In November 2001 Microsoft entered the hotly contested video games console market shared by Sony and Nintendo with it's Xbox console. In a market that has traditionally only been able to support 2 contenders, increased consumer demand driven by changes in technology and consumer behaviour has given Microsoft hope of muscling in on a highly lucrative market.

     At the time of the Xbox's entry, the latest generation console market was already approaching the second stage of it's product life cycle. The "market growth" stage, where Sony whom previously had dominated it's duopoly with Nintendo and had already sold it's Playstation 2 console 20 million times over. Microsoft had a lot of catching up to do and it was riding on the technological superiority of it's console and a highly publicesed launch to be competitive. The entrance of the Xbox brought a worthy contender to Sony's dominance of the video game consoles market. The year of Xbox's entry into the market saw a flurry of price cutting and dealing by all players in their bid to maintain market share and at years end only did prices finally settle. In the course of a year where consoles once sold for more than $600 with nothing more than a controller, consumers can now purchase bundle packs that includes games, peripherals and even movie rentals for around $400. Only the quality of games can now determine the winner in the gaming market as producers are now selling consoles at a loss.

     The video games console market is a very global one and video game producers have geographically segmented the global market in to four main markets. These are the United States, Japan, Europe and Australia. The United States is undoubtedly the biggest market for video games with Japan coming second. Microsoft has organised it's Xbox launch dates accordingly with the US coming first, followed by Japan, then Europe and Australia. All four are major markets for video game producers and a lot of money is spent in creating different marketing campaigns to appeal to the unique needs and want of each different market. In Australia for example Microsoft luanched an extensive advertising campaign covering all communication channels such as television commercials, outdor advertising, print media, sponsorships and product-related Web sites. Prior to launch a teaser campaign was even launched to elicit people's curiosity and selected retailers were even enlisted to open their doors at midnight on launch day to create consumer buzz.

     There are three different homogenous groups that video game producers target. These are the hardcore gamers, the average gamer and the underage gamer. Nintendo's main target market is the 14 and under group, it appeals to this age group with it's compact cube shaped purple console and by producing cute and cuddly games. Sony targets the average gamer which is the broader group of consumers young and old who enjoy games. Microsoft Xbox targets the hardcore gamers, the consumers who want the best graphics and the fastest game speeds. The marketing concept implies that an organisation aims all of its efforts, in a coordinated and integrated manner at simultaioneously satisfying its customers and achieving its own corporate goals. It sees customer satisfaction as the path to profits and "Customer Value", "Competition" and "Customer Relationships" are it's three main elements.

     Microsoft claims it's Xbox performs three times better than it's competitors. It was touted by Microsoft to revolutionise video games with never-seen-before gaming experiences. By claiming a technological advantage it is hoping to deliver better customer value to consumers. The Xbox sets itself apart from the competition with its more powerful compenents and by offering an integrated hard drive which is something its competitors have never even considered offering before. It's online gaming service is another feature designed to creat customer value. Xbox owners can enhance their gaming experience by playing online with people around the world and are not just limited to their living rooms anymore. Sony as market leader countered with an online service of its own but Microsoft's diligence in integrating online gaming with it's console has paid off as it's Starter Kits have lead in sales. Microsoft is doing a good job of building customer relationship through it's Xbox Magazine and it's official Xbox website. Microsoft's use of the marketing concept in delivering value has succeeded as it has taken over Nintendo's second place ranking and continues its push for greater market share by commissioning more game publishers to work on its games.

     Retailer support in displaying banners and posters and with numerous sales promotions such as in-store active displays has helped to maintain the Xbox's public exposure. Microsoft's success can mostly be attributed to it's intensive distribution and highly publicised promotions. With such a superior product and features that eclipses it's rivals technologically Microsoft could have created a bigger market share for itself by using this as a key selling point. They entered the market disadvatanged by their lack of games selection and this is the main benefit consumers consider when purchasing a console. By boasting their superior technology they could've influenced consumers to settle for a better product and wait patiently for better games to be released.