The wounded Zune

Zune Pricing is an obscure piece of the marketer’s tool kit, the least considered of the 4 Ps (others being product, promotion, and place). Some people are good at it and those who are really good at it practice a fine art. 

For the rest of us, pricing is mostly a matter of calculating costs, estimating what the market will bear, looking at the competition, and reaching for a dart board.

But Microsoft has come up with a new approach.  The consumer who wishes to purchase tunes for a Zune must buy points.  A Zune point is worth $1.25 cents and a track costs 98.75 cents.  To buy a single song, the consumer must surrender $5.00.  If this consumer never buys another song, this is what the single song will cost them, $5.00.

We can guess that Microsoft thinks it’s doing: incenting the consumer to buy more tunes.  Kingsley-Hughes believes this pricing scheme will allow also Microsoft to increase prices much more easily than iTunes can. 

But could we consult Marketing 101 for a moment?  The first question of every marketing exercise is this: what problem are you trying to solve?

The problem for Zune is clear.  Microsoft is trying to break into a market that is occupied by an incumbent who precedes Microsoft by several years, enjoys deep brand loyalty, still has better technology, offers a more attractive product, and gives the consumer entry into a magic circle called "cool."  This is what we call an "advantage."

And the advantage is daunting.  Chances are Zune will not make it.  So the problem is adoption.  It is not repeat use.  I am quite certain most MBA students would see this.  Yes, I can hear someone calling out from the skydeck now. 

"Professor McCracken, tune purchase is not the issue.  The issue is getting the consumer to buy a Zune in the first place."

The Zune pricing scheme will not merely muddy the waters.  It will create confusion and coercion.  Let’s consult the Marketing 101 textbook for a moment.  Yes, it’s right here.  Confusion and coercion, bad.  Clarity and engagement, good. 

What is it about this corporation?  They get into the hardware business.  They decide to go toe to toe with a great competitor.  They produce (ok, buy) a piece of hardware that just might have a shot. (Hey, I’m giving them the  benefit of the doubt).  And then they allow someone on the marketing team to screw things up. 

Is there something self destructive about Microsoft.  Have they reached deep and come up with a will to lose, a wish for failure?  Are they now the Bobby Knight of marketing? 


Kingsley-Hughes, Adrian.  Crazy Zune Marketplace pricing scheme. Hardware 2.0. November 13, 2006.  here.

12 thoughts on “The wounded Zune

  1. Tom Guarriello

    As you say, Grant, pricing isn’t the main problem. But it reflects the kind of we’re-more-clever-by-half mindset that Microsoft’s ossified leadership has now elevated to an art form. Emboldened by the success of the xBox360 they put together a monstrosity of a combination of DRM and stupidity (think that’s hyperbole? what else would you call making it impossible for customers who adopted EITHER Play For Sure or Media Player to play their music on the Zune?) that is supposed to be saved by a wifi feature that allows owners (these are kids we’re talkin’ about!) to beam their buddies tunes THAT EXPIRE AFTER THREE DAYS OR THREE PLAYS, WHICHEVER COMES FIRST! And then this points business? Somebody on the TWiT podcast figured out that you’d have to buy $495 worth of points to assure that the odd pricing scheme wouldn’t result in your account having a balance of excess, unusable, points.

    Time for these Ballmer-led guys to go.

  2. steve

    The biggest problem with the pricing scheme I can see is the confusion factor. I’m frankly confused by Grant’s explanation. It sounds like a classic two-part tariff like a phone bill or joining Costco,but I’m really not sure from reading this.

  3. Luke Razzell

    Grant, It’s rather annoying that you write so consistently well I always find myself clicking out of the convenient comfort my feedreader to read your posts. Please start writing less well so I don’t have to bother. ; )

  4. jens

    looks like an allround “daddy cares for you” approach. this nanny-corporation strategy is the opposite of cool – but it is possibly very much embedded in the microsoft culture.
    also very nerdy to construct whole worlds where you pay with funny money. definitely patronizing it is.

    one great thing about the ipod is that it is actually quite rough and edgy. on first sight the ipod is by far not as user friendly as it gets credit for, but it is easy to learn and then you use a pretty comfortable environment consisting of pretty limited elements and functions. once you know it it has become a simple and basic tool – it has become a part of you.

    i quess the microsoft approach is quite different. as they can’t beat apple by steve job’s rules they are going an entirely different way. more tec-features – more nerdy – more of an xbox thing – more lord of the rings – more of a boy toy. – dancing for dummies – music for nerds.

    they have got no chance but they are taking it. respect.
    any way: zune vs ipod is going to be a hell of an interesting case.

    hope the ipod will not lose its neat profile in the fight for market niches that apple should leave to others.

  5. Brian Phipps

    I had the same reaction as you when I first looked at the Zune download pricing scheme. It’s illogical and retrograde from a customer perspective. But then I realized that Microsoft doesn’t really operate in customer perspective. They make their real money where customers have least voice. Ergo, Zune is not a consumer device. It’s a control device, especially with its heavy-handed DRM. It seems to me that Zune download pricing is really designed to appease the major music labels, and to position Microsoft as their favored partner for all things downloadable. The hokey “points” stuff makes it easier to raise prices for hit tunes, something labels can’t do when they’ve agreed to a flat $.99 price on iTunes. Plus, Microsoft’s deal with Universal to toss that label compensation for each Zune sold puts pressure on Apple, which can now be pictured as giving the labels “less.” Microsoft, it would seem, is trying to cut off Apple’s “air supply” with labels–and working to close the market that Apple originally opened. That’s the only logic I can see emanating from the Zunescape.

  6. Madison Guy

    It’s not just the pricing, Microsoft’s marketing problems with their wannabe iPod-killer begin with the name — just one small part of the problem, but a significant part, sowing confusion. The words iPod and iTunes are variations of real words that point to real things. But what’s a Zune? What does it point to? Nothing. Plus, it rhymes with all kinds of things Microsoft probably doesn’t want to rhyme with, including Apple’s dominant and highly successful music marketplace. Not smart. Downright Zuny (sorry). And that’s without mentioning shared songs that evaporate after 3 days, the inability to use the device as a portable hard drive, and — yes — the confusing and just plain screwy MS “points” ordering system.

  7. Auto

    Grant’s post comes on the heel of two people in the last two days betting me that Microsoft’s lame marketing will take the device down. Zune just sounds ugly. And that point system — yipes.

    You’d think that Microsoft, having seen Apple hit the ball out of the park, would figure how to copy/improve on iPod/iTunes, not come out with a me-too product that simply reinforces market perception that what Apple sells is the gold standard for such devices.

    You have to wonder — did some committee inside Microsoft, comprised of the firm’s competing interests and constituencies, make Zune’s important decisions? With the predictable result that no one is satisfied.

  8. Sydney

    I don’t know what their marketing department was thinking – were they thinking? Or is this a Ballmer/Gates directive? First of all, “Zune” makes me think of “Dune”, not music. What kind of a name is that? Second, as much as most of us hate points/miles/anything that makes us add things and try to figure out the restrictions on our “rewards” or whatever, why in the world do they think that people will like this pricing scheme?

    How do you hit a marketing home run? Keep it simple – make it fun and hip. Microsoft fails consistently at both of these things!

  9. jens

    btw. nanny corporation – apple enters the christmas period with their (product) RED iPod. philanthropy for the masses.
    love it.
    i know what i will give this year.

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