Expect the Un-X-pected From Microsoft

The fall 2001 launch of Microsoft Corp.'s Xbox video game console will pit the software giant against some tough competitors with considerably more experience in the video game hardware market. Sony Corp. and Nintendo of America Inc. are both powerhouses in the field, and Microsoft has never launched a major hardware product.Still, Bill Brownell, group manager of retail marketing for the Redmond, Wash-based company, seems undeterred. With 12 years of prior experience as a field merchandising manager for Nintendo, Brownell sees fundamental problems with the merchandising approaches currently in use for game consoles, and he hopes Microsoft can avoid those pitfalls."A key problem in the video game market is that everything in the channel has a homogenous look," says Brownell. "Some competitors have seeded so much P-O-P at retail that if flat-out confuses the retailer. You walk in and you see four banners, six counter cards, danglers, shelf talkers and stickers, and you wonder what they're trying to tell the consumer. We want to approach in differently and avoid that type of P-O-P pollution."The Xbox merchandising team's goal is to provide a wide range of pieces that focus on the key themes each retailer can use, explains Kris Ringenbach, merchandising manager. "We are focused on using unique materials to stand out and making sure the space we have available to us is used well. We'd rather have one really great piece out there than seven not-so-great ones."Xbox marketers realize that they will need to work closely with each retailer and not simply rely on the Microsoft name to generate cooperation. "Our biggest challenge will be to find ways to work with accounts that generally don't allow a lot P-O-P into the stores," says Gunn Robison, channel marketing leader. "Our goal is to have programs in place to cover all types of formats and ensure the P-O-P is getting out there in the forms the retailers want."The key to creating a successful launch is to educate the retail sales people, adds Millie Steury, field merchandising manager. "Xbox is going at the market with a different approach than most video game makers." she says. "We want to create a team dynamic and install in our field merchandisers a lot of knowledge about Xbox, so they are educating the retainers. And when they leave the retailer's store, Xbox remains. The retail sales people are our true advocates."Retailers are also providing the team with their own valuable insight. "At Microsoft, I have more leeway than in previous positions I've had to develop great programs that can be executed well," adds Jake Jacobsen, merchandising operations manager. "There's more opportunity to go the retailers and gain more feedback, so we're more in tune with what they want and can convey that to our own P-O-P suppliers. That great communication means that we can create a program that will absolutely rock. It will please retailers and sell product."That creative approach was apparent in last fall's teaser announcing the coming products, notes Brownell. "Our objective was to let consumers know we were coming and to drive them to the Web site to find out more, while also driving the sales associates to the Web site we'd created specifically for them. That way they could learn more and talk knowledgeably about the product as consumers learned more. One of the strong assets Microsoft has is the understanding of how important store associates are to our success. We're going to spend a lot of time making sure they understand the product."The Xbox TeamThat customer-oriented focus on the retail market was created by the full merchandising team, which brought a combination of backgrounds in video game marketing and Microsoft development to the table. Don Coyner, director of brand marketing, spent seven years at Nintendo before joining Microsoft five years ago. He came onto the Xbox team two years ago as it started up, followed by Alex Kotowitz, senior director of Xbox sales, Brownell and Steury."Marketing always has been a huge part of Microsoft's success, and we've gone all out to build a first-class marketing team," says Coyner. "It represents a strong combination of people from inside and outside Microsoft, some with consumer marketing backgrounds, and some with business-to-business marketing backgrounds within Microsoft. We have a lot of perspectives represented."Brownell's background, for instance, includes 12 years at Nintendo as field merchandising manager. "I spent three-quarters of my time in the stores, so I understand the market," he says. "However, I also understand that it's an ever-evolving field. If you're out of the industry for a year, it can be completely different when you return."Xbox operates as a totally separate division of 1,200 employees within the Microsoft structure. "What we're doing is so different from the rest of the company," Brownell says. "Our target and the way we approach the retail channel are different than anything the company has done before."The new division and its plans were born two years ago as Microsoft examined new business opportunities, Coyner explains. "We looked at our resources and expertise and identified points that made gaming make a lot of sense," he says. Microsoft's coding already was used by game developers creating console or PC games, and the company worked with third-party suppliers to provide peripheral support in other areas. Plus, it already produced PC games and a few peripherals. "We had a lot of resources in place already to draw on, and it was a big category," Coyner says.These coding advantages will help Xbox roll out with severed games, Brownell adds. "First-generation games typically aren't as good because developers have to get used to the code," he explains. "With Xbox, they're already familiar with it." Most developers work within Microsoft's DirectX API set and then translate that result for use in the game system for which the game is planned. "Instead of wrestling with the coding, developers can focus on a great game," Brownell says.The company has agreements with more than 200 game companies, including Electronic Arts, Konami, Namco, Activision, THQ, Eidos, Midway, Take-Two and Infogrames. It also has partnered with several companies, including Oddworld Inhabitants and Lionhead Studios.The Xbox team is working with a select group of P-O-P producers to create "the division's look." "Microsoft really values its partner relationships," says Coyner. Although some of the design work is being done in-house for display pieces, about 90% relies on vendors. "We allow our suppliers to use their expertise to bring their ideas to the channel. Going to the trade shows to meet with vendors has really let us see the latest technology in posters and substrates. It reassures us that we don't need to create standard-looking pieces," Brownell says.Working with RetailersThe team also met with key retailers in the market, presenting the planned merchandising program, gaining feedback and determining how it would work best for that chain. "We presented the program a full year before the launch, which really showed the retailers that Microsoft values their input," says Brownell. "That was a major strength, and we developed programs to meet the needs they explained to us."The research and supplier advice will pay off in better-looking and more durable pieces, Coyner says. "The nice thing about understanding the issues involved in video game merchandising up front is knowing what to anticipate once they're in the field," he says. "We can determine what parts will break first -- and interactives do have an Achilles' heel. Then we can work to bulletproof them while still ensuring they look good and are well-liked."Some customizing will be done for key accounts, but no more than is typical for such programs in the industry, says Jacobsen. Instead, a variety of pieces are being produced within a menu of options including interactives, software displays, peripheral displays, branding signage, and product-specific floor graphics, says Kotowitz. "There are going to be enough pieces available that the store can create a dedicated Xbox store if they want it, and some will want one," he says. "But we believe that on the merits alone, if we are put in a competitive situation with other game consoles near ours, we'll shine. We don't want to be taken out of that competitive buying environment.""Our challenge is to take these really cool P-O-P pieces and make sure they are blanketed at retail," says Robison. "We have to be sure Xbox is represented well in the stores to get the word to consumers."Adds Brownell, "We want to convey that we're new and different, and we want to help retailers so when consumers come into the store, they realize there is something new in the gaming environment and that we're not just another product on the shelf."The display materials will begin shipping in advance of product to ensure all merchandising is in place as the product arrives. "We're all scrambling like crazy to make the launch, and then we'll settle into an ongoing maintenance program for the display materials," Brownell says.The P-O-P will play off the images and messages seen in other marketing materials, including print and broadcast advertising. "We're approaching the marketing very specifically as to what we want to trigger at retail based on what is advertised on TV," Brownell explains. "The general goal for the P-O-P at retail is to have it trigger the intent to buy when the consumer comes to the store after seeing other media."Many current video game merchandising approaches fail due to a lack of focus, Brownell says. "Some companies are trying to use too many triggers, and it becomes a blur. That leaves the customer paying no attention to the materials, so they sometimes fail to buy anything," he says. "Our approach will be methodical as to how our image is portrayed at retail. It will be completely up to each account how they use it, but it still will be screaming 'Xbox' within their parameters.""Each channel has its own needs," adds Kotowitz. "Mass merchants, for instance, have to stay within their decor themes while also giving the consumer something exciting. Whereas with the specialty gaming retailer, we'll probably be doing something a bit more over the top, because games are their total focus." To date, the team is encouraged by the response they've received, he notes. "The enthusiasm from retailers always has been very high, and as we get closer to launch, that enthusiasm is being reinforced by the materials they're seeing. There's been an overwhelmingly positive response to our position and breadth and depth of merchandising."But they aren't patting themselves on the back just yet, Brownell stresses. "We are not going into the market with any arrogance. We have to earn our right to be in the gaming business and be at retail with video game lines. That's our approach, and we want to be at our best in presenting materials to retailers. We want to produce quality games and quality P-O-P and earn our right to be on the shelf."

Expect the Un-X-pected From Microsoft

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