In the shadow of the iPod: Microsoft Zuning out of the Social

In Microsoft Changes Its Marketing Tune for Lackluster Zune, AdvertisingAge outlines the changes in the company’s new Zune 2 promotional strategy:

…Zune is dropping its original strategy, which painted the iPod as an isolating device and Zune as more social because its tunes can be shared among users. Now the campaign is centered on the individual and tagged “You make it you.” The iPod “has become a superficial status symbol,” said Mike Harris, partner-strategy for [Microsoft ad agency] T.A.G. Zune is more personal, he said.

When Microsoft launched Zune last year, it wanted to establish the brand and emphasize its unique wireless sharing ability to create a “stark contrast” to the iPod. Peter Kingsley, group manager for Zune brand marketing, explained the approach to CNET:

A key principle to our advertising creative is authenticity, in that the Zune brand is about celebrating great artists and the real people that enjoy it.

Hmm. After its first year, Zune gained less than 11% market share in the $250+ players-with-hard-disks category (cf. Apple’s 86%+ share) and 2.2% overall share among all MP3 players. For a company that spends $1 billion in advertising, its paltry $9 million ad budget in 2006 underscores Zune’s lowly status in Microsoft’s strategic focus hierarchy.

So what does Microsoft do for Zune 2? Double the ad budget ($17 million for the next six months), change the ad agency (McCann-Erickson’s new T.A.G. unit in San Francisco) and drop the “Welcome to the Social” strategy.

With the iPod having a near-invincible lead, Zune 1 took the alternative, anti-entablishmentarian approach by featuring quirky arts and sharing themed campaigns, which I declared a dud in an earlier article, Consumer markets: Time for Microsoft to exit?

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Now the new youth-oriented agency, is planning a more aggressive TV-heavy approach. As can be seen at ZuneJourney.net, there’s a Beatlesque, happy-to-be-alive, psychedelic streak to the campaign:

zune2-music.png

The first Zune 2 TV ad is Ballad of Tina Pink, featuring “Lake Michigan” by Rogue Wave (1:05 min video):

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Is this going to work?

Let’s recall that Microsoft first ignored the iPod, then attacked it for being closed and touted its own ‘many options’ approach with its hardware partners. Christine Andrews, lead product manager of MSN, at the introduction of Microsoft’s music service in 2004:

We’re different because Apple is a closed system. If you want Apple, you have to use the iPod. A lot of people want choice and we offer that.

When that didn’t work, it complained about its partners not delivering compelling hardware, abandoned its PlaysForSure platform and got into the hardware business to compete directly against its erstwhile partners. Now that Zune 1 has flopped, Microsoft is playing its ultimate card: ‘we’ll get there by version 3.’ Chris Stephenson, GM of global marketing, Microsoft Entertainment:

We are very much aware of the strength of our competition, but once our company gets into something, it will not give up…It’s good being in the No. 2 place — we can fight the good fight.

As I argued earlier, Zune has no compelling advantage over the iPod, other than being not-the-iPod. With the possible exception of Sony (that apparently cannot write software if its life depended on it), there’s really no other company better positioned to challenge Apple’s digital music hegemony than Microsoft. But is Microsoft being delusional here or is Zune 2 just a bridge to Zune 3 that’ll crush the iPod?

At the company’s financial analysts meeting this summer, Robbie Bach, president of the Entertainment and Devices Division at Microsoft, outlined Microsoft’s ‘version 3′ strategy:

We think of this in the hundreds of millions of dollars of investment…It is something that is going to take time. This is not a six-month initiative.

At this rate of ad spending alone this should be a five-year initiative. Does Microsoft have that much time? And what of the brand strategy that’ll run that initiative? Robbie Bach:

We have to drive a new brand: Zune…We have to drive people who think about iPod as the brand to think about other things.

Is that clear?

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You might also be interested in this article:
Consumer markets: Time for Microsoft to exit?

9 thoughts on “In the shadow of the iPod: Microsoft Zuning out of the Social

  1. Committing gazillions of dollars to irrelevant, though state-of-the-art branding creative, and massive, though purposeless media buys, isn’t a strategy…it’s a deathwish, though a full-employment program for all the marketing vendor partners producing the dreck.

    Microsoft makes its money selling software. That’s why it’s in the Xbox business (it’s the “razor/blades” model people often talk about). There’s no money to be made selling music, so what’s the company’s end-game with Zune? Become a hardware company?

    I’m surprised that more media critics aren’t slamming the new campaign for its surreal irrelevance. If you want to buy a smart stock, invest in one of the companies extorting cash out of Microsoft for producing the new campaign. The company seems to have an endless willingness to endure pain, and a bottomless fund available to enable Zune’s self-destruction.

    I’ve written about this today at DIM BULB, http://dimbulb.typepad.com/my_weblog/2007/11/zuned-out.html

  2. “I did call for Ballmer’s resignation in:”

    I want him to STAY. I don’t want anybody smart in there to turn things around.

  3. In the 1990′s, MS was able to ride the coattails of BG’s life story and MS corporate name to win over consumers as the “solid,” and “safe” choice but after the last 12 years of poisoning their own brand name with monopoly manuevers, and shoddy OS (HOW many viruses?), time and time again in the past 12 years, it’s proven that when consumers have a choice, they seldom choose MS … MSN as an ISP lost to AOL – that should tell you something after MS spent $4 BILLION dollars … $4 BILLION … or the Xbox, another “me-too” product – the tally? $21 BILLION spent, $6 BILLION in return … and the latest? A recall that isn’t a recall. The only reason the original XBox even sold was people tired of viruses and driver patches on the PC – now, after a year head start for the 360, defeated by Nintendo already. The Zune, it takes MS 400 days to sell a million Zunes – Appl takes about 9 days to sell a million iPods.

    For shareholders, at least the Zune is only losing them millions and not billions. Only MS would consider that a victory.

  4. New Zune ad (satire):

    “All we are saying is give Zune a chance,
    All we are saying is give Zune a chance”

    Apologies to John Lennon

    ***************************************
    “It’s good being in the No. 2 place — we can fight the good fight.”

    Let’s see if they’re still saying that when Leopard’s market share eclipses Vista.

  5. Pingback: The First Zune 2 Ad? « Life is far too important a thing ever to talk seriously about it..

  6. Apple’s vision: the Mac is the digital hub in your life. Share photos and documents with your friends. Collaborate and be creative.

    Microsoft’s vision: our market share shall be at least 90%.

    Being all things to all persons have never been a viable strategy in history. When Marketing & Sales end up running a company it usually is downhill from thereon.

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