Marketing at Microsoft

Introduction
Marketing. It is defined as the action or business of promoting and selling products or services,
including market research and advertising. For this report, after having researched on a number
of products and organizations and narrowing them down by using the theories in marketing to
identify something that can be considered as a textbook case of success, I have chosen the
Microsoft Surface product line. Microsoft is a very large corporation and is a very successful
technology leader. It has the biggest portfolio of any technology company, having many
successful products such as Windows, Xbox, Office, Skype, Surface etc. Hence it was imperative
to focus on a single product line. Surface was chosen as it is the most recent and has succeeded
on the basis of solid marketing and it being a solid product. From a 1-billion-dollar loss in 2013
to 1.3 billion dollars in revenue in just Q1 2017. The surface line has come a long way. In this
report, we will explain the rise of the product line and how it became such a successful product
because of solid marketing and positioning.

Surface 2012 Surface Pro 4 2015

The revenue of Microsoft is growing year over year, in 2016 it was $ 93.1 Billion. The surface
line now contributes 6 Billion dollars to that revenue. Its most profitable businesses remain
Windows and Office, but with growing competition from Apple and Google, Microsoft has
innovated and created new product lines. The Surface line is now the most sold tablet computer
after the Apple IPad line, and seems to have a really good future. However good a product is, it
cant sell itself. That is why good marketing is very important. Let us look into the specifics of
the surface product line.

Microsofts Revenue over the Quarters (Hundred-thousands)

Environmental Analysis

Surface was launched in 2012. It is important to understand the environment and the conditions
that necessitated the release of the Surface line. The Apple IPhone was released in 2007,
although Microsoft had its own Smartphone Operating system- Windows Mobile, it was far
inferior to the IPhone and Microsoft decided to reboot it. Thus, the Windows Phone OS was
released in 2009, but by that time Google had already captured Mobile OS and was moving
ahead with good momentum as their OS was free for the Operating Equipment Manufacturers or
OEMs like Samsung, LG etc. By 2011, despite the best efforts from Microsoft and the
partnership with Nokia, Windows Phone was failing and the foothold Microsoft had on the
hardware market was failing and failing fast. This necessitated the launch of the Surface Product
Line. The PESTEL Analysis is given below.
1) Political In 2011 , the US department of Justice had just lifted its monopolization restriction
( bundling of products ) on Microsoft which helped MS to go ahead with innovation and
worrying less about legal battles .
2) Economic Financially Microsoft was doing good , but its outlook for the future was bleak ,
this mandated that they invest the abundant cash reserves that they had into building products for
the future , and on research and development.

3) Social Microsoft was relegated to being limited to work environment and was fast losing
space in consumer mindshare and their homes. And the consumers of today are the businessmen
/ office workers of tomorrow. Which meant that Microsoft had to improve its consumer
portfolio.

4)Technological While the above factor was a negative for Microsoft, it had immense talent in
its 90,000-strong workforce of quality engineers, and an R and D department that had a budget of
10 billion dollars a year.

5) Ecological Microsoft was already one of the best in handling its products and services in an
eco-friendly manner, but since surface was a hardware electronics line, care went in to ensure
ecological impact.
6) Legal Apple was already into year 3 of its IPad and care had to be taken not to impinge on
their patents.

Buying Behavior

Buying a tablet computer is a highly-involved decision as the cost is Dollar 1000 and upwards.
Hence it is important that the consumer is convinced that the particular product is the best buy.
The Various steps of the buying process and how Microsoft has tackled it is below
a) Problem Recognition Before the whole buying process starts, the consumers start his
search when he realizes he needs a product to service a problem he faces. The Surface
line has created a lot of advertisements which pitches the product as the best hybrid. A
device which can be a tablet when you want and a Laptop when you need it to be.
b) Information Search Having high visibility at online search engines such as google,
yahoo etc. Combined with visibility at stores like best buy, target, Walmart, Costco,
Malls etc. is something Microsoft has done well.
c) Evaluation of Alternatives Microsoft in its sites and tech-staff are forward with
helping their customers explore all the available options, even while explaining the
superiority of their product. This establishes trust with the consumer.
d) Purchase Decision - At this stage, giving as much information relating to the need that
was created in step one along with why your brand, is the best provider to fulfill this need
is essential. This includes technical support personnel who demonstrate all the
requirements to customers and take them into confidence regarding the products, its
warranty, insurance, service etc.
e) Purchase Marketing to this stage is straightforward: keep it simple. Test your brands
purchase process online. Is it complicated? Are there too many steps? Is the load time too
slow? Can a purchase be completed just as simply on a mobile device as on a desktop
computer? Ask these critical questions and make adjustments. If the purchase process is
too difficult, customers, and therefore revenue, can be easily lost. As a technological
company, Microsoft, has taken all steps to ensure purchasing is very easy with them.
f) Post-Purchase Evaluation Marketing doesnt end with the purchase, it is very
important to keep the costumer happy post purchase as it contributes to brand loyalty and
goodwill and these are very critical to future marketing momentum. They are the ones
who will advocate and do word of mouth for the product.

Competitor Analysis

As mentioned earlier, Microsofts biggest competitors in this space is Apple, Google and its
own OEMs. Microsoft has made a conscious decision not to directly compete with its OEMs
by keeping its product price high and also showcasing their products in its web and retail
stores.

As for Apple and Google, Microsoft is hoping its unique capabilities like stylus, Cortana etc.
are unique selling propositions for it. Additionally, since the Surface is marketed as a
productivity device as well, Microsoft is able to leverage its Office and OneDrive products as
well, to increase the value proposition.

It is also going for a blue ocean strategy as it single handedly created the hybrid space for
personal computing devices, to create and capture new demand. With Apple trying to play
catchup with IPad Pro. It had acquired Ntrig, an Israeli inking startup to provide unique
technology to create the best stylus experience out there as well.

SWOT

Microsoft, just like other organizations has its own Strengths, weaknesses, Opportunities, and
Threats, even on a product to product basis.

a) Strengths Microsoft has a very powerful organization and History. It has already
launched previously successful hardware such as XBOX, XBOX 360 and Zune HD.
b) Weaknesses Microsoft has been historically slow to recognize trends and innovate
quickly in cases like search, social, and smartphones. Its hopes it can learn from these
failures.
c) Opportunities Consumers are tired of carrying multiple devices, Laptops, Tablets
Digital note takers and phones. The surface pro 4 tries to be the replacement for the first
3.
d) Threats Apple has responded with the IPad Pro. Google is trying to catchup with the
Pixel.

Before we analyze the marketing mix of the product we need to look a little more at the
Organization Microsoft, Its mission, vision, values, goals, strategies etc.

a) Mission To empower every person and every organization on the planet to achieve
more.
b) Vison To help individuals and businesses realize their full potential.
c) Values
Integrity and honesty.
Passion for customers, partners, and technology.
Open and respectful with others and dedicated to making them better.
Willingness to take on big challenges and see them through.
Self-critical, questioning, and committed to personal excellence and self-
improvement.
Accountable for commitments, results, and quality to customers,
shareholders, partners, and employees.
d) Strategies - Microsoft is releasing and fixing products like a modern cloud company. Its
moving fast. Its shipping updates within weeks instead of months. Products that may
have been in development for years are being deployed and getting updated.

The company is driving the evolution of the web and computing interfaces. Obviously,
Microsoft has been moving toward a cloud first company with Windows, Office and
Azure for some time. However, its also focusing more on the next generation of the
Internet and computing with services such as the Azure IoT, the Bot framework, machine
learning APIs and augmented/virtual reality solutions.

Universal availability is the new Microsoft. In a previous era, Microsoft ran on

Microsoft. The Windows operating system was king and everyone built for it. Mobile and
cloud changed all of that and Microsoft ran the risk of becoming irrelevant. Today, it
wants to be anywhere the user is. Its apps and services are available on all the major
operating systems.
Looking at Microsoft from the perspective of the Ansoff Matrix, The Surface comes under
diversification. As its a new product in a new market.

We know that a Market Segment has to be

1) Measurable
2) Substantial
3) Accessible
4) Differentiable
5) Actionable

The Market segments that Microsoft has identified for the Surface Pro 4 are College students,
Professionals and Executives. The Advertising, written material etc. are geared towards this
segment.
 Marketing Mix

1) Product: Powerful processor, High DPI screen, Multi touch, Windows 10, Very
powerful, Portable, 9-hour battery life, Excellent Pen and Face recognition.
2) Price: Price has been intentionally kept high to ensure that the OEMs arent threatened,
also its a play to keep the product premium and aspirational. Also, while keeping price
on the higher side it is always competitive than apple and the number of features built in
and the quality of build create value proposition.
3) Promotion: Using it in TV shows like Castle and Sports programming like NFL.
4) Distribution: Microsoft leverages its own wide distribution network internationally,
while also relaying distribution to its retail partners like best buy etc.
5) Physical Evidence: - The Microsoft Stores are designed to have an Ambience and feel
of the product.
6) People: Microsoft has hired some of the best celebrities to market the Surface Pro. Also
its employees who work on the Surface are the best in the business. Its salesmen and
support staff are well trained.
7) Process: The design and Fabrication of the surface products are technically advanced
are of high quality and workmanship.

Future Suggestions & Conclusions

What the future holds for the Surface line is very exciting, but it also comes with its
challenges.

Challenges The next versions of IPad pros may take out the competitive advantage that the
surface has, Samsung may make its own version based on Googles Android. Lack of apps
specific for the surface use case.

The best ways to tackle these challenges would be to

1) Lower the pricing or make student discounts steeper. This will allow the volume of units
sold to be higher and hence developers will start making apps for it .
2) Incorporate upcoming technology like holo-lens and virtual reality into the product.
3) Make the product modular.
4) Incorporate Artificial Intelligence even further i.e. make Cortana central to the surface
experience.

With these strategies in place, the Surface Product line that has been a success for Microsoft
will continue to be a success.