Marketing

Strategy: Windows Phone 8

B2B-High Tech Marketing Course

(Fall 2012)

Professor: Jean Micol

Submitted By: Aniruddha Loya Akay Mustafa Aydin Castro Nicolo Das Guru Ramesh Roshan Habfast Paul Patel Pranav Suresh Ziad Hamed

Table of Contents
Executive Summary ............................................................................................................. 4 Microsoft Corporation ........................................................................................................ 5 Introduction ..................................................................................................................................... 5 SWOT Analysis ................................................................................................................................. 5 Smartphone OS Industry .................................................................................................... 6 Industry Analysis Porters Five Forces Approach ............................................................................ 9 Microsoft and Smartphones ............................................................................................. 10 Windows Phone 8 .......................................................................................................................... 11 The 3 Cs of Windows Phone 8 ........................................................................................................ 11 SWOT Analysis of Windows Phone 8 OS ......................................................................................... 11 Objectives ........................................................................................................................... 12 Market Share ................................................................................................................................. 12 Shipment Volume .......................................................................................................................... 13 Microsoft-Windows Phone 8 Marketing Strategies ....................................................... 13 Alliance & Partnerships .................................................................................................................. 13 Selected segments ......................................................................................................................... 13 Positioning ..................................................................................................................................... 14 Marketing Mix: The 4Ps .................................................................................................................. 14 Action Programs ................................................................................................................ 16 For the Manufacturers ................................................................................................................... 16 For the Vendors and Carriers .......................................................................................................... 16 For the Customer ........................................................................................................................... 16 Marketing Budget .......................................................................................................................... 17 Bibliography ......................................................................................................................... 18

Figures & Tables

Figure 1: Sales of Smartphones Figure 2: Market Share OS wise for last 5 years Figure 3: Q32012 Market Share for OS Figure 4: Estimates of Windows Phone Sales

8 8 9 13

Table 1: Market share Estimates Table 2: Marketing Budget Cost 13 17

Executive Summary
This report was commissioned in order to examine the current situation of the smartphone OS market, and determine a winning strategy to apply for the recent introduction of the Windows Phone 8 operating system produced by Microsoft. The research first gives an overview of Microsofts current and past situation, showing how Microsoft currently is the market leader in various markets (47% of the gaming consoles, 94% of the office suits and 92% of the computer OS). Microsoft though has also given proof of its lack of innovativeness in its products, causing it to fall back in several markets, among which the smartphone market. This report also draws the attention to the current situation on the smartphone OS market shares, and its volatility. Symbian, which up to 2007 owned 65% of the market was, in 2011, present on less then 20% of the smartphones. The market is now divided between two main competitors, Android, with about 68% of the market, and Apple, which comprises almost 17% of the total devices. Recent studies have also shown how the total market has greatly grown even during the recession, with an increase of sales of 61.3% in 2011, a trend that is not foreseen to change in the next 3 years. Based on all the data acquired the report thus tries to give an accurate overview on how Microsoft should approach its re-entrance in this market, after the failure of Windows Mobile. Bargaining power with the customers is relatively slim for Microsoft, who has to sell its product to hardware manufacturers, especially since its major rival (Android) is currently offering a good product with a wide variety of applications. Furthermore the competitiveness of the market is also very high, something Microsoft is not used to. Nonetheless the threat of entry from emerging companies is relatively small, as the development of a new OS requires large capital and know-how, as well as the threat of substitution, which could possibly only be done by netbooks, which nonetheless remain in a different market. Keeping in mind all of the characteristics of the market Windows Phone 8 presents several opportunities, in particular for business-oriented customers.

Microsoft Corporation
Introduction
Microsoft Corporation, founded in 1975 by Bill Gates and Paul Allen is the largest software developing company (in terms of revenues) with its headquarters in Redmond, Washington USA. It develops, manufactures, licenses and supports a wide range of products and services related to computing. Microsoft operates businesses in five segments (Microsoft Corporation): Windows & Windows Live Division: Microsoft is market leader in this segment. Its principal products and services are Windows operating system, Windows Live suite of applications, web services and Microsoft PC hardware products. Server and Tools: Microsofts principal products and services in this segment are Windows Server operating systems, Windows Azure, Microsoft SQL Server, SQL Azure, Windows Intune, Windows Embedded, Visual Studio, Silverlight, System Center products, Microsoft Consulting Services and Premier product support services. Online Services Division: Microsofts principal products and services in this segment are Bing, Microsoft adCenter, MSN and Atlas online tools for advertisers. Microsoft Business Division: Microsoft has a dominant market in office suite markets with Microsoft Office. Its other principal products and services in this segment are Microsoft Exchange, Microsoft SharePoint, Microsoft Lync, Microsoft Dynamics ERP and Dynamics CRM, Microsoft Office Web Apps such as Office 365. Entertainment and Devices Division: Microsoft principal products and services in this segments are Xbox 360 gaming and entertainment console, Kinect for Xbox 360, Xbox 360 video games, Xbox 360 accessories, Xbox LIVE, Mediaroom and Windows Phone. It also entered the vendor market by launch of Microsoft Surface tablet computer. For the fiscal year 2012, Microsoft had earned revenue of US$ 73.7 billion, employed approximately 94,000 people on a full-time basis, 55,000 in the U.S. and 39,000 internationally. It is one of the most valuable companies in the world (Microsoft Corporation).

SWOT Analysis
Internal 1. Strength Microsoft is the market leader in Xbox 360, video game console, with 47% of the market share; MS Office, office suite for desktop applications, has 94% of the market share; and Windows OS is the largest operating system in the world with 92% of the market share in the Operating software industry. Microsofts Internet Explorer is the second largest web-browser and Bing is the second largest search engine. Microsoft has extensive dealer network and contracts with all the major OEMs. Microsoft also has strong financials. Apart from product specific R&D teams, it also has a strong independent research

wing (Microsoft Research), which often provides the development division with key technology upgrades and ideas. 2. Weakness Microsofts company culture lacks innovativeness as it faces a severe constraint in technology innovations having to support the legacy products over an extended period of time and also maintaining the backward compatibility in its new products. It also has a historical baggage of producing software with bugs. It has very limited experience in hardware industry (PC, smartphones and tablets) with its only exposure through X-box, video game consoles. External 3. Opportunity Microsoft has opportunity through the next generation products such as Windows 8, Windows Phone 8, Surface tablets and Xbox 720. Their also exists an opportunity to enter the hardware markets for tablets & smartphones, like it has entered the video game console market. 4. Threat Microsoft is perceived primarily as a PC brand; its primary revenues come from the OS sold to the desktops, while current trend of market is moving towards mobile devices smartphones and tablets. Technology life cycle of the industry is getting shortened and traditionally Microsoft hasnt been the quickest to respond. In operative system space, the open source models like various Linux flavors and Mac-OS (another Unix derivative) used by Apple have proven to be innovative and have quick response cycles to new trends. Similarly, in the graphical web browser market Internet Explorer lost its dominant position, offers lesser features and is last to adapt to new web technologies like HTML5 in comparison to Chrome, Safari and Firefox. Moreover, their products are susceptible to widespread piracy and virus attacks.

Smartphone OS Industry
Smartphone devices comprises of hardware and software. In both domains there are different players in the market. In context of this report, we are going to focus at the smartphone operating system (OS) industry, the key segment of the smartphone software industry. Smartphones OS comes in 3 different forms: (1) Proprietary: These are developed in-house by the smartphone manufacturer like Apple (iOS), RIM (BlackBerry OS), Palm (webOS, acquired by HP). In this approach the manufacturer can attain advantage by differentiating it smartphone. By this approach manufacturer vertically integrates the supply and value chain. (2) Licensable: These are essentially proprietary OS but the owner themselves do not manufacture the phones and license their OS to various OEMs. Windows Mobile and now Windows Phone series come under this category. This model helps OEMs by reducing the cost of developing OS by taking advantage of already existing platform. We saw Nokia loosing its market leader position after failing to develop an OS to compete against iOS and Android. Similarly, Samsung started working on Bada, which hasnt been very successful forcing Samsung to adopt Android and Windows Phone as the preferred platform for its smartphones. (3) Open Source: These are freely available OS, regularly customized by the OEMs to suit their taste and style. Andorid, Symbian OS, MeeGo are some of

the open source OS. Many of them are backed by big companies, for instance Android by Google and Symbian by Nokia & Accenture, and being available at no cost to OEMs, they evolve to dominate the market share in terms of units sold. (Cromar, 2010) Smartphone Industry is a rapidly changing and highly competitive industry. IBM developed the first smartphone in 1992, than in 1996 Nokia came with Nokia 900 smartphone series. In particular, it was the release of Apples iPhone, in January 2007 that marked the true beginning of the smartphone era while its predecessors were categorized by many experts as feature phones. With the advancement of technology and new players entering the market, the competition became very stiff ultimately leading to OS-wars. This brought into direct competition five key brands: Apple, which promotes its intuitive and user friendly iOS, Google, with its open-source and ever expandable Android, Nokia, which was the leader in this business with Symbian OS, RIM, with its enterprise friendly BlackBerry OS, and Microsoft, which had to restart from scratch after its original OS (Windows Mobile) failed to live up to expectations (Arthur, 2012). Smartphone market has seen a steady growth since 2007 (Figure 1: Sales of Smartphones). With the growth of the smartphone business, the business behind the operating systems and supporting applications has also grown. Especially considering how present smartphones companies tend to link their phones to a particular OS, making it impossible for the average user to switch between different software. This has created a particular bond between hardware and software producers, which has lead to a symbiotic relationship between companies. Thus, the success of both the brands depends on the others work. Furthermore this market is also characterized, as all high tech markets are, by a fast paced change in user opinions, and a very short life cycle for the products, forcing the companies to be quick and agile. As illustrated in Figure 2: Market Share OS wise for last 5 years, Symbian, leader with over 65% of the market share in 2007, dropped to below 20% of the market share in 2011 having failed to meet costumers changing needs and expectations. In recent years the smartphone market has became price sensitive, which explains the growth rate experienced by Android in the last couple of years, as it is shipped by Samsung and HTC, the two companies that tend to offer devices in a wider price range. Right now the main protagonist of the mobile operating systems is Android, who according to IDC, is present on 68.1% of the 169.4 million smartphones sold worldwide in Q3 2012, followed by Apples OS at 16.9% Figure 3: Q32012 Market Share for OS (Brownlow, 2012). According to IDC, smartphone market in 2011 showed a 61.3% year-on-year growth reaching 494.4 million shipments. They estimate total shipment to reach 717.5 million implying a 45.1% year on year growth. Estimating a CAGR of 18.3% for 2012-2016, smartphone market is expected to reach 1.4 billion units by 2016.

1600 Sales of Smartphones (millions of units) 1400 1200 1000 800 600 400 200 0 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E

80% 70% 60% 50% 40% 30% 20% 10% 0%

Figure 1: Sales of Smartphones (Source: IDC, Gartner and interpolation of estimates to match trend)
Android iPhone Windows Mobile/ Phone Blackberry Symbian Bada (Samsung) Palm/Web OS (Palm/HP) Linux Other Total Esmmated Shipments

70% 60% Percentage Market Share 50% 40% 30% 20% 10% 0% 2007 2008 2009 Year
Figure 2: Market Share OS wise for last 5 years (Source: Christy, Gartnet Newsroom, 2012)

Android Blackberry iPhone Linux Palm/Web OS (Palm/HP) Symbian Windows Mobile/ Phone Bada (Samsung) Other 2010 2011

4% 5%

4% 2% Android iOS

17% 68%

BlackBerry Symbian Windows Phone Others

Figure 3: Q32012 Market Share for OS (Source: IDC)

Industry Analysis Porters Five Forces Approach

Bargaining Power of Suppliers: No clear suppliers exist There are as such no suppliers for the smartphone OS developers. Operating systems for the smartphones like Apple iOS, Windows Phone or Android, were developed/derived from the existing OS for PCs or from the previous version used on smartphones. Except for some pieces of network related technology patents, which apart from Google everyone else already owned in some manner, as such these developing companies dont buy anything; the OS is completely developed in house. They also acquire patents for some parts of their OS that can be licensed to another firm if need be. Thus, there is no material purchase required for the development of smart phone OS (Chao, Fan, Lin, & Saha). Bargaining Power of Customer: High There are two customers: the OEMs (ODMs in case of Apple and RIM) that manufacture the smartphones and the end users that buy the phone where decisions are made on both criterions, OS and the device manufacturer (when the two are different). Thus, OEMs also face the same customer, the end users and thus prefer to choose the platform providing more compatibility and developed applications that are valued by the end users. Their choice of OS at times is also defined by the cost of developing and marketing the device as there is increasing competition and stiff pressure on profit margins with the sales now expected to be driven by developing markets compared to developed markets. For the end user the applications available on the OS are more important than the OS itself. Todays end user is well informed about the trendiest features and applications offered by different OS and smartphone brands. Their switching cost is low, due to availability of the contract phones and stiffening competition leading to lower prices of hardware. Threat of Substitutes: Moderate Phone has become a necessity and is thus, difficult to replace. The two possible substitutes are tablets with calling features (SIM enabled) and netbooks with VOIP or software-enabled telephony like Skype and Google Voice. But both these options have severe demerits inconvenient size in case of tablets and 9

requirement of decent bandwidth in case of netbooks. Thus, we perceive them as moderate threat (Chao, Fan, Lin, & Saha). Threat of Entry: Low Mobile OS have higher constraints in terms of memory and power consumption but at the same time need to provide rich features and must support and integrate well with the manufacturers hardware specifications. Thus, in order to develop a new Mobile OS platform, a firm requires a great amount of knowledge and experience is relevant technologies along with a substantial amount of capital to support its R&D activities. Secondly, there is a high cost of switching for the hardware manufacturer. As a hardware manufacturer, the collaboration with the OS maker is maintained from the starting point to insure the compatibility and competency of the OS with their phone taking into account the targeted battery life and cost and the platform for holding the required features and applications. So this makes it difficult for the manufacturer to change the OS and difficult for a new OS developing firm to find a customer (Chao, Fan, Lin, & Saha). Intensity of Existing Rivalry: High The smartphone industry is still growing rapidly. Two major players Android and iOS accounts for 75% of the market share. Other competitors have carved their niche and also have strong capital background and firms easily adapt to change in the market and accordingly increase the competition in the targeted segment. For e.g. BlackBerry started with targeting the enterprise segment before moving to consumer market.

Microsoft and Smartphones

Microsofts dominance in the operating systems for personal computers and office software has made it number one in the industry. With the smartphone industry booming at the beginning of 2007, it emerged as a vast new market in the horizon. As cellphones morphed into smartphones with capabilities similar to PCs, the new frontiers for operating systems were open. Microsoft despite with an early mover advantage with its Windows Mobile OS struggled to keep up with its rivals Apple and Google in providing a modern smartphone operating system. As a result, in 2010, Microsoft revamped their aging flagship mobile operating system, Windows Mobile, replacing it with the new proprietary mobile operating systems Windows Phone. Unlike its predecessor, Windows Phone was designed with consumer market as the primary target rather than the enterprise market. With Windows Phone, Microsoft created a new user interface, featuring its design language called Metro. Additionally, the software is integrated with third party services and Microsoft services, and sets minimum requirements for the hardware on which it runs. The new OS was launched along with a new strategy in the smartphone industry that has Microsoft working more closely with smartphone manufactures, such as Nokia, and to provide a consistent user experience across all smartphones using Microsoft's Windows Phone OS. With the rapidly growing smart phone industry Microsoft, with its core competencies has a huge revenue opportunity. To achieve this goal Microsoft knows that it needs to reach to the

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smartphones in the users pocket through its operating systems designed for mobile devices. Windows Phone 8 is Microsofts latest push in this area.

Windows Phone 8
Windows Phone 8 (WP8) is the second generation of the Windows Phone mobile operating system that was released to consumers on October 29, 2012. Three companies initially launched the devices with integrated WP8: Nokia, Samsung, and HTC. It is the first mobile OS from Microsoft to use the Windows NT kernel, which is the same kernel that runs Windows 8, their latest operating system for the personal computers. WP8 offers a truly personal phone experience, connecting users to the people and things that matter most. WP8 is new from the ground up which means that the operating system is incompatible with all existing hardware and so the previous Windows Phone 7.x devices cannot run or upgrade to WP8 and the new applications compiled specifically for WP8 will not be compatible with Windows Phone 7.x devices.

The 3 Cs of Windows Phone 8

The 3 Cs, stated by Michael Porter, allow determining whether a company has the attributes needed to prosper and acquire stable customers and market share. Michael Porter points out that a company has to build a community, needs core competencies and need to produce a product that can be customized. As far as community goes Microsoft definitely has a widespread community, even though not a sect as Apples fans, or well defined as the Android lovers, Windows probably has the most widespread community regarding operating systems on personal computers, and this could definitely give an upper hand to Microsoft, as they offer seamless synchronization between their mobile devices and the personal computers, making the experience unique for the user. Core competences are also present within Microsoft, which has been developing operating systems and software for users for the past three decades. With their success with Xbox in dominating the game consoles market, Microsoft has proved that they are capable in developing new technologies customized to specific market and needless to say that they have the financial strength to perform such activity. The final C, customization; this has always been a strong point of Microsoft products, especially in comparison with Apples products, as they have always been easy to customize by downloading 3rd party applications. WP8 may not be as customizable as Android is owing to its open source, but it definitely is offering a much higher degree of customization than iPhone and more can be expected with increase in number of applications in its app store. WP8 thus, has a solid base to be a successful product, if marketed correctly.

SWOT Analysis of Windows Phone 8 OS

Internal 1. Strengths The biggest plus of Windows Phone 8 OS is the seamless integration of mobile with tablet (Surface) and PC; also X-box, video game console can be integrated; Skype can be integrated even for regular calls. Windows Phone OS also has solid enterprise management support. Windows have proven skills in multi- tasking environment a key requirement in todays smartphones. Other features available like Kids Corner available with separate sharing for Kids, Start Screen with live tiles, Photos Hub, Rooms, etc. gives it advantage over the other available smartphone OS in the market. 11

2. Weaknesses WP8 OS is incompatible with previous hardware thereby no option for upgrading. Previously Microsoft has promised update to version 7.8 for the early adopters of version 7.5, but hasnt been done in over 5 months since announcement, leading to a large disappointment amongst the early adopters. WP8 OS offers weak applications eco-system. It only offers 120,000 applications compared to 700,000 plus applications provided by Apple iOS and Google Android. WP8 dont have maps, only Nokia (maps) phones have turn-by-turn driving directions. It is difficult to offer low-feature models like Android to reduce product price for mass market. External 3. Opportunities There exist an opportunity to establish a strong partnership with Nokia, who lost their market leader position, and are struggling in the space due to lack of quality operating system for their smartphones. Microsoft also has great opportunity in enterprise market that has fragmented with Blackberry no longer the preferred phone for the users. With most companies using Windows server software for their internal & external use, WP8s seamless integration features can turn this into a great opportunity. Mobile carriers are adopting anti-Apple, anti-Android rhetoric, want a third ecosystem other than these two dominant mobile OS systems. (Global Equity Research, 2012) 4. Threats WP 8 OS has threat of the lawsuit filed for tiles patent. The competitors (Blackberry, Apple, Google) in the market are coming out with major breakthrough changes could draw curtains to their plans. Nokias move to Android could be a major setback.

Objectives
Market Share
Windows Phone OS hasnt actually taken the market by storm until now, and has in fact sold under Microsofts expectations, but then there had been a considerable skepticism going on in the market with the existing Windows Phone 7.5 getting obsolete with launch of Windows Phone 8 and no updates being provided for it, which affected the sales considerably. Despite that Microsoft managed to increase its share in smartphone market by more than 1% in the last one year and is expected to reach 2.6% by the year-end. With Windows Phone 8 in the market and positive expected growth for smartphones, we foresee a growth in its share in the mobile OS market in the coming quarters. We are aware of the fact that, WP8 being a new entrant in a highly competitive market, will need time to rise up in the ladder. According to an independent study by Canalys (Feb 2012) Windows phone & Windows mobile together accounted for only 1.4% market share in 2011 that, according to IDC, has significantly increased to 3.5% in Q3 2012 and expected to reach 2.6% for the year 2012. IDC estimates (Table 1) a market share of 11.4% by 2016 for the Windows phones. In view of this, we aim to achieve a market share of 4.6% for the year 2013 with future targets as illustrated in Figure 4.

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Shipment Volume
Our target of 4.6% market share for 2013 implies a shipment volume of 45 million smartphones operating on WP8 operating system. Given the slow cycle of update, we do not expect a brand new OS (WP9) in 2013 but only incremental updates to WP8, so majority of Windows phone sold would be running the latest WP8. We aim to achieve these objectives using the strategies discussed in the following section. Smartphone OS Android iOS BlackBerry OS Windows Phone Linux Others Total 2012E 68.30% 18.80% 4.70% 2.60% 2.00% 3.60% 100.00% 2016E 63.80% 19.10% 4.10% 11.40% 1.50% 0.10% 100.00%
100.0 50.0 - 200.0 150.0 12% 10% 8% 6% 4% 2%

0% 2012E 2013E 2014E 2015E 2016E Units Shipped (in millions) % Market Share

Table 1: Market share Estimates (Source: IDC)

Figure 4: Estimates of Windows Phone Sales (by interpolation of IDC estimates)

* It is important to note here that mobile phones having become a commodity product, market penetration is not a good measure as it is difficult to account for discarded phones.

Microsoft-Windows Phone 8 Marketing Strategies

Competing in this highly competitive market, Microsoft should focus on its unique resources to sustain and thrive. Combining the internal analysis within the company itself and the external analysis of the industry and the competitive environment Microsoft holds an advantageous position in the Windows Phone 8 project and in the overall smartphone market as well.

Alliance & Partnerships

Microsoft worked closely with Nokia during the development of WP8 but Samsung was the first to launch a WP8 enabled phone while HTC 8X was used as showcase product. We believe Microsoft should forge stronger ties with Nokia as they are in dire need of a quality OS while Microsoft needs a strong and committed partner, a mutually beneficial relation. Also, Lenovo is expected to become the leader in China smartphone market. Microsoft already has a working relation with Lenovo that can be leveraged to promote fruitful ties in mobile space as well making inroads in the lucrative Chinese market.

Selected segments
To succeed WP8 enabled phones will have to target the entire consumer market but we emphasize on a focused approach to enter and dominate the enterprise segment, which after the decline of Blackberry is very fragmented.

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Positioning
For Mobile Network Carriers: A smartphone that unlike others is smart to reduce your mobile data traffic and at the same time provides your customers a truly smart experience. For Normal end-user: Who want a truly personal smartphone, WP8 enabled phones offer The perfect companion for your Windows devices and your Xbox along with Skydrive cloud storage, a range of brands, form-factor and color to choose from and unlike others, a phone customized and personalized to your tastes right from the start screen to display size of each item to the updates received. For Corporates & Enterprise Customers: who wants a seamless integration across their enterprise network and workstations and security features like never before. WP8 offers all these along with child corner to avoid accidental emails sent to your key clients as your kid plays his favorite games.

Marketing Mix: The 4Ps

Using the right marketing mix i.e. a set of controllable, tactical marketing tools Microsoft can produce the response it wants in the target market. Price, product, place and promotion are the 4 P's that constitute the marketing mix here. Product: Windows Phone 8 is the latest mobile operating system offered by Microsoft, offering a very personalized mobile experience to its user using live tiles, completely different from the existing icons modes available in all other smartphones. This new operating system powering the high-end smartphones of top mobile manufacturers has amazing features and secure mobile experience for personal and enterprise consumers. Price: This product comes with a price premium and is not open source as the industry leader Android. Pricing of the WP8 OS is done using tiered pricing strategy, which means the licensing fees is low for the volume manufacturers and high for the new entrants. According to available data, low volume phone manufacturer like ZTE pays Microsoft around US$ 23-30 for each Windows Phone license, so we assume that high-volume customers would be paying roughly US$ 10-15 US per handset. (Foley, 2012) (Weir, 2012) In a market led by open source and free licensing operating system Android, putting a price premium may sound suicidal, but then considering the target market Microsoft aims is the high end smartphones segment, and directly compete with iOS and Blackberry OS, it does makes sense. However, we believe that keeping the price premium low will be in Microsofts advantage, since operating system has a potential to generate revenues from advertisements and applications in the long run. Starting with low price premium and good product features will help generate confidence among the phone manufacturers and user base, which will help WP8 to gain market shares in smartphones as per our strategy in coming years

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Promotion: The promotion factor has been grand but the advertisements by Microsoft have not been very clear and focused on end-users rather they are very encrypted and tech oriented, which might not work with the target consumers. Microsoft tried creating a buzz around the product launch by releasing a developers preview few months before the actual launch, but there was a lack of proper effort in maintaining and propagating it with suitable follow-up activities. Negative sentiments of early adopters of Windows Phone 7.5 didn't helped to Microsofts cause. We believe workshops and app contests before launch could have helped sustaining the buzz and also filled up their app store with more apps. Presently, they are promoting WP8 phones as a better alternative to iPhones/Android phones by comparing and actually showing the better features in tech blogs and YouTube. This is helping to promote the Windows Phone, but is not getting viral since the complimentary TV commercials, to generate users curiosity to search more, are lacking. We believe Microsoft needs to effectively use television commercials to show users how Windows Phone is better, and target the competitors brutally in the competing environments dominated by Apple and Samsung killer ads. Also promotion strategy in this segment is all about the ecosystem experience, and though the Windows Phone 8 lacks the number of applications it still has all the best possible used applications from the Android market and the App store, and they need to make it visible in their adds not just mention about it, since users feel demotivated when they compare the 120,000 applications in Windows Phone to the over 700,000 applications in Apples AppStore and Android market, even though they use merely 10-20 applications from it. A simple commercial showcasing the users enjoying those 20 applications on WP8 would be more effective. Microsoft should also use its various channels to do the promotion of its mobile operating system, like the Office Suite and Bing its search engine, which are used by many users daily. Promotion should reach out to the end user and should be viral through all possible media to generate enough buzz and hype for Windows Phones, especially in this quarter since it is holiday season and the advertisements could be showing WP8 phones as the best Christmas/New Year gift ever. Also for promotion a good partnership with manufacturers in the advertisement promoting WP8 should be a good way to advertise the product Place: The customer for our operating system is the OEMs and their customers i.e. the end-users buying the smartphones. Microsoft as of now has tie up with Samsung, Nokia, HTC and Huawei for manufacturing the WP8 smartphones, and these phones are available to the end users from phone carriers or the retailers. Microsoft can directly reach to the enterprises that are already using the Windows network in their work place and make contracts with them for providing their office executives with WP8, the kind of strategy RIM adopted for BlackBerry devices.

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Action Programs
Nokias abandoning of Symbian platform and addressing network carriers woes of high data traffic by the new Data Sense capabilities provides WP8 a strong base to capitalize on. Also it can leverage its tie- ups with corporates having existing Windows framework to considerably dent the Blackberrys OS market. Since we have a price premium with our product, we cannot directly compete with Android, and again we already have an indirect advantage from Android sales through licensing patent progress, so for now, we need to focus mostly on taking shares of iOS and other mobile operating systems. From our own experience and observing the competitors we have learnt that before a phone is sold it has to go through a number of obstacles. It needs to appeal to operator/distributor priorities, it needs to fill a slot in a portfolio of products for the manufacturer and the channel, it needs to acquire shelf space, it needs to appeal to end users and, unless it has a blindingly strong brand, it needs to offer incentives to the retailer. We recommend the following action for the key stakeholders in this ecosystem to drive WP8 to be the third force in mobile OS market in coming quarters.

For the Manufacturers

The consumers for Windows Phone 8 are the phone manufacturers capable of making phones with sufficient hardware capacity to run WP8, and that means we need to focus on the top existing manufacturers like Samsung, HTC, LG, and the potential PC giants moving into phones like Dell and Lenovo. Also Microsoft should try to reach to the various manufacturers from China, who are the major forces in the smartphone transition of users in the emerging markets of China and India, by giving them a beefed down version of operating system for the entry level smart phones at lower cost and thus reach out to wider user base. Since our product comes at price premium, we can give them the advantage of accruing co-op advertisement dollars for each of the WP8 phone they sell, which in the long run, will be helpful in moving them away from Android and also subtly help us in branding.

For the Vendors and Carriers

Most of the American and European post-paid phone market is still controlled by the carriers and the vendors are the one reaching to the end users in almost all sort of market in different geographies. These carriers can use strong and repeated emphasis on Data Sense capabilities in their promotions, which is a key benefit for them as well as provides a better user experience, to drive sales. At the same time, a large majority of phone buyers still buy their phones on the advice of retailers at the market or carrier. By giving proper feature training to the staff of vendors/carriers, and introducing incentives and rewards for each unit sold by them, could encourage the channel partners to guide people in buying WP8 phones and thus steer away from other phones.

For the Customer

Most of the phone buyers are tempted to buy based on the advertisements, and our marketing strategy should focus primarily on highlighting the advantages of phones with WP8 over iPhone and selling our USPs of personalized smartphone for individuals. Smoked by Windows Phone campaign has worked well in the shopping outlets all across America, and their videos in YouTube and other tech-blogs have managed to promote Windows Phone, and those can

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also be used as TV commercials to reach wider audience, as majority of the phone buyers arent tech bloggers. The more clearly we show our strength in the TV adds over the iPhones/Android, the easier it will be to reach the masses. Special discounts on Xbox stores, more space on Skydrive, free Skype upgrades to premium accounts for a year, etc. are some bundled features which could incentivize the sales of WP8. For the enterprise customers, seamless integration with their existing Windows office network and the enhanced security with Bitlocker encryption are the key features we need to promote. Added incentives to corporates in terms of reduced prices for Windows 8 upgrade or upgrades to other softwares bundled together with WP8. These would be a great attracting force for them to switch to WP8 phones from their existing Blackberry systems. We should also offer them benefit of free support and thus an easier way to upgrade, which will be useful for us in the long run.

Marketing Budget
With the aim to sell 45 million Windows Phone systems in 2013, we propose the breakdown of the cost of marketing on each phone as per the table below. From the below table, we can see that, around 20- 30$ will be spent on marketing for each phone sold with Windows Phone 8 operating system. But to reach the figure of 45 million buyers, we need the advertisement and promotion to reach much wider canvas of users, and correspondingly there would be an increase in the final marketing budget. Elemental Cost of Marketing Cost/Phone ($) Phone Manufacturers Co-Op Add 5 Vendor/Retailer Initiatives 5-10 Support/Service 5 Advertisement 5-10
Table 2: Marketing Budget Cost

The final marketing budget would be triple the calculated figure of USD 900 - 1350 million for the running promotions, and including the launch buzz and initial pre-launch promotions, the marketing budget would rise to around USD 2.7 - 4 billion for Windows Phone 8.

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