CHAPTER 13

CRAFTING A DEPLOYMENT
STRATEGY

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 Deployment Tactics in the Global
Video Game Industry
“ In the global video game industry, the introduction of each
generation of console has ushered in a new battle for market
dominance. New entrants have made startling entrances and toppled
seemingly invincible incumbents. Game developers, distributors, and
customers have had to watch the battle closely in order to place their
bets about which console would emerge as the generation’s victor. Each
generation has also revealed which deployment strategies have paid off
— or proven fatal—for the contenders.

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 Pong: The Beginning of an Era

“ In 1972, Nolan Bushnell founded a company called Atari and

introduced Pong. Also, Magnavox introduced a home video game console
called the Odyssey.

By 1984, video game console and games sales had reached $3 billion
in the United States alone.

By 1985, many industry observers were declaring the video game

industry dead.

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Magnavox Odyssey Ping Pong Like Game

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 The Emergence of 8-Bit Systems
o Nintendo, with its 8-bit Nintendo Entertainment System (NES),
introduced in 1985, and Sega, which launched its 8-bit Master
System in the United States in 1986.

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 The Emergence of 8-Bit Systems
o From 1985 to 1989, Nintendo held a near monopoly of the U.S. video game
industry. The company sold its consoles for a price very close to production costs,
while earning the bulk of its profits from games.

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 The 16-Bit Video Game Systems
o In September 1989, Sega launched the fourth generation of video game console
competition when it introduced its 16-bit Genesis to the U.S. video game market.

o Developers began to abandon the NEC platform, and NEC exited the market in 1991.
Nintendo finally introduced its own 16-bit Super Nintendo Entertainment System
(SNES) in 1991, but it was too late to quell Sega’s momentum.

o In 1992, Nintendo controlled 80 percent of the video game market (based on

combined 8-bit and 16-bit sales), but by 1994, Sega was the market leader. Nintendo
chose to make the system incompatible with the 8-bit games.

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 The 16-Bit Video Game Systems
o By the end of 1991, the SNES had 25 game titles compared to the 130 available
for Genesis. Nintendo had given Sega two years of installed base lead on a
system that offered a significant technological advantage and then entered the
market at a ground-zero position with respect to the availability of
complementary goods.

o The consequence of Nintendo’s late move is aptly captured in a review of video

game players published in Fortune: “To tell the truth, Nintendo just isn’t cool
anymore. This one is 16 bits, so it’s better than the original Nintendo. But the
company only made it to compete with Sega, and most kids already have that.
So they don’t need Super Nintendo, unless they’re jerks and have to have
everything. 8
“

Nintendo Entertainment System Master System

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Genesis Turbo Gafx-16

Super Nintendo Entertainment System

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32/64 BIT System
5TH Generation
⬡ In 1989, Philips Company first introduced Compact Disc-Interactive
(CD-i).
⬡ Back on 1993, the Turbo Techs Duo first introduced by NEC.
⬡ The 3DO’s Company introduced Interactive Multiplayer on 1993.
⬡ The Atari Jaguar is a home video game console developed by Atari
Corporation and released in November 1993.

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⬡ The Sega Saturn is a home video game console developed by Sega
and released on November 22, 1995.
⬡ In 1995, the first widely popular 3D video game console, the Sony
PlayStation.
⬡ Nintendo 64 was first released in June 1996 and was meant to
compete against the Sony PlayStation and the Sega Saturn.

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 Turbo Tech’s Duo
Compact Disc - Interactive Interactive Multiplayer

Saturn

Jaguar PlayStation

Nintendo 64

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128 BIT System
6th Generation

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o The Dreamcast is a home video game console released by Sega on
September 1999.
o The PlayStation 2 (PS2) is a home video game console developed and
marketed by Sony Computer on March 2002
o The Xbox is a home video game console and the first installment in
the Xbox series of video game consoles manufactured by Microsoft in
2001.
o The GameCube is a home video game console developed and released
by Nintendo in Japan on September 14, 2001

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DreamCast PlayStation 2

Xbox GameCube

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128 BIT System
7TH Generation
 Launched worldwide by Microsoft across 2005–2006, the Xbox 360 was initially in
short supply in many regions

 The PlayStation 3 (PS3) is a home video game console developed

by Sony Computer in 2006

 The Wii (/wiː/ WEE) is a home video game console developed and marketed by
Nintendo. It was released in November 19, 2006

 PlayStation Move is a motion game controller developed by Sony Computer

Entertainment that initially released in 2010

 Kinect is a line of motion sensing input devices produced by Microsoft and first
released in 2010

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 Xbox 360 PlayStation 3

Wii

PlayStation Move Microsoft Kinect

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8th

Generation

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 The Wii U is a home video game console developed
by Nintendo as the successor to the Wii that been released in late 2012

 The PlayStation 4 (PS4) is a home video game console developed

by Sony Interactive Entertainment in 2013

 Announced in May 2013, it is the successor to Xbox 360 and the third
base console in the Xbox series of video game consoles

 The Nintendo Switch is a hybrid video game console developed by

Nintendo and released worldwide in most regions on March 3, 2017

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 Wii U PlayStation 4

Xbox One Switch

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LAUNCH TIME,
LICENSING
& COMPATABILITY
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 Overview
⬡ The value of any technological innovation is only partly determined
by what the technology can do.

⬡ An effective deployment strategy is thus a key element in a

technological innovation strategy.

⬡ Some of the key elements of an effective deployment strategy include

launch timing, licensing and compatibility, pricing, distribution,
and marketing.

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Launch Time
The timing of the product launch can be a significant part of a company’s
deployment strategy.
Strategic Launch Timing
⬡ Firms can use its launch timing strategy to take advantage of business
cycle or seasonal effects.
⬡ E.g. video game consoles are always launched just before Christmas
⬡ Timing also signals customers about the generation of technology the
product represents.
⬡ E.g. if too early, may not be seen as "next generation"
⬡ Timing must be coordinated with production capacity and complements
availability, or launch could be weak.

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Optimizing Cash Flow versus Embracing Cannibalization
⬡ Traditionally, firms managed product life cycles to optimize cash flow and
return on investment --would not introduce new generation while old
generation selling well.

⬡ However, in industries with increasing returns this is risky.

⬡ Often better for firm to invest continuous innovation and willingly

cannibalized its own products to make it difficult for competitors to gain a
technological lead.
∙ Cannibalization - When a firm’s sales of one product (or at one location)
diminish its sales of another of its products (or at another of its locations)
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 Licensing and Compatibility
⬡ Protecting a technology too little can result in low quality complements and clones;
protecting too much may impede development of complements. Firms must
carefully decide:
 How compatible to be with products of others?
 If firm is dominant, generally prefers incompatibility with others’
platforms but may use controlled licensing for complements.
 If firm is at installed base disadvantage, generally prefers some
compatibility with others and aggressive licensing for complements.
 Whether to make product compatible with own previous generations
(“backward compatibility”)
 If installed base and complements are important, backward compatibility
usually best – leverages installed base and complements of previous
generations and link generations together. Can be combines with
incentives to upgrade.

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PRICING,
DISTRIBUTION
& MARKETING

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PRICING
act of placing a value on a product

PRICING STRATEGY
⬡ 1. Survival Pricing - the price of good is set to cover variable costs
and part of fixed costs.

⬡ 2. Penetration Pricing - the price of good is set very low to maximize

the goods market share.

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Pricing
⬡ Objective
1. Maximize Current Profit- price setting objective in which organizations set a
price for a product that will give maximum profits, cash flow or return on
investments in the short term withouth regard to long-run performance.

⬡ 2. Maximum Market Skimming - pricing approach in which the producer sets a

high introductory price to attract buyers with a strong desire for the product and
the resources to buy it, and then gradually reduces the price to attract the next and
subsequent layers of the market.

Freemium Model - a pricing model where a base product or service is offered for
free, but a premium is charged for additional features or services.

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Distribution
process of sending goods from one party to another such as producers and
consumers.

⬡ 1. Direct Distribution or Selling Direct - sale and transfer of a product directly

from a producer to customer r the consumer.

⬡ 2. Indirect Distribution- sale and transfer of product feom producer to

wholesaler and or retailer and then to the consumer.

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Intermediaries
⬡ 1. Manufacturer's Representative - independent agents that promote and sell the
product lines of one or a few manufacturer's.

⬡ 2. Wholesaler's - companies that buy manufacturer's products in bulk, and sell

them to other supply channel members such as retailers.

⬡ 3. Retailer's - companies that sell goods to the public.

⬡ 4. Original Equipment Manufacturer's (OEM) or Value Added Resellers (VAR) -

company that buys product from other manufacturers and assembles them or
customizes them into a product that is then sold under the OEM's own name.

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Disintermediation - when the number of intermediaries in a supply channel
is reduced.

Strategies for Accelerating Distribution

⬡ 1. Alliances with distributor's

⬡ 2. Budling Relationship

⬡ 3. Contracts and Sponsorship

⬡ 4. Guarantees and Consignment

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Marketing
process of exploring, creating, and delivering value to meet the needs of a target
market in terms of goods and services.

Methods
⬡ 1. Advertising - the practice and techniques employed to bring attention to a
product or service.

⬡ 2. Promotions - refers to any type of marketing communication used to

inform target audiences of the relative merits of a product, service, brand or
issue, most of the time persuasive in nature.

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⬡ 3. Publicity and Public Relations -practice of managing and disseminating
information from an individual or an organization (such as a business,
government agency, or a nonprofit organization) to the public in order to
influence their perception.

Viral Marketing - sending information directly to targeted individuals in effort

to stimulate word-of-mouth advertising.

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Media Advantages Disadvantages

Online Advertising: Pay- Can be highly targeted to a particular Vulnerable to click-through fraud
per-click (search engines) audience; pay only for results (clicks); fast to (e.g., clicks by a competitor or an
deploy—can gain immediate visibility, and can unhappy customer or employee),
be adjusted or deleted just as quickly; enables which could result in wasted
rapid and efficient tracking of responses for advertising spend
analyzing effectiveness of the ad
Online Advertising: Can connect with customers in a rich way; Conversion of visitors to customers
Social Media potential for broad reach and viral marketing; is often low; can be difficult to build
can be highly targeted to a particular audience; awareness and traffic to social
relatively inexpensive; can be quickly media site
deployed and adjusted; can track visitors in
real-time
Television High sensory richness that combines sight, Increasingly fragmented audience
sound, and motion; high geographic and due to proliferation of stations;
demographic reach; independent stations offer increasing use of DVR’s enables
new opportunities to more directly target viewers to skip the advertising; high
specific audiences absolute cost; fleeting exposure

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Radio High geographic and demographic Audio presentation only; advertisers may
selectivity; medium reach; relatively low cost need to buy ads with multiple stations to
achieve desired audience reach; fleeting
exposure

Newspaper Timeliness; good local market coverage; Newspaper audiences are decreasing; easy
broad acceptance; high believability; for audience to skip over ad; relatively poor
audience can keep or revisit the production quality; high advertising
advertisement; wide price ranges available clutter; may be difficult to selectively target
a particular audience

Magazine High geographic and demographic Slow deployment (long ad purchase lead
selectivity; high quality visual production; times); some waste circulation; may require
long life; can enable significant technical advertising in multiple magazines to
content; good pass along readership achieve desired reach

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Direct Mail High audience selectivity; no ad Relatively high cost; “junk mail”
competition within the same image; requires access to good
medium; personalization; enables mailing lists; requires relatively
communication of significant long lead times for printing and
technical content; may be passed mailing
along to others; responses can
usually be efficiently tracked

Outdoor (e.g., billboards, High repeat exposure; low cost; low Limited audience selectivity; very
banners) competition limited technical content

Telephone High audience selectivity; can give Relatively high cost; can be
personalized message perceived as an annoyance

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Theory in Action
Generating Awareness for Domosedan
 Farmos wanted to build awareness of its new
innovation in animal painkillers.
 Asked university professors and advanced
practitioners to help with testing process for drug –
acted as premarketing tool.
 Drug was featured in conferences, articles,
dissertations.
 Farmos also hosted a large dinner party for all
practicing veterinarians at the drug’s launch.
 Domosedan was adopted rapidly around the
world and became a commercial success.
 Tailoring the Marketing Plan
to Intended Adopters
⬡ Innovators and early adopters respond to marketing that
offers significant technical content and emphasizes leading-
edge nature of product.
*need media with high content and selective reach
⬡ Early majority responds to marketing emphasizing product’s
completeness, ease o fuse, consistency with customer’s life,
and legitimacy.
*need media with high reach and high credibility
 Tailoring the Marketing Plan
to Intended Adopters
⬡ Late majority and laggards respond to marketing
emphasizing reliability, simplicity, and cost-effectiveness.
*need media with high reach, high credibility, but low cost.
⬡ Often hard to transition from selling to early adopters to
early majority, resulting in “chasm.”
 Using Marketing to Shape
Perceptions and Expectations
Perceptions and expectations of value can be as important
as actual value. To influence, can use:
1. Preannouncements and press releases can build “mind
share” in advance of actual market share and can forestall
purchases of competitors’ products
 Using Marketing to Shape
Perceptions and Expectations
2. Reputation provides signal to market of likelihood of
success
3. Credible commitments substantial irreversible
investments can convince market of firm’s confidence
and determination
 Research Brief Creating an
Information Epidemic
Gladwell notes that some individuals have a disproportionate
impact on marketplace behavior:
1. Connectors
⬡ individuals having exceptionally large and diverse circle of
acquaintances
⬡ knack for remembering names and important dates
 Research Brief Creating an
Information Epidemic
2. Mavens
⬡ individuals driven to obtain and disseminate knowledge about one
or more of their interests
⬡ will track prices, tend to be consumer activists
⬡ take great pleasure in helping other consumers
3. Salespersons
⬡ individuals who are naturally talented persuaders
⬡ acute ability to send and respond to nonverbal cues; can infect
others with their mood
Thank You!!!

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