Marketing-Push vs. Evangelism-Pull: Microsoft/Sony vs. Apple/Nintendo

Which is better - spreading your product gospel through slick marketing campaigns or having your own customers doing the talking for you? I think the answer is pretty clear. But what about the breadth of your product's reach? What if you have a loyal, passionate following of hard-core users but you want to expand beyond this core? Don't you run the risk of alienating those core users as your product becomes increasingly mainstream? And is this a problem, or simply a natural and expected evolution following the product life cycle? These are just some of the thoughts that went through my head upon reading an interview with Shane Kim, Head of Microsoft's Game Studio, by Dean Takahashi, author, blogger and writer for The Mercury News. One Q&A in particular prompted my own questions about marketing strategy and customer-driven product evangelism (the bolding is my own):

Q: I (Dean Takahashi) talked to Peter Moore recently. He said we will have an answer to the approachability of the Wii in the next three to six months. I asked him if that meant you are doing mass market games. He said no. It would be a combination of things. Is this part of your strategy?

A: First of all I wouldn’t say it is an answer to the Wii. That sounds way too reactive. While Nintendo is enjoying a lot of early success with the Wii, for us, part of our strategy has always been to appeal to expand beyond the core gamer. That goes back to our primary objective to win this generation. We know from prior experience that you don’t win the generation just by winning the core. If we want to win this generation, we have to expand beyond that. Now is the right time for us to do that. The first two holidays were really about competing for the core gamer. I agree with Peter it is not just one thing. It is an end to end strategy to appeal to a broad audience. It’s not just about content. It’s not about how you market the platform. You have to do all those things if you want to reach a broader audience. That will be a challenge for us because we have been so strong with the core gamer. It’s been part of our strategy all along.

Wow. There is a lot going on here. Let me try and parse the language to identify some of the key issues:

1. Being reactive is bad
IA question: but reactive to whom?

• Isn't being reactive to the needs of your market good? Isn't this called being customer-centric?
• If a competitors' strategies are working and yours are not, is there shame in being reactive (which entails being humble, learning and listening, which is not necessarily a core competency of many of those involved in gaming)?

2. Winning the generation means moving beyond the core

• It is conceivable that a successful console strategy could be built around the core - as long as you don't spend billions building it.
• Figuring out how to "cross the chasm" is essential in positioning the early sales strategy, lest you be pigeon-holed as a hard-core application.

3. A winning strategy is built off of success in selling to the core

• Nintendo's success with the Wii would indicate that this isn't necessarily true.
• You might actually develop a strategy and product that is not well-suited to the broader audience if you initially cater to the core, whose requirements are likely very different (and more costly).

4. Appealing to a broader audience means delivering an "end-to-end strategy"
IA question: an end-to-end strategy to appeal to a broader audience involves precisely what?

• Does end-to-end mean offline/online/gaming and media?
• If so, the Wii's low-end entry strategy that can subsequently be upgraded is a much lower risk, lower cost way of building an installed base which can be upsold later, no?

5. Appealing to a broader audience will be a challenge due to strength with the core
IA question: but why? Due to concerns over alienating the core or the difficulty in moving beyond the perception of being a hard-core application?

• Is the core essential to your DNA, i.e., not simply as a stepping-stone to a broad market strategy?
• If the core is essential, how do you lower the price/feature point to a level that represents an attractive value proposition to the broader audience but doesn't alienate the core?

An interesting point to note about Nintendo is that its "core," unlike Microsoft and Sony, is not in its user base but in its IP - namely, its stable of timeless characters. Mario. Zelda. Donkey Kong. Characters who have had appeal across generations and have acted as the glue of the Nintendo franchise. This kind of core - a mass-market, family-friendly core - is invaluable. And is something possessed by neither Microsoft nor Sony. An interesting post discussing Xbox 360's keys to victory offers some insight into how the Xbox 360 can compete for the mass-market against Nintendo:

5. Broaden the audience with more family-friendly IP

If Microsoft wants to be able to compete with Nintendo for the family-friendly market, it not only needs to bring down the price of the core package, but it's got to introduce more kid-oriented IP, whether through its own studios or licensing partnerships with third parties. Rare's Viva Pinata and Banjo Kazooie may help, but the 360 is still very much a hardcore gamer's machine and is dominated by hardcore titles like Gears of War, Crackdown, Ghost Recon, etc.

This, however, is an area where Microsoft's Xbox Live Arcade service can give the 360 a leg up. XBLA already has a good portfolio of titles for people of all ages and it's only going to continue to grow. MS recently announced that they have 6 million Xbox Live members, but how many of these are actually gold-level, paying members, let alone people who pay to download Live Arcade games? If MS wants to make the 360 more appealing to a broader audience, not only should Xbox Live be made free, but Xbox Live Arcade should offer an ad-supported type of service that lets users play games for free – similar to what GameTap just announced.  This would likely go a long way toward getting more "soccer moms" and their children interested in the 360.

Interesting stuff. My belief is that while Dean's interview was with respect to the Xbox 360, a similar conversation could have been had with Sony product management regarding the PS3. Both consoles are currently in the midst of an identity crisis, having their legions of loyal fans but having a hard time breaking into the mainstream. A high price point. Consoles loaded with features that reflects a far grander strategy than simply gaming. In short, a high-risk strategy that is heavily dependent upon changing market perceptions about a gaming console's use and the features and functionality desired by the broader market.

But even more importantly, the issue to me is that Microsoft and Sony have to convince the recreational gamer of at least one of two things in order to buy their products:

1. The features and functionality over and above those of the Wii are worth paying for
2. The console should be viewed not simply as a gaming tool but as a multimedia vehicle in the living room

These are hard things to convince people of. If I'm not a hard-core gamer do I really care about all the bells-and-whistles of the Xbox 360 and the PS3? Probably not, and certainly not to the tune of $200-$300 more than the Wii. And what about the box-in-the-living room argument? I think this approach kind of sticks them in no-man's-land. The multimedia consoles are still expensive - period. There is no getting around this. So is the broad market going to lap this up? Hmmm. Risky bet. And what if the money isn't really the gating issue, would the monied multimedia buyer choose to use their gaming console as their multimedia portal? I'd strongly doubt it. So I'm not sure where this puts Sony and Microsoft in this quest for the mass market. That said, there is one thing that could surely drive sales if only it happened: viral word-of-mouth selling by existing customers, the kind that gets people to the store tomorrow because they just have to have what their friends have. Now this can either be a faddish thing or an evangelical thing, and I'd posit the difference between the two as being:

• Faddist: I observe something an influencer has. I think it's cool. I get that thing. But once that thing is no longer cool I move on to the next cool thing.

• Evangelist: An influencer whom I respect has something cool. They tell me about it. They show it to me. I trust them. I buy the thing. I like the thing. I then become an influencer and tell others about the thing. And so on...

If you are Tommy Hilfiger, you were a prep-school fad phenomenon. It's appeal spread like wildfire. Stores were built, specialty boutiques in high-end department stores were constructed, the advertising machine kicked in and distribution quickly moved mass-market. The early-adopter cool left the brand, but by then it had become firmly mass market. They engineered the transition extremely well. But the road is littered with brands that had a rapid ascent, only to peter out after the transition from fad to mass-market didn't take. Wrong messaging, wrong product, inadequately capitalized, bad management - there are a litany of reasons for these failures. But there is fundamentally greater risk when one is reliant on marketing-push versus evangelist-pull, because it sets a higher bar for being convinced then if one is "sold" by an evangelist. Because you trust an evangelist. They are your friend and/or someone whom you respect.

Nintendo and Apple products are being effectively pushed by evangelists. Sure, slick advertising augments these more organic efforts, but make no mistake: in general, people that own Apple products love them and talk about them. Frequently. The same with Nintendo and the Wii. I just can't get people to shut up about these products. But I can't say the same for Microsoft and Sony, notwithstanding how cool or slick their graphics are or how many features and functions their consoles have. Either I don't know the people that are the evangelists (notwithstanding the fact that I know dozens of people that have the Xbox 360 and the PS3, yet never evangelize to me about them) or they are just not into spreading the gospel. And this is a problem. And raises risk. The holy grail is to have millions of evangelists out there pounding the pavement for you, completely unpaid. They are the best sales, marketing and PR force money can't buy.

Comments

[Samuel Cooper]

Waltermh

I think you overestimate corporate altruism. Ultimately, the goal for Nintendo, Sony, and Microsoft is the same: profit. Everything else is a means to that end. Nintendo does care about your satisfaction and does care about accessibility, but they care because it earns them the loyalty you're now displaying. They care because they want you for a customer and hopefully an evangelist.

The one part of your comment that I feel was spot on was your belief that Nintendo cares about the industry as a whole. Unlike Sony and Microsoft, NIntendo's sole interest is in game. I believe this is the reason that they have been trying for two generations of systems to put an end to the escalation plaguing the industry. Nintendo lives or dies in this market and has seen it crash before. They have a much more vested interest in pleasing customers on the gaming front and in keeping development costs down.

Sony views their gaming division as an opportunity to extend their brand influence by controlling media formats. They are perfectly willing to come in second or third this generation if it pushes Blu-Ray into the public consciousness. Further, they are content to see development costs rise until fewer and fewer companies can make it and the industry as a whole suffers. Keeping gamers happy is not their path to profit. It's a means to an end, and therefore their plan is not for long-term industry growth, but for leveraging the power they have (had) over the gaming demographic.

Similarly, Microsoft does not care to make gaming profitable. Or rather, they care, but less than they care about becoming the media center in the living room. Everything they do is focussed on that goal. They see profitability in movies and music. They see an opportunity to replace iTunes someday. The Xbox is a way to get into the living room. In reality, they benefit from the Wii, because it makes the everyman more comfortable with having a system in their living room. A new device in there, of any sort, encourages people to someday look into a media hub. Like Sony, Microsoft wants to leverage their userbase to become profitable in other markets. They want game disciples who can be funnelled into their other interests to push technologies that they see a broader market appeal for. Even if gamers are the minority, if every gamer goes Blu-ray, that's a big swing in the overall movie media market.

Microsoft is attempting to build a userbase large enough to push the technologies they see profit in. Sony already had such a base and has made their bid.

Nintendo on the other hand has no greater interest to sacrifice their userbase to. They are not trying to gain dominance in order to increase their user-pool elsewhere. Quite the contrary; Nintendo would be quite content to come in second or third if it meant greater longevity for the industry and a broader gaming market. This is why 'losing' last generation was perfectly acceptable to them. The Gamecube was quite profitable and the PS2 and Xbox expanded the gaming demographic; this was a perfect win for Nintendo.

These companies are about profitability, not knocking the big competitor off the hill. The success of the PS2 has ultimately led (in part) to the success of the Wii in that the proliferation we're currently seeing would not have been possible 10 years ago, even with an equally appealing product. Now however, thanks to the PS2, there is a much larger market with an appetite for affordable gaming. This market is migrating to the Wii and evangelising to their parents, friends, and coworkers.

The reason Nintendo seems to care about you is that they care about the industry. They are concerned with the longevity and expansion of gaming. Their competitors are concerned with gaming as a tool. The market isn't stupid, and customers know when they are being used. Nintendo is in a classic give and take mutually beneficial business relationship with you. Sony and MS want to use your loyalty elsewhere. This doesn't make them particularly bad, but it does ingender much less brand loyalty and much less drive to evangelize on their behalf. That equates to less success, and that equates to less profit, and that, that is bad.

[Waltermh]

Thank you for writing this. You are so right. I was talking to a coworker, who i didnt actually know, while he was playing spiderman 3 on ps3 demo at our store (frys, and we dont have a kiosk, but our own ps3 setup, no wii kiosk yet :( ).

i dont know that hes an evangelist, but something about nintendo products just begs that they be talked about. i didnt mention the wii, but he started talking about how much better the controls for the wii version are. and that any bugs didnt affect his enjoying the game. though he did say, if you dont have a wii the other system versions are fine.

I am a proud fanboy. i know it has a bad reputation these days, but i love what nintendo has always done to make me happy. when i hear the talk, see them anywhere, they exude the feeling that they really care about more then money, but about the fans. its like apple who has this focus on artsy and sleek, and knows where they want to go, and they do it with passion. i love that (not an apple fan but can appreciate their stuff.)

nintendo has drive and passion, and i have always loved the way they approach things, and believe they just dont get enough credit, can never get enough credit for what they mean to this industry. yes you can love a company, not all companies are soulless, and when you find one that shows some heart, they need to be held up high as an example of how a company can make money while serving the people.

but that is actually missing a much longer message on why i believe the other companies are not serving the people well, and may even be detrimental to the industry in some sense. i do think about this alot and could go on so much longer, but already said too much.

i do understand you were not meaning to promote fanboyism, or anything of the sort, and didnt realy get into any emotional or detailed technical reasoning that turns people into evangelists, but i dont know, just happy to have read this.

[Richard Gaywood]

Just a clarification on something that I see misrepresented in a lot of places on the web: you can buy Xbox Live Arcade titles with the free, basic-level Xbox Live account type (silver). You can still do leaderboards, score tracking, and all that stuff. The pay-for tier to the service, Gold, only adds online play to the service. Additionally, you may not know, all XBLA games can be downloaded for free in a trial mode, which varies from game to game; some are annoyingly short, others generously long. In a clever move, buying the game then enables all the content without a further download, satisfying impulse-buy cravings.

I agree that an ad-supported service would probably sell like hot cakes but the question is, would it generate revenues all that large? As you have written about at great length, the only possible explanation for the price of accessories on the Xbox 360 platform, which border on gouging in most cases, is if the gaming division is under serious pressure to stop spending so much money. So they'd have to be damned sure of the ad revenues to persue that route... I'd be expecting one or two carefully monitored trial games if Microsoft took that route.

On a personal level, can I say that I only recently discovered your blog and reading your analysis of the games industry from a purely financial point of view has been interesting and informative. Bravo!

[Mr Roberto]

I think it has something to do with the rebellious fringe and the somewhat paradoxical need to belong. The brands they/I gravitate to tend to be a personification of a cool, hip and - more importantly - incredibly self-confident person.

Items like the Mac and certain brands of cars appeal to people like this not just because they are always on the lookout for something new, but also because they recognise the quality intrinsic within which they have pleasantly discovered.

These features are often not shouted out. Instead, the companies have the cool self-confidence to let the products speak for themselves, and they have ferreted away subtle touches that you will come across and appreciate only after you have used them. Like the "whump" of a car door or one-touch battery level indicator on a notebook or the attention to detail in the throwaway packaging itself.

It's a delicate balance. Apple doesn;t always get it right. On the other hand, what puts me off products from Microsoft, for example, is the underlying neediness and insecurity that you can just almost discern from the way they market, advertise and project themselves.

It's hard to quantify or put in words. But there you go.