers less reluctant to spend their money for luxuries. The internet access in households has also shown a significant increase with statistics showing 60% of the usage spent on entertainment alone (Australian Bureau of Statistics 2016). 8

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11 2. Attractiveness of Consumer Segments 2.1 Consumer Segmentation Creating Consumer Segmentations We decided, after evaluating the nature of the general PlayStation 4 consumer, to divide our potential consumers into segments based on the amount of time dedicated to gaming per week. The profiling elements were selected based on the research by Neys et al. (2014, p. 202), which looked at what motivated gamers to continue using the console and the average hours spent on them. The following table looks at four types of gamer, based on their frequency of use. Use Frequency (per week) Availability of large range of games Interest in a range of multimedia features Battery Life Importance Access to online and multiplayer features Console Processing Power Non-Gamer (>1 hour) Very Low Very High Very Low Very Low Very low Casual Gamer (1-5 hours) Heavy Gamer (5-20 hours) Hardcore Gamer (<20+ hours) High High Low High Medium High Medium Medium High Very High Very High Medium High Medium Very High Table 2a - Consumer Segmentation for PS Profiling Elements Defined The availability of the games differs in importance for different gamer types. Using a range of gaming genres would appeals to wider audiences. Multimedia features include services such as Blu-Ray playback, streaming services, and other nongaming related functions usable on the PS4. Battery life focuses on the length of time the PS4 controller battery lasts, as the experience will be more pleasant for users who aren t made to recharge their controllers at inopportune times. 10

12 Online multiplayer features include cross-play voice chat, multiplayer games and other online features. Console processing power considers the importance of the technology running the system, which can affect loading times, graphics and gameplay smoothness Justification of Segmentation Base The reason we profile our consumers is to distinguish between different ways each type of consumer consumes the product. As we are separating our users by the amount of time they dedicate to gaming per week, it s impossible for them to fall into two separate categories. There are five factors that can be used to justify and prove that your segmentations are a useful base for profiling. These include: Measurable, Accessible, Substantial, Actionable and Differentiable. Measurable segments can accurately be measured by size and purchasing power. Statistics on usage can be obtained by looking at the statistics behind the 60 million users (Makuch 2016) who have a PlayStation Network account. The use frequency of offline gamers who may not have internet connections can be found through market research. Accessible segments are segments that can be reached or served. All segments can be reached via media sources such as television and magazines. Substantial segments refer to segments that are large or profitable enough to worry about. All segments are worth it currently, except non-gamers who are are a large segment but uninterested in the product. Actionable segments are segments which can have effective programs designed for attracting and serving them. For example, heavy and hardcore gamers can trial the console in stores to try a range of games and compare the system to competition. Differentiable segments can be separated from the other segments of consumers and have a marketing mix delivered just targeted to them. As all the segments have different priorities, this can be achieved for the PlayStation 4. 11

13 3. Segment Attractiveness 3.1 Segment Comparison Segments (Use Frequency) Size & Growth Structural Attractiveness Company Objectives & Resources Non-Gamer Small Low Low Interest Casual Gamer Large High High Interest Heavy Gamer Medium High Medium Interest Hardcore Gamer Small High Medium Interest Table 3a - Segment Attractiveness Comparison Size & Growth As technology advances, the PS4 begins to appeal even to the non-gamer segment, as Pike (2015) discussed results of a console survey suggesting that the blu-ray player aspect of the console is a high factor driving sales. Meanwhile, the other segments are relatively bigger in size and Sony even has said in a corporate strategy meeting that the Playstation is the largest growth driver of its midrange corporate plan (ENP Newswire 2016). Many factors would affect the size and the growth of the segments such as brand loyalty, quality and availability Structural Attractiveness The entertainment systems market can be considered an oligopoly, where there is small number of brands that compete against each other to maximize their profits. GameCentral for Metro.co.uk (2016) suggest that PS4 regard the gaming PC as their main competitor and the incentive behind releasing the PS4 Pro despite not being an exclusively gaming console competitor Company Objectives and Resources Sony Corporation (2017) plans to grow by 10% in profit during the 2017 financial year, so having the console selling at a stable rate and being the highest selling PlayStation control so far, this is a good match for our segments. Research by SpilGames (2013) shows that the number of gamers are growing, and non-gamers are becoming a minority with over 44% of the world s online population playing some amount of video games Sony s communication objectives were: * Be the most talked about entertainment launch of the year 12

14 * Drive desirability and advocacy for PS4, both at launch and beyond * To be seen as Liberating play (Euro Effies Award 2015) We can see that the company s prestigious position is essential to maintain the good relationship between the company and the customer. Sony wants the PS4 to be more than a novelty item. As the objectives focus on desirability and liberating game play, a combination of entertainment and gaming, the best market for the PS4 would be casual gamers. They are the largest growing sector, and would be interested in all the different aspects of the consoles objectives. 3.2 Additional Information Market Factors The entertainment systems market is very competitive, however it is very difficult for new businesses to try and enter the market due to Sony, Microsoft and Nintendo having a huge market share and loyal following, with support from numerous developers. 13

15 4. Recommendations for additional research 4.1 Additional Research We want to tap into the rising casual gaming market, and convince non-gamers to begin considering buying consoles even if not for gaming. With this in mind, we have four suggestions on future research questions to help the marketing team: 1. Why do non-gamers not play games? 2. What features would attract non-gamers to choose buying a console over other media players? 3. What do gamers dislike about the console? 4. What additional features would convince consumers who buy competitor products to change brand loyalty? These questions would all be useful in targeting a market that isn t already heavily into games, and finding ways to appeal to them instead of just advertising for the players. As we already know from Pike (2015) what driving factors people have to buying the console, we should also find out what else they want, and what consumers might dislike about the PS4. This research would help us develop marketing strategies which would ultimately expand our market share if done effectively. 4.2 Primary Research One way of researching what non-gamers would want in a PS4 system is to conduct a focus group meeting with a group of people of various ages to see what features may convince them to purchase a system. A focus group would allow Sony to bring in the PS4 and let the group see how it works, as nongamers are unlikely to have used the system. It also allows participants to give not only feedback on ideas, but feedback on why they might not like the current console in terms of user interface and ease of use. Focus groups also allow for follow up questions. However, focus groups are only a select few people and do not offer the scope of ideas that might arise from a large survey, for example. There is also no way of telling whether participants are speaking truthfully or not. Another advantage, however, is that focus groups can have both qualitative and quantitative data. Qualitative data generates and gets reactions to new ideas and provides insight into problems, while quantitative lets you determine customer opinions, behaviours and provides data for segmented markets (Hooley, Piercy & Nicoulaud 2008, p. 22). 4.3 Research Design The focus group should have around 10 participants. As entertainment is a universal want, Stewart, Shamdasani & Rook (2007, p. 22) suggest a group with a even mix of demographic and sex would be beneficial to get different results on the same questions. As shown in the SpilGames (2013) report, ages and are the highest percentage of gamers, so this should be the main represented age groups. 14

16 During the focus group, and using a PS4 console when appropriate, questions that could be asked include: - Why don t you play video games? - Did you know the PS4 can fulfil most entertainment needs such as Blu-ray, Netflix etc? - Can you comment on the ease of use to start an application such as Netflix? - What features would you want to see added to the console? - What are the thoughts on the controller design for ease of use and comfort? 15

17 Conclusion We can see that Sony and its PS4 might not have a lot of competitors, but faces high competition against Nintendo, Microsoft and the PC. Sony must continue to market itself as the brand of choice to keep brand loyalty amongst the gamers, especially the heavy gamers who spend more money on consoles and their software. More research should be done to attract non-gamers to the console before a competitor does. The purpose of the report was to not only find the dominant market segments to market to, but to find an untapped market, both goals which have been achieved by looking at casual gamers and non gamers. This report also recommended several research questions, with the one deemed most influential in creating research that could lead to increased market share discussed in more detail. All these findings and suggestions should help the marketing team at Sony develop new marketing plans for its PlayStation 4 console. Recommendations In summary, some of our recommendations included: - Heavy gamers needing to be marketed to for continued brand loyalty, casual gamers were the highest growing market who would benefit from the console, and should therefore be the focus of future marketing towards new customers. - A focus on creating marketing that outlines the differences between PS4 and its competition. - Marketing towards the casual gamer so they choose the PS4 over the competitor, as they are the largest growing market. - Further research into the non-gamer segment of consumers, in particular doing research via focus groups. 16

18 Reference List Australian Bureau of Statistics 2010, Year Book Australia, , cat. no , ABS, viewed 1 May 2017, < Australian Bureau of Statistics 2016, Household Use of Information Technology, cat. no , ABS, viewed 2 May 2017, < Australian Bureau of Statistics 2017a, Australian Demographic Statistics, Sep 2016, cat. no , ABS, viewed 27 April 2017, < Australian Bureau of Statistics 2017b, Labour Force, Australia, Mar 2017, cat. no , viewed 27 April 2017, < Chand, S 2014, Micro Environment of Business: 6 Factors of Micro Environment of Business, YourArticleLibrary, viewed 21 April 2017, < Cloutman, N 2016, Video Game, DVD and Recorded Music Retailing in Australia, IBISWorld, G4242. Dell 2017, Alienware Alpha, Dell, viewed 4 May 2017, < desktop/pd>. Electronics Boutique Australia Pty Ltd 2017, Console Hardware, Electronics Boutique Australia Pty Ltd, viewed 4 May 2017, < ENP Newswire 2016, Sony Corporate Strategy Meeting FY2016, ENP Newswire, 30 June. Euro Effie Awards 2015, Sony PlayStation > This is for the Players. This is PS4., Effie Worldwide, viewed 5 May 2017, < Harrison, W 2016, Sony failed to deliver with PlayStation Vita, Blade, viewed 4 May 2017, <ezproxy.lib.swin.edu.au/login?url= =2.1&id=GALE%7CA &it=r&asid=b2eb44d51b60ad611ea0239fc666afaa>. Hooley, G. J, Piercy, N & Nicoulaud, B 2008, Marketing Strategy and Competitive Positioning, FT Prentice Hall, New York. Jericho, G 2014, Rising living costs are hitting some of us harder, ABC News, viewed 28 April 2017, < John Carpenter House 2017, Sony Corporation, MarketLine, 881B16EF-3BEC-4BDD-B10A- 26FAB18DEC3B. Kerr, A 2017, Global Games: Production, Circulation and Policy in the Networked Era, 1st ed, Routledge, New York, NY. Lee, S 2016, Samsung Stock Plunges Amid Massive Galaxy Note 7 Recall, TIME, viewed 4 May 2017, < 17

19 Makuch, E 2016, Here s How Many PS Plus Subscribers There Are, GameSpot, viewed 4 May 2017, < Magner, L 2016, Online Video Game Sales In Australia, IBISWorld, OD4189. Microsoft 2017, Xbox One, Microsoft, viewed 4 May 2017, < Neys, J. L. D, Jansz, J & Tan, E. S. H 2014, Exploring consistency in gaming: The role of selfdetermination and social identity, Computers in Human Behavior, vol. 37, no. 1, pp Nintendo 2017, Technical Specs, Nintendo, viewed 4 May 2017, < OUYA 2017, OUYA: A New King of Video Game Console, KickStarter, viewed 5 May 2017, < Patty, A 2016, Australia has a comparatively high rate of worker redundancies following corporate downsizes, viewed 30 April 2017, < has-a-comparatively-high-rate-of-worker-redundancies-following-corporate-downsizes go0yme.html>. Pike, N 2015, No Stranger To The (Video) Game: Most Eighth Gen Gamers Have Previously Owned Consoles, The Nielsen Company, viewed 4 May 2017, < Sony Corporation 2017, Sony Global - Corporate Strategy, Sony Corporation, viewed 5 May 2017, < Sony Interactive Entertainment Europe Limited 2017, Tech Specs - The Power Behind PS4 and PS4 Pro, Sony Interactive Entertainment Europe Limited, viewed 4 May 2017, < Razer 2015, Razer Acquires OUYA Software Assets, Razer Inc, viewed 4 May 2017, < Roser, M 2016, Technological Progress, Our World In Data, viewed 4 May 2017, < Segundo, E 2013, Sony Nears Breakeven Point on PlayStation 4 Hardware Costs, IHS Markit, viewed 3 May 2017, < Smith, P 2017, Sony plots post-iphone future with VR, The Australian Financial Review, 8 April, p. 25. Spil Games 2013, State of Online Gaming Report, Spil Games, viewed 5 May 2017, < Statista 2017, Video Game Industry - Statistics and Facts, Statista, viewed 4 May 2017, < 18

20 Stewart, D. W, Shamdasani, P. N & Rook, D. W 2007, Focus Groups, SAGE Publications, (n. p.). Sun, L 2017, A Foolish Take: Which company is winning the game console wars?, USA Today, viewed 4 May 2017, < 19