Xbox 360 and Three Red Lights: Like Tylenol and Cyanide?

Maybe to hard-core gamers who need their fix, or for those in the midst of a multi-player fiesta that gets abruptly terminated when the console melts down. I hadn't really thought about it until I read N'Gai Croal's informative piece in today's LevelUp titled Confession is Good for the Soul, but Microsoft may have a recall on its hands. But even if it doesn't, it is in the midst of a crisis, and it needs to use the same types of techniques for handling a product defect that crisis managers recommend:

• Take full responsibility
• Clearly communicate that you understand the problem
• Research and communicate the root cause of the problem
• Do whatever it takes to fix the problem

Why? Because brand equity and customer relationships are at stake, the very lifeblood of a company, yet time and time again companies make the same stupid mistakes. In fact, I think N'Gai mis-titled his post: it think it should be Confession is Good for Business.

...the recent announcement that the Xbox failure rate is significantly higher than the generally accepted 3-5 percent standard for consumer electronics products raises questions some important, as-yet unanswered questions. Did Microsoft's zeal to have the Xbox 360 both launch first and turn a profit--after the first Xbox launched second and lost billions of dollars--cause it to cut corners in a headlong rush to market, resulting in the current debacle? What, precisely, are the factors causing Xbox 360s to fail? What is the failure rate? How many devices have been returned thus far over the flashing three red lights? Was Microsoft aware of the magnitude of this problem before it launched the Xbox 360 Elite?

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In our interview with Microsoft corporate vice president Peter Moore, he pointedly declined to offer specifics about what was causing the problems on the grounds that he is not a technical person, nor would he answer whether the flaws should be attributed to design or manufacturing.

This is just inexcusable, a PR gaffe of the highest order. If you're not a technical person, Peter, then either get someone to comment who is or get someone with technical credibility to do the interview, like, say, J. Allard? This side-stepping of a fundamental question is no way to engender confidence or support from either your customer base or the media. All those hard-core gamers that have paid premium prices for your consoles and games - don't they deserve better? I'd say so.

N'Gai makes the case for Microsoft either doing a recall or providing an offer to replace consoles from the batch numbers that are suspected to contain a high incidence of defects. His argument centers around three specific issues:

First, it took Microsoft months to acknowledge the scope of the problem, long after afflicted Xbox 360 owners were already complaining loudly, attempting to identify the issue, and desperately inventing homegrown remedies.

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Second, there are several highly anticipated games shipping this fall--Halo 3, Grand Theft Auto IV, Call of Duty 4: Modern Warfare, Guitar Hero III and Rock Band--whose addictive nature makes it likely that the players of these games will have their Xbox 360s fired up for hours at a time. If the amateur forensic engineers are correct that insufficient ventilation and poor placement of critical components are largely responsible for the three flashing red lights errors, there could be a slew of already-purchased--and about-to-be-purchased--Xbox 360s succumbing to the Red Ring of Death during the height of gaming season.

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Third, absent a definitive statement from Microsoft about precisely when it identified this design flaw and rectified it, it's reasonable to assume that there are still thousands of Xbox 360s in stores with this design flaw.

I've got to say, these are pretty good reasons, and these map pretty closely to the four crisis management points I cited at the beginning of the post. N'Gai wraps up his post with the following:

At a six percent failure rate--just one percent more than the generally accepted 3-5 percent range for consumer electronics products--that statement would still be operative. At 30 percent, it would be unacceptable. Microsoft is saying, "Trust us," but given the sheer number of anecdotes about broken Xbox 360s and customer service horror stories, gamers ought to be able to quantify precisely how much trust Microsoft is asking of them. And the fact that Microsoft won't put a number to the failure rate and won't say which batch numbers are affected--while continuing to leave flawed machines on store shelves and in consumers' homes; while not even giving people advice on how to manage their Xbox 360's life span without resorting to Microsoft customer service--to us, that is equally unacceptable. The bottom line is that the answer to "Why would you knowingly continue to sell a defective product?" should not be "We're extending our warranty program." It is for this reason that we say that Microsoft must either be thoroughly forthcoming about the Xbox 360's flaws, or initiate a recall.

N'Gai is right. It is all about trust. But trust is something that is earned over time, and needs to be constantly re-earned through actions. Microsoft has breached the trust of its single most important constituency, its customers, the effects of which are only beginning to be felt. Come clean, Microsoft, because confession is good for business. And it is also the best way of protecting your brand and your customers.

Comments

[mr muggins]

Okay... Ive been through three original xboxes and now im moving on to my third 360. The first 360 i got for xmas right after the launch it lasted just over a year so i was beat for that, I did manage to take it apart and clean it up but it only lasted a few more months, I purchased another on in febuary 2007 and last month i ended up with the three lights so my first reaction was to try to fix it but before i cracked the seal on the hardware i decided to phone microsoft and they said they would replace it. I shipped it out to them only to get it back with a note saying they are not fixing it because it looked like it was opened... In a way i understand, but in another way if it wasnt a piece of garbage i wouldnt have to open it up to begin with. and i only opened the casing, not the hardware. Im totally fed up with ms, but if i was to switch to a sony, my 40 or so 360 games will be worth nothing more than coasters. Really i cant afford to shell the cash for another one so merry christmas to me i guess.