1. Introduction
Do you know Microsoft is the world’s fourth most valuable brand after Apple, Google and Amazon, with the total brand worth of $661 billion?
What makes Microsoft so successful?
This article analyzes the Microsoft marketing strategy to understand how brand used marketing as a tool to gain so much success.
Microsoft marketing strategy- Shift from old to new style marketing
When Satya Nadella took charge as Microsoft CEO, he brought a major shift in Microsoft marketing strategy. Previously, Microsoft marketing strategy was hostile and directly attacked the competitors. An example of old style Microsoft marketing strategy is the “Scroogled” campaign:
Above example shows how Microsoft directly attacked Google to divert its customers to Bing search engine. However, Nadella stopped all hostile marketing campaigns and adopted a customer centric approach with direct implications on Microsoft marketing strategy.
In this article, we will analyze current Microsoft marketing strategy by applying the marketing mix model.
Take a brief overview of company’s current standing in the market.
2. Company Overview
| Company | Microsoft Inc. |
| CEO | Satya Nadella |
| Founding year | 1975 |
| Headquarters | Washington, USA |
| Type | Public |
| Annual revenue 2021 | $168 billion |
| Profitability 2021 | $115.9 billion |
| Market capitalization (December, 2022) | $1.917 trillion |
3. Microsoft Marketing Strategy
Microsoft spends heavily on marketing and promotion. In 2022, Microsoft spent 22 billion dollar on the marketing and sales expense, which is the highest marketing expenditure over last decade.
By spending heavily on the marketing and sales expenses, Microsoft is able to have consistent revenue growth over last decade. In 2016, 2017 and 2018, Microsoft spent $14,635, $15,461 and $17,469 billion on marketing expenses respectively.
Here is the result of Microsoft marketing strategy effectiveness:
To understand how Microsoft marketing strategy has been so successful, let’s analyze its marketing strategies in light of marketing-mix model.
Microsoft marketing mix
3.1 Microsoft Product Strategy
3.1.1 Microsoft Product Mix
Microsoft is a research and development driven company that identifies the needs, expectations and demands of customers even before they emerge. Currently, Microsoft offers a wide variety of products, including- Windows lines, MS-Office, Xbox Consoles, cloud solutions and touch screen PCs.
In 2022, Microsoft launched three products- Surface pro 9, Surface Laptop 5 and Surface Studio 2.
3.1.2 Microsoft unique selling proposition
In all marketing mix elements, Microsoft pays specific attention to the product element, which has paid well. Microsoft marketing strategy focuses on ‘high level user convenience’, and considers it the unique selling point.
3.1.3 Top performing products
Among a wide array of products, tech giant’s all-time best products include- google drive, Skype, Xbox, visual studio, Bing, Microsoft Solitaire, Azure, Internet explorer, Microsoft office Suit, and Microsoft windows.
Take an example of Microsoft’s highly successful product- Azure. Azure gave tough competition to the Google Cloud and Amazon by having triple digit growth, even though Azure was a late entrant in the cloud computing industry.
3.1.4 What makes Microsoft products so successful?
• User convenience
• Reliability
• Wide product variety
• Products meeting customers’ current and potential needs
• Advanced technical features
3.2 Microsoft pricing strategy
Microsoft adopts a mix of pricing strategies to capture the major market portion.
3.2.1 Market oriented pricing
Its market oriented strategy considers the market factors like customers’ demand and competitors’ prices. For instance, considering the rising demand of Windows OS, Microsoft is now setting premium prices for its product.
3.2.2 Freemium pricing
Company also sets freemium pricing strategy by offering free basic features and charging for additional features. Like, it offers Office 365 free on devices with 10-inch screens, and charges for using product at larger screens.
3.2.3 Customized/tailored pricing
Microsoft also employs customized pricing strategy by considering the customers’ convenience. For instance, Microsoft adopts this pricing strategy for its cloud services, and requires users to pay as much they use.
3.2.4 What we learn from Microsoft’s pricing strategy?
Consider multiple factors (demand, competitors and customers) while setting prices. Adopt flexible pricing strategy, and do not stick to single pricing strategy when offering a wide product mix to multiple customer segments.
3.3 Microsoft place/distribution strategy
Microsoft target market is diverse. It targets both- hardware and software segments. So, to maximize the reach, Microsoft uses multiple distribution channels.
3.3.1 Microsoft online store/website
It mainly uses official website to ensure the direct, convenient access to software products. You may visit Microsoft website, and easily download the required product from online store.
3.3.2 Microsoft physical store outlets
Other than online store, Microsoft has physical outlets as well, from where customers can purchase hardware. Through physical outlets, Microsoft not only directly sells its products to customers, but also builds relations by offering an ‘overall user experience’. Store aesthetics, staff behavior and overall environment in which customers interact with brand enhance the overall brand image.
3.3.3 Authorized sellers and devise manufacturers
Microsoft has a list of authorized sellers who widen the company’s reach to the market. Microsoft carefully chooses the sellers by considering their image and location. Lastly, to sell its inbuilt operating systems, Microsoft partners with the device manufacturers.
3.4 Microsoft Promotion/Microsoft Advertising Strategy
Microsoft has developed a well-focused and comprehensive promotion strategy that sets company’s image as a reliable brand with advanced tech features. Alike its product and distribution strategy, Microsoft’s promotion strategy is also tailored according to targeted market segments.
3.4.1 Microsoft advertising strategy
Company spends heavily on TV and online advertising to approach the end users. Recently, Microsoft launched an ad campaign “The Power of Teams” to promote its new product ‘Teams’. As per CNBC, the campaign successfully raised the product awareness at global level.
Another creative example of Microsoft advertising strategy is use of Shadow Posters to promote Surface Pro 6.
3.4.2 Sales promotion
Other than spending on advertising, Microsoft adopts sales promotion strategy by offering regular discounts and incentives to the customers. For instance, it offers MS Office at a discounted price to customers to push the sales, increases loyalty and make it harder for competitors to steal its price sensitive customers.
3.4.3 Direct marketing strategy
An example of Microsoft’s direct marketing strategy is its partnership with educational institutions and device manufacturers. During pandemic, Microsoft collaborated with educational institutions across the world to facilitate hybrid learning by adopting Teams.
3.4.4 Personal selling
By using personal selling strategy, Microsoft presents its products to the customers (through physical store outlets), and also attracts new customers by encouraging free trials.
3.4.5 Personal Relations
Microsoft is a PR savvy company that consistently tops the CISION Index, which ranks the companies based on their positive media coverage. In 2022, CISION PR NEWSWIRE ranked Microsoft among top performers that were considered the best companies to work with. The company frequently engages in philanthropy, and actively takes social responsibility initiatives. Recently, company launched “Anthem for all” campaign in 2022 to pay tribute to the sick and injured service personnel.
3.4.6 Social media marketing
Microsoft invests heavily on social media. Microsoft has over 3.9 million followers on Instagram, and nearly 13 million followers on Facebook. Other than traditional advertising, Microsoft actively showcases its products on TikTok to connect with the younger audience. A blend of corporate humor and professional advice captures the younger audience’s attention. As Microsoft targets young people we well (particularly students), the published personable content resonates well with the Microsoft target audience over TikTok.
After analyzing the Microsoft’s marketing strategies, now let’s discuss what makes Microsoft different from its competitors?
4. What makes Microsoft different from its competitors?
Microsoft gives tough competition to its competitors through its unique selling proposition.
• Unlike Apple, Microsoft offers installable operating system that could be installed on any laptop/PC without any hardware binding. It is considered a user-friendly, reliable and customer-centered brand.
• Another factor that makes Microsoft different from its competitors is its ‘broad differentiation’, and ability to meet the needs of diverse market segments. With flexible pricing, loyal customer base and well-integrated marketing strategy, the company is able to stay ahead of competition.
• Company’s strong financial performance and intellectual property are also important sources of competitive advantage that protect the tech-giant from intense market competition.
5. Key lessons learned from Microsoft Marketing Strategy
Here are the some lessons/takeaways from Microsoft’s marketing success:
5.1 Customer focused
Microsoft promotes ‘customer first’ culture, which has paid well to the tech-giant. Microsoft makes ‘customers for life’, and recognizes the importance of adopting customer orientation to achieve success.
5.2 Holistic view
Previously, Microsoft adopted a myopic view, as its marketing strategy mainly focused on technical aspects of its products. But Satya Nadella brought a fundamental shift in Microsoft marketing strategy by underlining the need to ‘rediscover the soul’.
Under new leadership, company now understands its purpose is beyond delivering long standing software. While discussing Microsoft marketing strategy, Wall Street Journal states that tech giant’s marketing efforts now focus on communicating how Microsoft makes peoples’ lives better, and helps in running businesses more efficiently.
5.3 Well-integrated marketing communication
Microsoft communicates marketing messages through different channels that are well-integrated. All communication channels like public relations, direct marketing, events and experiences, advertising and sales promotion send consistent marketing messages to the Microsoft target audience
5.4 Effective segmentation and targeting
Microsoft STP (segmentation, targeting and positioning) is done with strategic wisdom. The corporation chooses the specific customer groups that value speed, efficiency and advanced technological features.
After choosing the most viable target market segment, Microsoft then uses well-integrated marketing and promotion channels (as discussed before) to set a clear and strong brand positioning in customers mind as “productivity and platform company for the mobile and cloud first world”
5.5 Network marketing
Microsoft has developed a large network of business partners who support direct selling programs, and extend the company’s reach to corporate customers and SMEs.
5.6 Go-to-Market Strategies
Microsoft has adopted a winning go-to-market strategy by- identifying a clear target market, developing a compelling value proposition, adopting a customer orientation mindset, understanding the competitive landscape, offering tailored products, and then convincing customers ‘how’ Microsoft is better than its competitors.
6. Recommendations
• Minimize the resistance to change, and proactively respond to the external market environment.
• Focus on all four marketing mix elements, even if it is a product focused company.
• Make life-long customers by adopting a long-term view, but do not forget to measure the impact of life-long customers on business performance. To do this, evaluate the level of investment needed to make customers for life against the quantifiable financial value that such customers give to the company.
• Avoid adopting a myopic view, and respond to the customers’ needs even before they emerge
• Identify a clear target market, and choose one whose needs could be effectively met by using company’s core capabilities
• When targeting multiple target market segments, tailor the marketing mix strategies according to unique needs of each segment
• Use multiple distribution channels to maximize the reach, but take care of the brand image while authorizing the distributors
• Adopt flexible pricing strategy, and do not stick to a single pricing strategy while operating in multiple market segments
• Ensure that all marketing mix elements are well-integrated, and send a consistent messages about brand image to target market
7. Concluding Remarks
Microsoft marketing strategy has proven to be successful over time. The company has changed its marketing strategy over the last decade according to changing market trends, and it is one of the main reasons behind Microsoft’s resilience and continual success.
We hope you have learned a lot from this article. If you want to know about the marketing strategies of Microsoft’s key competitor, Apple have a look over our article- “Apples marketing strategies| Secret behind Apple market leadership”.
8. References
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