Deals, ads, stores, and buzz: Has Microsoft retail grown up?

There’s just no getting around it, this has been one heck of a holiday season for Microsoft.  12 days of deals, Xbox One blowouts, $20 brand new smartphones, doorbusters, and potshots at Apple, Microsoft has been pulling out all the stops.  So far, this “One Microsoft” approach to retailing seems to be working.

Back in the old, pre-Satya days, Microsoft’s retail decision-making made you scratch your head more than grab your wallet. Probably the most recent and glaring example was the pricing and launch of the original Surface tablets.  If you remember, when the Surface launched, Apple was killing it with the iPad, and cheap Android tablets were just starting to appear.  To everyone’s surprise, and to Steven Sinofsky’s credit (if nothing else he was obsessed with keeping secrets) Microsoft announced the Surface, but attached to it was a price only bean counters could love.  From day one, tech pundits and Microsoft watchers deemed the Surface as interesting but overpriced, and sure enough, a year later, Microsoft took a $900 million write-down on poor sales.  How many Surface devices could Microsoft sold with more competitive pricing?  Who knows, but one thing’s for sure, even at a loss, they wouldn’t have lost $900 million.

Then the Xbox One came out, and again, the bean counters had prevailed.  Bundled tightly with the Kinect, the Xbox One was $100 more than its arch rival the Sony PS4, and while the Xbox One didn’t tank like the original Surface, Sony pulled ahead in early sales.

But somewhere in between Sinofsky’s ouster, Ballmer’s “retirement”, and the choosing and rise of Satya Nadella as Microsoft’s new-age leader, something happened. Microsoft went back to the drawing board with the Surface Pro 3, but more than that, it upped its marketing game, by a lot.

Azure has been pushing hard with competitive pricing for a while, and it’s starting to show. So has Office 365.  OneDrive, while it still has work to do, is making inroads. Microsoft’s push into iOS and Android app markets are striving to increase not only market share for the apps, but market awareness of Microsoft as a player.

This holiday season, Microsoft went against its old bean counting dna and dropped the price of Xbox One, making it not only competitive, but an outright bargain.  We’ve since learned that this bargain basement pricing will only last through the holidays, and Xbox One’s price goes back up (to $399) next week.  The wisdom of that is already being debated, but there’s no denying that the price drop pushed Xbox sales and Microsoft’s stature in gamers’ eyes, and the multitude of Xbox game deals helped, too.

Microsoft’s new retail savvy goes beyond Xbox deals, too.  Microsoft Stores, the physical ones, are popping up everywhere, and are proving to be a great showcase for the company’s 1st party and 3rd party hardware offerings.  And while the poor sales of the first generation Surface models may have provoked some gun-shy thinking about making big bets on hardware, early indications are that the Microsoft Band could be a big seller as well.  So far, the Band has been sold out more than it’s been available, and that may be because of low production numbers.  Still, when shipments do hit the stores, they sell out quickly.

None of this retail expertise has seemed to do much for Windows Phone, but the combination of a transition from Nokia to Microsoft, expectations of a new OS and new marketing opportunities that will come with Windows 10, and perhaps a reluctance to go head to head with the iPhone 6 have put a damper on new Windows Phone models.

2015 will be a different story, and it’s going to take every bit of retail trickery that Microsoft can muster to get Windows Phone sales out of the doldrums.  Competitive pricing; bundled marketing with Windows 10, Surface, and services; a down year for new iPhone releases and the continued struggles of Samsung; and some really great new phones will all be necessary to get Windows Phone rolling.

Microsoft has always tended to tread lightly with hardware marketing, as it walks the fine line between pushing its own products and not stepping on partners’ toes.  It crossed that line with the initial Surface launch, not telling OEMs about the new line until VERY late in the game, but Microsoft has come a long way since then.

This new year, we’ll see if Microsoft really has become better at retailing.  Windows 10 will be a huge launch, of course, but so too will be new Windows Phones, a new Surface line (or so we hope), and the continued refinement of Microsoft Band, not to mention Skype and OneDrive and Office 365 and a renewed emphasis on Bing Maps and the MSN apps.  And oh, by the way, the first new Microsoft browser brand in 14 years. 

Has Microsoft turned a corner on successful retailing of its hardware and services brands?  This holiday season showed glimpses of a new Microsoft.  In 2015, we just may see a markedly different (and hopefully marked-down) Microsoft.