SONY EYETOY: CASE ANALYSIS

MKTG 6525
SONY EYETOY
Jianxiong Guo
Ashley Hegland
Matthew Joffre
Preetham Pillarisetty
September 28, 2005
SONY EYETOY: CASE ANALYSIS
MKTG 6525
SONY EYETOY Background
Sony Computer Entertainment Inc.
Playstation 2
Video Game Industry: Hardware Vs. Software
EyeToy History To-Date
SONY EYETOY: CASE ANALYSIS
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SONY EYETOY Problem Statement
Central Problem
Symptoms
Inadequate initial marketing strategy for the Sony EyeToy
Lack of brand synergy between the Sony Eye Toy and the Sony PlayStation
Groove sales cause concern that product may be a fad and that Sony will not
be able to sustain the initial success of the technology
Uncertain adoption by the complementary network of 3rd party game
developers
What is the optimal marketing strategy that Sony
Computer Entertainment Europe (SCEE) should pursue to
enhance the competitiveness of the Sony PlayStation and
grow the Sony brand?
SONY EYETOY: CASE ANALYSIS
MKTG 6525
SONY EYETOY Situational Analysis
Internal Analysis
External Analysis
Product Price Promotion Place
Strengths
Weaknesses
Social Technological Economic Political
Opportunities
Threats
First to market
Expertise in technical
development
Can be sold profitably at
a price consistent with
other gaming offerings
Experience marketing to
hard-core gamers
Sony & PlayStations brand
& $$
Internal funding
methodology designed for
software
Reliant on success of
PlayStation console
Margin constraints on
bundling camera with
software
Weak groove sales hurt
future efforts with retailers
Product needs to be seen /
tried / buzzed
Target customer not
well defined
No experience
positioning to broader
market
Potential to leverage
resources and know-how
from other Sony divisions
Camera technologies are
rapidly improving
May appeal to broader market
than other offerings
Royalties from 3rd party
developers
Technology will likely be
imitated by competitors if
successful
3rd party developers not
100% sold on
development
SONY EYETOY: CASE ANALYSIS
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SONY EYETOY Situational Analysis Cont.
Internal Analysis
Internal Capabilities & Resources Valuable Rare
Costly To
Imitate
Organized
To Exploit
Competitive
Consequences
Performance
Implications
Innovation Y Y Y Y Competitive Advantage
Above Average
Returns
Integrated Market Power Y N Y N Competitive Parity Average Returns
Product Quality Y N N Y Competitive Parity Average Returns
Brand Awareness Y N Y Y Competitive Parity Average Returns
A Competitive But Profitable Market:
Power of buyers - High
Power of suppliers - Low
Barriers to entry - High
Threat of Substitutes High
Rivalry Among Competitors - High
SONY EYETOY: CASE ANALYSIS
MKTG 6525
SONY EYETOY Strategic Orientation Modes
Product Ecosystem Perspective
1. User Network gamers

2. Complementary Network 3
rd
party

3. Producer Network - Sony
SONY EYETOY: CASE ANALYSIS
MKTG 6525
SONY EYETOY Alternative 1
Cost-leadership mass market penetration strategy, using pipeline products.

Strengths Weaknesses
Protect EyeToy technology in a
most effectively way
Extend product life cycle
Extend technology platform


Heavy costs of product-line-
developments
Risks, lack of experience of
marketing to the mass market
Substitute new technology
emerging
Jeopardize Sony brand

SONY EYETOY: CASE ANALYSIS
MKTG 6525
SONY EYETOY Alternative 2
Abandon all Sony Pipeline offerings except EyeToy Play 2 and focus on mass
market with third party software.
Strengths Weaknesses
Greater mass market appeal in the
short-run
Could create more solid
complementary network
Over time may lead to less
competent game designing team
and game market sensitivity.
Could decrease synergy
between between EyeToy and
PlayStation in the mid to long
term.


SONY EYETOY: CASE ANALYSIS
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SONY EYETOY Alternative 3
Initially focus on integrated high-profile game leadership & alliance strategies in
the hard core gamer segment and use selected publishers, such as Electronic
Arts, to market to both the mass market and hard core gamers.
Strengths Weaknesses
Targets most sophisticated players
and biggest spenders first.
Pricing and bundling issues can be
resolved in partnership with 3
rd
party
developers.
Leverages core competence in R&D
Does not have the potential that
alternative 1 does to enhance the life
cycle of the technology
Less mass market penetration
potential than alternative 2
SONY EYETOY: CASE ANALYSIS
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SONY EYETOY Alternative Analysis
Criteria Weight
Alternative A Alternative B Alternative C
Rating (1-3) Score Rating (1-3) Score Rating (1-3) Score
Profit 1 1 1 2 2 3 3
Brand Equity (Eye Toy +
Playstation)
2 2 4 1 2 3 6
Synergy within Sony 1 2 2 1 1 3 3
Market Penetration 1 1 1 3 3 2 2
Cost Minimization 1 1 1 3 3 2 2
Risk Minimization 2 1 2 3 6 2 4
TOTALS 11 17 20
SONY EYETOY: CASE ANALYSIS
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SONY EYETOY Recommendation
Alternative 3:
Focus on integrated high-profile game leadership & alliance
strategies in the hard-core gamer segment and use selected
publishers, such as Electronic Arts, to market to both the
mass market and hard core gamers
SONY EYETOY: CASE ANALYSIS
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SONY EYETOY Implementation
Re-design marketing strategy to initially target the hard core gamer market (mass
market to broad and costly to target now)
Larger than average budget must be allotted to initial campaign (manage the internal
funding issue)
When hard core-focused games are in the pipeline, invest the majority of allocated
marketing budget toward marketing communications in gaming magazines, high-profile
sports events, gaming conferences, internet marketing, and television commercials
Year1: Essentially a massive one-time effort to create the critical mass required to tip
the demand for the EyeToy.
Year 2+: Spending on communications and promotions can be reduced significantly:
Natural word-of-mouth among customers initiates (buzz) and;
3
rd
party games developers advertising and joint advertising.