Introduction The focus of this report would be to assess the marketing activities of SONY Corporation, focusing on one of its particular product which is the Playstation Portable, which is also known as PSP for short. Although SONY had released various versions of the PSP, however, our main focus would be on the original version of the PSP and also some emphasis would be given to PSP Go, to elaborate on the current product that SONY is promoting. Through this analysis, we hope to discover whether SONY has adopted the appropriate strategies and analytical thinking in their marketing techniques to promote their product to their target markets.
Background Portable media industry Portable gaming consoles have been in kids’ hands for more than 20 years in the United States and nearly 30 years in Japan (Pikover, 2009). Now, in Singapore, these consoles have also been popular. However, the difference between Singapore and these other two countries is that these consoles are not only meant for kids. Based on our observation, adults too have been using these consoles, particularly during long journeys while they are taking public transportation. However, one thing that varies is the kind of console that they used.
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This could be seen through the different demographic data. For instance, women and children seem to favor using the Nintendo DS while on the other hand, most men seem to favor using the PSP instead. Beginning from the first launch for the Nintendo’s Game Boy in 1989, many competitors have been trying to break the market share that had been captured by Nintendo. Unfortunately, many had failed in their attempts. However, the playing field has since been changed to suit the demands of the economy. For the past five years, SONY’s PlayStation Portable (PSP) has been its one sole competitor.
To boost up their individual’s sales, both SONY and Nintendo have released multiple models of the PSP and DS, respectively. Also, recently, Apple has also proved themselves as a threat to the oligopoly that had been formed by these two large firms. SONY Corporation It was founded in 7 May 1946 and its headquarters is located at Tokyo Japan. SONY has its focus on its major products such as audio, video, televisions, information and communications, semi conductors and electronic components. More information of details of its products can be found in Appendix C.
However, SONY does not have a mission statement and, up until a few years ago,??founders Ibuka Masaru and Morita Akio were the company’s living mission statement. At SONY’s 50th Anniversary (1996) the now Chairman and CEO, Idei Nobuyuki, presented the “SONY Spirit. ” The “SONY Spirit” consists of four words that further heighten SONY’s greatest asset, the SONY brand name, they are: ??? Unique- Offer uniqueness by continuously creating new things and always striving to create expectation. ??? Quality- Make product quality the major premise in the pursuit of that uniqueness. Speed- Ensure that decisions are made and actions taken quickly in spite of the large size of the company. ??? Cost- Offer cost competitiveness while retaining excellence. Industry analysis Technology Technology is the application of science to convert the resources of an economy to output. The technological environment affects marketing in two ways- new products and new processes. The rapid pace of technological change opens up new opportunities for companies such as SONY. It is easy for a company to slip into a production orientation in the flush of excitement that follows a new discovery in a research and development (R) laboratory.
However, it is vitally important for marketing thinking to guide the production process. And this needs to begin with decisions about where basic R efforts should be focused (Mccarthy, Mcgiggan, Perreault, Quester, 2007, p. 93). SONY’s R&D mission can be described as “Technology for Inspiration and Shared Experience. ” The framework for the emotions consumers experience has until now been described as “Take/Capture, View, Store, Listen, Create. ” Now this framework must be expanded as we move into the era of networking and connectivity.
Technology must create applications that generate new kinds of inspiration and shared experience. This has been evident in the product PSP as it has multiple features. This includes gaming, connectivity through Skype, DLNA (Digital Living Network Alliance), RSS and internet browsing, multimedia features allowing the browsing of movies, videos, and other features. The PSP certainly has a good grip on the major features that consumers would want in an all-in-one gadget at the same time increasing its level of marketability. Legal issues
In order to protect their consumers’ privacy to the maximum extent possible, they have also undertaken a privacy initiative and that their Websites have been reviewed and certified by ESRB (Entertainment Software Rating Board’s Privacy Online Program) Privacy Online to meet established online information collection and use practices. ESRB Privacy Online is a third-party seal provider whose mission is to protect consumers’ online privacy and make the Internet a secure, reliable, and private place to share information and conduct business (SONY Computer Entertainment, 2009).
Competitors 1. Nintendo Nintendo is the worldwide pioneer in the creation of interactive entertainment. They manufacture and markets hardware and software for its Wii??? and Nintendo DS??? systems (Nintendo, 2009). From Nintendo, they offer several kinds of interactive entertainment for their customers, however, for the purpose of this essay, only the Nintendo DS would be the main focus. Based on this product, it could be considered as close competitors to SONY Playstation. Even though the mode of gaming is different, they are still considered under the same industry.
They both provide entertainment to their consumers, in terms of electronic games in the form of different gaming consoles. However, Satoru Iwata (2006), Nintendo’s president insisted that their line of games and consoles, was not a ploy to compete and overthrow SONY, but were just games targeted at different groups of people. He was quoted saying, “We’re not thinking about fighting SONY, but about how many people we can get to play. The thing we’re thinking about most is not portable systems, consoles, and so forth, but that we want to get new people playing games. For further elaboration on the products that has been implemented by Nintendo, please refer to Appendix A. 2. Apple iPhone Another close substitute to PSP would be Apple iPhone. The iPhone is an Internet and a multimedia enabled smartphone designed and marketed by Apple Inc.. The iPhone comes with features that a PSP owner would find very satisfying to their needs. This is because, besides acting like a normal handphone, it boasts a 480×320 display, with 2MP camera, Bluetooth, OS X, iTunes video and music, which could fit up to 8GB of storage(Yoon, 2007).
Also, with its dual touch screen, PS3-styled accelerometer and Internet capabilities, this device can do seemingly everything that the PSP and DS can do. Although the iPhone is marketed as a phone rather than a gaming machine, it will certainly compete against the PSP, especially as a multimedia device. This is due to the fact that the features that it holds are much comparable than that of the PSP. However, one factor that may prove vital for a customer’s decision to purchase the PSP rather than the iPhone would be due to its price factor. Phones on its own costs much more than the PSP. As such, depending on the market segmentation, perhaps the younger generation would rather invest in an affordable PSP rather than the iPhone itself. Competitive piracy For some small shops, they may also offer services such as hacking into the PSP’s system so that they are able to enjoy various games and movie downloads at a cheaper price. In other words, some smaller scale shops, may provide these services to customers for a cheaper price. In this case, it is seen cheaper than actually purchasing the original version of the game.
Also, this could be easily done by their consumers also. So far, there is a steady increase in downloads for PSP games throughout 2008, and an even steeper one over the last three months. To give an example of the piracy rate of PSP games, Dissidia: Final Fantasy was downloaded 200,000 times via BitTorrent over the past 5 days, which is pretty significant for a PSP game (Ernesto, 2008). This goes to show that this would also lead to SONY drop in terms of sales of their games as users may tend to used this cheaper alternative rather than purchasing an original copy.
MARKET SEGMENTATION Market segmentation Market segmentation is a two- step process of: (1) naming broad product markets and (2) segmenting these broad product markets in order to select target markets and develop suitable marketing mixes (Mccarthy, Mcgiggan, Perreault, Quester, 2007, p. 177). Effective marketing segmentation begins with identifying a broad product market that is of interest to the company. This involved disaggregating, or breaking down, all possible needs into some generic markets and broad product markets in which the company may be able to operate profitably.
Disaggregating is a practical step aimed at narrowing the marketing focus to product- market areas in which the company is likely to have a competitive advantage, or even to discover breakthrough opportunities (Mccarthy, et al, 2007, p. 178). In the case of SONY Playstation Portable (PSP), the broad market would be those consumers who are keen to own a new game that is being offered by SONY. SONY Playstation initially started out as a game console that could only be played at home. However, with the invention of this new product, PSP, users are able to enjoy a simple video game anywhere.
Also, its small size is a plus point to the product as it is light and can be easily carried by the user anywhere. In our opinion, we feel that this product, initially started out as a fad, which refers to an idea that is fashionably only to a certain group enthusiasts. As such, this had attracted the likes of many consumers who would like to own this product due to its simplicity. It can be seen that the market is segmented into various groups. As mentioned, the broad product market would be users who are keen to own the product due to the promotions and fads.
From this, it can thus be broken down to several submarkets, which are loyal SONY product followers, avid- gamers, parents who would want to purchase this product for their children, those consumers who are keen on following a fad and those consumers who see the product as a way to curb boredom. Targeting There are three basic ways of developing market-oriented strategies in a broad product market. Firstly, the single target market approach involves segmenting the market and selecting one of the homogeneous segments as the company’s target market (Mccarthy, et al, 2007, p. 90). SONY adopts the single target market approach as it designs its systems and gadgets for a wide group of consumers whose main interest of the product would be for entertainment. The PSP alone not only serves young gamers but has been commonly seen used among working adults in their 30s. However, SONY still has its focus on a definitive group such as gamers hence it clearly adopts the single target market approach. Marketing mix analysis Product Product is actually a complex, multidimensional concept.
It is defined broadly enough to include services, programs, and attitudes and includes whatever a company is offering their target market in an effort to meet their needs. It involves all tangible and intangible aspects of the good or service that is offered to the target market. These are things which have value and are balanced against the value you expect to receive from the target consumer. Every organization has a product mix that is made up of product lines. Product lines contain product items. Each product item is a product or service as well as the brand, package, and services associated with it.
Let us look at SONY’s product mix. The six components as follows: ??? Services: An online web portal which directs PSP users on the usage methods, troubleshooting, software updates and the downloading of games. ??? Brand: The brand in our case is SONY and all of the image attributes that are associated with the NPS. ??? Product Item: A distinct unit within a product line that is distinguishable by size, price, appearance, function, or some other attribute. A guided hike along a particular trail might be a product item. Product Line: A group of products within a product mix that are closely related, either because they meet the same need, function in a similar manner, or share some other characteristic. Interpretation might be considered a product line. ??? Product Mix (assortment): the set of all product lines and items that an organization offers its target market(s). Everything the NPS offers target market(s) constitutes its product mix. ??? Warranty: The warranty statement of SONY PSP can be found at Appendix D. The product life cycle (PLC) describes the stages that a new product goes through from beginning to end (Mccarthy et al, 2007, p. 27). The cycle has four major stages, which are: market introduction, market growth, market maturity, and sales decline. This cycle is not only concerned with individual products, but it is also concerned with new types or categories of products in the market. A particular company’s market mix usually changes during the product as customer’s attitudes and needs tend to change over time. One product may be aimed at different target markets at different stages, and the nature of competition usually moves towards pure competition (or oligopoly) as the product progresses throughout its life cycle.
In the case of SONY’s PSP, we find that the product is in the market maturity stage. The market maturity stage occurs when the industry sales level off and competition increases (Mccarthy et al, 2007, p. 327). Unless an oligopoly exists, many aggressive competitors are competing for profits. As such, industry profits will decline, because promotion costs rise and more competitors cut prices to attract business. In this stage, promotion is critical and persuasive promotion is critical. In our opinion, we feel that SONY has reached its peak in the market maturity stage.
In fact, their sales have been dwindling to a certain extent, especially due to the existence of Nintendo’s PSP and the emergence of Apple iPhone as a stiff competitor to the product itself. Based on recent data, Nintendo DS sales have supersedes that of SONY’s PSP. And also, with the entry of Apple into the picture, the sales for PSP could possibly hit an all- time low. In this case, it is evident that these three firms constitutes to an oligopoly. Nevertheless, PSP’s sales may be largely affected since their products are close substitutes to one another.
This is because although each company may still have its own demand curve, the curves become increasingly elastic as the various products become more similar in the minds of potential competitors. Based on our observation, it is clearly that PSP’s are now rarely seen as a form of entertainment, with the existence of these two other products in the market. This goes to show how consumers’ preferences tend to change within a span of time. As such, to combat the sales from falling any further, SONY had invested its time and money on new versions of the product.
They have strategized a new plan to prevent themselves from falling into the sales decline stage. For instance, there are newer versions of the PSP which are PSP Lite and PSP Go. Before this current version dies off, they have a new design to replace it. Due to this, we can see that through time, the product price would still remain around the same range. This could be seen via the leapfrog effect PLC as shown below: Pricing One of the four major elements of the marketing mix is price. Pricing is an important strategic issue because it is related to product positioning.
Furthermore, pricing affects other marketing mix elements such as product features, channel decisions, and promotion. The firm’s pricing objectives must be identified in order to determine the optimal pricing. Common objectives include the following: ??? Target return objective- sets a specific level of profit, usually stated as a percentage of sales or capital investment. ??? Current profit maximization – seeks to maximize current profit, taking into account revenue and costs. Current profit maximization may not be the best objective if it results in lower long-term profits. Sales oriented price objective- seeks some level of unit sales, dollar sales, or market share, without referring to profit. ??? Status quo – the firm may seek price stabilization in order to avoid price wars and maintain a moderate but stable level of profit. Pricing must take into account the competitive and legal environment in which the company operates. From a competitive standpoint, the firm must consider the implications of its pricing on the pricing decisions of competitors. For example, setting the price too low may risk a price war that may not be in the best interest of either side.
Setting the price too high may attract a large number of competitors who want to share in the profits. In a post E3 interview on GameTrailers. com analyst Charles Pachter stated that the $249. 99 price for the new PSP Go was, “… too much Period”. He explained that the PSP 3000 is profitable at $169. 00 (all prices listed are U. S. dollars) and that replacing the UMD drive assembly with 16GB of flash memory makes the PSP Go less expensive to manufacture than the PSP 3000. At $249. 99 it’s more than an Xbox Arcade and equivalent to a Wii.
Pachter went as far as to say that SONY was “ripping off” consumers. Not long after, Pachter regretted his earlier choice of words against SONY and said that “The company has the right to price its products at a point that they think is competitive, and has no obligation to sell products at lower than a competitive price. ” It can be seen that they are pricing at a point that positions the PSP Go competitively with the iPod Touch, and the PSP Go arguably has much more value than the Apple product Promotion
By market maturity stage, more competitors have entered the market, and marketing communications become more persuasive (Mccarthy et al, 2007, p. 515). Also, advertising and sales promotion nay dominate the promotional mixes of consumer product organizations. Companies that have a strong brand name like SONY would have to invest in reminder- type advertising to ensure the customer’s remember the product name. In Singapore, however, SONY has not been promoting much on its product. Instead, they focus on minimal advertising. Some of its ads have been featured in newspapers and magazines, mainly targeting the younger generation.
This is unlike the ad campaigns that have been going around in Netherlands, featuring a Caucasian woman holding a black woman by the jaw in a threatening manner was decried as racially insensitive (Appendix B). SONY originally defended the ad, saying its only intent was to contrast the colors of its two models of PSP, however after much scrutiny and pressure from the National Association for the Advancement of Colored People (NAACP) and the civil rights education group Sojourn to the Past, they have resolved to pull the ad out from the market ( Sinclair, 2006).
In our opinion, one reason as to why they refuse to promote their product aggressively may be because they feel that not much local advertisements are required. Since Singapore is a small country, their target markets would also be relatively small as compared to other countries. Not only is that, through globalization, Singapore is also very much open to the western influences. As such, their consumers may be able to catch the commercials and advertisements from the web itself via various search engines such as through the means of Google, Youtube and so on.
Also, these PSPs are also featured in various television programmes to continually arouse the interests of their target markets. Therefore, due these reasons, not much local advertisements could be seen in this stage of the product life cycle. Nevertheless, many of their consumers are still aware of the existence of the product. This may be due to the fact that some companies actually tie in with intermediaries to offer their products alongside with their company’s products as well.
For instance, at one point of time, it could be seen that many insurance agencies were offering a free PSP if the consumers were to sign on with their insurance plan. This could be seen as a “pull” marketing communications strategy. Pull strategy refers to using market communications focused on consumers, which are aimed at getting them to ask intermediaries for their product(Mccarthy et al, 2007, p. 519). However, this sort of arrangement had died down eventually, after the fad was over. Currently, market sales have been dwindling, especially with the existence of two strong competitors.
As such, without much advertising or any forms of promotions, SONY may have to suffer with their low sales. In fact, even through the reinvention of the different versions of the PSP, this would not help to boost up their sales if the promotion aspect is still absent from the equation. Placement Offering customers a good product at a reasonable price is important to a successful marketing strategy, but that is not the complete picture. Managers must also consider the concept of place-making the right goods and services available in the right quantities and at the right locations, when customers want them.
Place arrangements can dramatically change the competition in a product market. The PSP can be found in all of the SONY retailer outlets. Other than that, it can also be found in various retailers such as Comics Connection, Best Denki and also other small computer outlets in Sim Lim Square. However, the availability of the product in these shops is subjected to the quantity that is available in the shop. The small shops tend to purchase them in bulks and as such, in some outlets, there may be a lack of stock for the product itself. Conclusion
In conclusion, although the product can be considered as a good and inventive product, it lacks the promotional appeal that is required to further market the product. In the case of SONY, they chose not to market the product aggressively and as such, this had led to their dwindling sales report. Also, over time, the PSP phase had died as consumers no longer consider it as a fad. In other words, the product has lost its appeal to attract consumers to purchase the product. Even with the existence of new products, sales may not increase if the company chose to forgo the promotions factor of the marketing mix.
The ignorance or the absence of a single factor of the marketing mix would prove fatal for the company. Moreover, with the existence of aggressive competitors such as Nintendo and iPhone, sales may only worsen in the long run for the PSP market. Considering that the product could be considered as a fad, SONY should have tried to adopt reminder advertising strategies so that other consumers are aware of the different versions of the product. In fact, they should promote aggressively for the new version of the product so as to combat the loss that they have suffered for the previous versions of PSPs.