A course assignment required essentially a postmortem analysis of a previously failed product and what changes to the strategy would have made a difference. With a strong passion for music and technology the Microsoft Zune instantly came to mind.

1. A Postmortem of the Microsoft Zune
Success for the Zune would have required significant changes before and during launch
of the product. It is clear that there was nothing wrong with the hardware or software of
the Zune. In this regard it was equal to the iPod and even had some features that the
iPod did not. However, the single largest mistake Microsoft made was trying to position
itself directly against the iPod and going after what is essentially the same segment of
customers, most of which already owned an iPod. To make matters worse, I believe
Microsoft understated how much it would take to get customers to make the switch and
entered the market at the same price. Some of this may be due to how Microsoft was
structured at the same time, i.e. the Xbox team was essentially given another hardware
project and its influence is clear with the points system they utilized for customers to
make music purchases.
First things first, if you’re going to compete against the iPod, don’t make your product
look similar to the iPod and compete at the same price. Why would someone buy a
Zune that looks similar to an iPod and has similar features when they could just buy an
iPod? Where’s the relative advantage? I think the early adopters asked this question
and came up with next to nothing.

2. Next, the big thing about the Zune was its wireless capability. It wasn’t necessarily a
game changer, but it was a promising feature that was completely overlooked. Limiting
the sharing to Zune devices really rendered this feature useless. Therefore, at a
minimum this feature needed to be compatible with other devices such as laptops,
phones, and the Xbox.
In order to cross the chasm, subsegmenting the market is often recommended and this
case is no different. I believe the answer was staring at Microsoft the whole time, Xbox
users. This was an easy way to sub segment the market and should have made
effective research easy to accomplish as they probably had a lot of the data already.
Xbox users would also be less likely to find the points system a nuisance as they were
already using it for video game purchases.
To further leverage this existing relationship Microsoft could have easily conducted
surveys and focus groups (online) to get inside the heads of their Xbox customers. This
could also have led to some additional features to make the Zune a more attractive
option such as syncing across multiple devices, being able to use the Zune as a storage
device for Xbox data, or increased focus on portable gaming.
This was when Halo was in full force and there are probably even more things that
could have been done to piggyback the success from that video game such as
releasing Halo editions of the Zune. The launch date could have coincided with the
release date of one of the Halo games as well. The Zune could have been incorporated
into the Halo campaign, which would have significantly reduced the cost of advertising
and gained the most awareness in the shortest amount of time possible. Microsoft did
try some of these tactics, but it was after months of the initial launch.
Targeting the Xbox community would also have made communicability a non-issue as
customers are already familiar with Microsoft and the product itself is not complex,
leaving the only real hindrance to success being risk.
I would have priced the Zune below the iPod, even if adding any of the features above.
This is really where the best case for a relative advantage could have been made
regardless of whether the customer was an Xbox user or not. It would also mitigate the
risk for many buyers as the main risk was investing a good chunk of money for a new
product and in many cases switching from a proven product.