Case Study #28: Microsoft Begins to Rebuild Its Brand Credibility through Windows 7 and Vertical Retail Integration

A good friend suggests that I write my next Stratelysis case study about Microsoft opening up its first retail store. I tell him that I will think about it, but joke that my “Apple-loyal” friends may not be too happy with this post. After much thought and deliberation, I want to give props to Microsoft for beginning to rebuild its brand credibility through the Windows 7 launch and vertical retail integration.

Unsuccessful products can negatively impact a company’s brand credibility and sometimes, reputation. It takes years for a company to regain confidence from existing and future stakeholders to overturn negative perceptions of the brand. Microsoft launches Vista in January 2007. Chief Executive Officer of Microsoft, Steven Ballmer, says: “It is the biggest launch in software history, and the broadest release ever”. Market researcher IDC says that Microsoft expects to sell 200 million copies of Vista to consumers and businesses worldwide in its first two years (Swartz, Jon. “Microsoft gets Vista launch off the ground”, USA Today. January 30, 2007). This is a very aggressive goal, but supported by a multi-million dollar marketing and sales strategy. As of early 2008, Microsoft sells 100 million retail copies, and this does not include 40 million plus retail licenses via various volume-licensing deals (Foley, Mary Jo. “Microsoft: 100 million copies of Vista sold at retail”, ZDNet, January 6, 2008). While there is some accuracy behind this push-driven sales forecast, we know that Vista isn’t received well by consumers or businesses. These problems range from security to digital rights management to memory protection.

Microsoft realizes it will be operationally challenging to overturn the negative perceptions of Vista through software optimization, servicing or recalls. Vista negatively impacts Microsoft’s brand credibility and its reputation.

During this time period, Microsoft considers a follow-up to Vista, and recently launches Windows 7. According to Microsoft, Windows 7 truly incorporates customer feedback: "Our customers co-create the product with us," said David Webster, general manager for brand and marketing strategy at Microsoft in Redmond, Wash. "We're using the customers' voice to tell our story." (Cringley, Robert X. “Will Microsoft 7 Change Our Minds About Microsoft”, USA Today. October 24, 2009). Microsoft 7 has user-friendly features such as “Snap” where window screens can appear side-by-side by simply dragging them to edges of the screen. The product development principles are represented through Microsoft’s “I’m A PC and Windows 7 was my idea” campaign. The personification of Windows 7 via its engaged customers can help combat Apple’s stodgy, unaccountable personification of PC in its marketing touchpoints. The marketing budget behind the Windows 7 is a fraction of the one behind Vista. The company is integrating good inbound marketing tactics to organically promote Windows 7. It is also possible to convert Vista into Microsoft 7. Overall, the company is taking a full-line approach to changing its brand perception.

Microsoft opens its first retail store in Scottsdale, Arizona and plans to open its second store on October 29th in Mission Viejo, California. Most companies sell products through some mix of direct-to-consumer and retail channels. Several industry verticals seem to be gaining more sales through direct-to-consumer channels as customers demand more transparency about products and services from companies. Ultimately, these channels should be integrated to create a consistent image of the brand. Product accountability via features and benefits is one of the several components of brand strategy. A customer must have mostly positive interactions with the product and other touchpoints of the brand through the entire product lifecycle so the brand can financially benefit from those interactions. A vertically integrated retail channel, like the Microsoft Store, indicates that Microsoft will be directly accountable for making sure the customer has a positive interaction through additional points of brand contact that may not be achieved through its non-vertically integrated channel. As the company continues to reinforce the “I’m A PC and Windows 7 was my idea” campaign, Microsoft Stores must be aligned with that message through store vistior interface, from the salesperson behind the checkout counter to technicians behind the service counter.

It has been less than week since Windows 7 and the first Microsoft Store launch into the marketplace. And it will take a few years to determine whether these product and retail strategies will rebuild Microsoft’s brand credibility. Overall, the Microsoft case study can serve as a benchmark on how to organically grow through customer-driven innovation, brand accountability and simply learning from prior mistakes.