Another Tale of "Differentiate or Die"

News that Microsoft may discontinue its Zune music player may be denied by the company, but it seems to be only a matter of time before it will happen. Launched in 2006 as a competitor to Apple’s iPod, Zune has done little to derail the iPod’s dominance. Microsoft faced an uphill battle given that iPod was established as the dominant music player in the market, but it is too easy to chalk the failure of Zune to being a late market entrant.

Portable music player is not the first category that Microsoft entered late; the company was far behind Nintendo and Sony entering the video game console category. It would seem that Microsoft faced a more daunting challenge taking on two entrenched brands, both with loyal customers. And, there were times when it looked like the Xbox could ultimately face a fate similar to the one Zune is staring at today.

However, Xbox has solidified itself as a force in video games. According to data from NPD Group for the period March 2010 to February 2011, Microsoft’s Xbox 360 had 38.3% share of the 18 million video game consoles sold. Microsoft’s share was just behind Nintendo Wii (38.6%) and Sony PlayStation 3 (23.1%). Microsoft’s market share jumped 12 percentage points in the past year, taking most of its gain from Nintendo (down 11.6 percentage points).

What is the difference between Zune and Xbox 360? Borrowing my favorite marketing book title, it is another case of “differentiate or die.” Zune has never successfully differentiated itself as being unique or superior to iPod. Granted, Microsoft faced an uphill battle given iPod’s icon status as a lifestyle brand. But, Apple successfully used marketing to get to that point. In contrast, marketing for Zune did not resonate with consumers.

Microsoft faced a similar uphill battle competing against Wii and PS3 yet has proven to be a formidable competitor in the video game category. The difference- Xbox has been able to differentiate itself from Wii and PS3. Its Kinect sensor, inspired by the motion-activated gaming experience of the Wii, has been popular with existing Xbox players and attracted new users. And, Xbox Live enhances the gaming experience by letting players connect with friends and fellow gaming enthusiasts online.

Being late to market is not a liability, it is an excuse. Failure to deliver a differentiated experience compared to the status quo is the real issue that dooms most failed products. “Differentiate or die” is not just a clever book title; it is a mantra by which marketers should live when it comes to developing product strategy.

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