On Monday, Microsoft bet big on a brand extension strategy. Real big- $1 billion big.
That money is what Microsoft will spend to advertise the launch the Windows Phone 7 and the Kinect hardware extension for Xbox 360.
Despite such impressive resources, I will confidently wager that their massive investment won't pay off. The reason is that Microsoft has a branding problem; one that even $1 billion in advertising cannot fix.
The problem is its poor marketing strategy. Both the Windows Phone 7 and the Kinect hardware extension are undifferentiated late arrivals to their respective established categories; therefore consumers will always perceive them as less than the leading brand.
In the smartphone category, BlackBerry and iPhone dominate with 68% market share. The other 32% is shared by the "me too" brands of Google, Nokia, Motorola, and htc. Soon, their share will be cut again when joined by Microsoft.
Furthermore, Microsoft is held back by two terrible names.
Introducing the Windows Phone 7. How come I cannot remember the first six? And why keep extending a brand that has been dogged by negative perception?
The Windows Phone: it's all the headaches of a personal computer on your phone! It's ugly too.
The Kinect for Xbox 360 is no better. I always ask, if a product is so wonderful, shouldn't it have its own name? Why does it share a name with Xbox, especially when people don't associate Xbox with motion gaming?
Microsoft should know better; they've made this mistake before. They wandered into gaming with Xbox, copied the iPod with its Zune and Bing is not scaring anyone at Google.
It's a crazy strategy. As Einstein said, "the definition of insanity is doing the same thing over and over again and expecting different results."