Microsoft has finally turned rumor into fact by launching its branded tablet, the Microsoft Surface. The software giant is taking several calculated risks as personal computing is changing, with Apple leading the shift by defining mobile devices with the iPhone and tablets with the iPad.
Microsoft Surface promises to be a marketing study for the ages. Here are factors to consider:
SWOT Analysis: In analyzing its strengths, weaknesses, opportunities and threats, Microsoft sees a major threat in the rise of Apple’s style of touchscreen hardware, increasingly popular with consumers and devoid of the Windows operating system and Microsoft applications such as the Office suite. Microsoft has determined that it can no longer sit idly as consumers learn to live without its products that have been the foundation of the PC era. The threat becomes an opportunity as Microsoft knows that iPad owners have limited ability to use Office and other Microsoft applications on their tablets. Microsoft’s strengths rest with its productivity software. Its weaknesses comprise a limited track record in hardware (think the Zune, the iPod wannabe, and its original Tablet PC, which predated the iPad and faded into oblivion.)
Positioning: Per the SWOT analysis above, Microsoft is known as a software company. Its reputation for quality is uneven at best, with the problem-filled launch of Windows Vista still fresh in many consumers’ minds. The Xbox family is its most successful hardware line, which like Windows has had quality issues on its way to becoming the top-selling gaming platform. Microsoft must now reposition itself as a producer of innovative, user-friendly hardware, a position firmly held by Apple. However, the fathers of positioning, Jack Trout and Al Ries, say that one company can’t occupy another company’s position. Therefore, Microsoft must create points of difference with Apple. These will rest with its legacy applications, now becoming fully functional on tablets via the Microsoft Surface.
Channel Strategy: This is perhaps Microsoft’s greatest challenge as it rocks its historic business relationships by becoming a producer and seller of branded computing hardware. The computer manufacturers who were planning on making their own Windows-based tablets now must compete against Microsoft itself. Retailers who were looking forward to selling Windows-based tablets must now vie against direct sales from Microsoft conducted online and through the Microsoft Store, a bricks-and-mortar chain.
Returning again to the SWOT analysis, one of Microsoft’s greatest strengths has been its channel partnerships, the global alliance of companies including manufacturers like Hewlett-Packard and retailers like Best Buy with mutual interest in the success of Microsoft products. Microsoft is now threatening the alliance by reducing their ultimate sales of any Windows-based tablet. While it’s true that manufacturers routinely engage in dual distribution–using direct and indirect channels simultaneously to market their products–such strategies are only successful if there is enough differentiation between the channels regarding products sold and market segments served. Microsoft’s tablet strategy creates vertical conflict in its traditional channels.
Relationship Marketing: Apple has mastered this supreme form of marketing where the consumer feels a bond of trust and satisfaction with a company. A visit to the tech Disneyland that is any Apple Store will confirm the relationship Apple offers its customers. There is no matching “cult of Microsoft.” For years, Microsoft has been treated like a utility, a necessary and non-elective part of one’s lifestyle (I’m old enough to remember when there was only one phone company). Some may call relationship marketing the secret sauce of the iPad and all other Apple products. Microsoft will have to whip up a comparable recipe from scratch along with its new tablet.
Let the marketing study begin.
POSTSCRIPT: Read my assessment of the Surface’s failure one year later in “Microsoft and the Product Life Cycle.”