Inside Microsoft's Marketing Machine

Some would argue that Microsoft has always been about marketing. Even if the products weren’t always the best, the company worked its way to 90 plus percent market share by dint of its marketing muscle (and money).

But over the last few years, rivals like Apple, Google and the open source movement have cut into the giant’s dominance. In just one example, the open source Firefox browser has been chipping away at the market share once held by Microsoft’s Internet Explorer, largely because of low- or no-cost online viral marketing. Technology analyst Rob Enderle has been quoted as saying that Microsoft is being out-marketed by people with no marketing budget. ‘Nuff said.

Beginning about a year ago, Microsoft acknowledged it was out of touch and embarked on an extensive reorganization of its marketing functions. The changes are so extensive Microsoft expects they’ll take 10 years to complete. That plan — and how online marketing fits into it — is what David Hamilton, the director of a group called Marketing@Microsoft, stopped by to chat with me about this week.

“We really feel that we need to get more connected with the customers and build better products for the future,” David told me.

Easier said than done.

The Not-so Secret Weapon: Microsoft.com

Microsoft has at its disposal an asset that would be the envy of any company doing marketing online (or off-). Microsoft.com, its main corporate presence, boasts 126 million unique monthly visitors, according to comScore MediaMetrix. That’s more than most ad-supported media sites. (Microsoft’s own count puts the audience at 217 million uniques, David tells me.)

David acknowledged the company hasn’t been using that traffic to its fullest potential, but says part of the re-focusing will involve re-structuring Microsoft.com to better take advantage of the asset. Already the 115-member Web site team has been integrated with the groups that do relationship marketing and events.

“This is one of the first fruits” of the changes within marketing, David said.

Next steps will involve segmenting the users to Microsoft.com and figuring out ways to better get them to their goals. The company also intends to more extensively use individual landing pages for advertising campaigns, so that the Web presence is more tied in with media plans both on- and offline.

“We’re just in the process of making Microsoft.com more of a relationship marketing engine,” he said. “Really at the moment, it’s still in its early stages of that.”

The Listening Process

Another part of Microsoft’s restructuring focuses on “listening” to customers. Six to nine months before engineers begin coding on a new version of a product, the company now puts marketers and engineers together to discuss the market opportunity. Then Microsoft’s research team — in which the company has recently invested heavily — goes to work examining how people utilize the products. Months and months of listening occur before developers type a single line of code.

Such a process might seem to add to Microsoft’s problems. It’s already criticized for over-thinking and taking too long to release products. By contrast, competitors Google and Apple are praised for developing products consistent with their own unique vision. A recent Time magazine article described Apple’s introduction of its super-small Nano music player as a gutsy move. “…It came from the gut: unlike almost any other high-tech company, Apple refuses to run its decisions by focus groups,” wrote author Lev Grossman.

But David insists Microsoft’s new approach is the right one. “To believe that internally you understand what someone wants and needs and that you know better is not the right approach,” he said.

The new research approach helped Microsoft conceive of a way to combat the “good enough” syndrome for its latest version of Office. The problem? People running old versions of Office (myself included) don’t feel the need to upgrade. At first the company’s marketers thought it should simply trumpet new features loudly. Then it conceived of badmouthing older versions of Office, to make the newer version seem more attractive. Finally, after much talking with users, it hit upon the idea embodied by the “Evolve” campaign, which featured people with dinosaur heads working in a cubicle environment.

The campaign focused on specific problems people had with the product — accidentally replying to “all” in Microsoft Outlook, for example — and sought to demonstrate how the new version resolved the problem. While advertising aimed to connect with users familiar with these pain points, the Web site sought to educate them about the benefits of new features. “Are you working in a bygone era?” the Microsoft microsite asks. The Web site lets users navigate through an office environment filled with dinosaur-headed people. As they proceed, they can click on items to learn about different problem-solving features.

More Sophisticated Segmentation

Another of Microsoft’s challenges has been appealing to a wide variety of target audiences — often a multiplicity of audiences for an individual product. Web marketing is helping it better reach niche targets, David said.

One example involves the Xbox gaming platform. When it was introduced, it immediately found a place among hardcore gamers. Going forward, the company wanted to expand Xbox’ appeal, but it didn’t want to risk alienating its core audience. So it took two very different simultaneous approaches.

To promote Halo 2, the eagerly awaited second version of the popular Xbox game, the company hired agency 4orty2wo Entertainment to build a now-legendary alternate reality game (define) called ilovebees. Besides engaging players in a sort of communal online detective story, the ilovebees campaign reached out to consumers through unconventional means like calls to pay phones. Hardcore gamers embraced the campaign and its “insider” chic.

Shortly thereafter, the company undertook the wider-awareness portion of the campaign via more mainstream media. It struck a deal with MTV to televise a primetime special dedicated to the unveiling of the Xbox 360. “Lord of the Rings” star Elijah Wood hosted the event.

“There was a fair amount of momentum up to it and the actual MTV event itself,” said David. “I do know it got a lot of coverage in the mainstream 18 to 35 demographic.”

Future Marketing

It appears Microsoft’s still all about marketing, and perhaps this new approach — consumer connection in particular — will help influence the products themselves. After all, if David’s telling the truth, Microsoft seems to be listening.

“The first thing we’ve tried to understand is what is the perception of our company and the products within different segments, so that we can connect more appropriately,” he said. “After that, it’s just a case of getting as close as we can to our customers and telling our story.”