Microsoft: A Worthy Competitor Or A Killer Of Startups?

Without a doubt, Microsoft, a US-based technology company, is a leading international software company that develops, manufactures, licenses, and supports a wide range of products and services. Founded by Bill Gates and Paul Allen in 1975, Microsoft has been committed to providing the best technology worldwide. They are always looking for ways to improve their products and make them more user-friendly. After a series of Microsoft acquisitions, such as Activision Blizzard Inc, a big game-holding firm, Mojang, Hotmail, and GitHub, Microsoft has recently forayed into DIY designing. In a recent report byTech Crunch, the American technology company is prepared to leverage the power of Artificial Intelligence for easy designing. Is this another competition for a SaaS startup such as Canva? Let's see.

Microsoft Bundling: A Killer Business Strategy?

Over the years, Microsoft has been known to bundle services in a suite of products at a lesser price. For example, "Office" software is a suite of other software such as Excel, Access, and PowerPoint.

This business strategy is known as "bundling." Bundling is the practice of combining multiple products or services into one offering. It is a strategy that can help you increase sales, reduce costs, and improve customer satisfaction. The idea behind bundling is that the customer will be more likely to buy something if they can get multiple things at a discount, even if they don't need or want them. Notably, Microsoft has been into this for decades.

For instance, according to a New York Times report in 1998, when Microsoft bundled its Internet Explorer with its Operating System Windows, the market share of Netscape Navigator decreased by 8.9% to 52.2%, while the market share of Internet Explorer increased by 9.6% to 45.6 percent. Notably, Netscape Navigator was one of the first web browsers for personal computers. It was released in December 1994 by Netscape Communications Corporation and became known as the best-known browser until Internet Explorer's release in 1995.

Bundling, for years, has been known to be a good business strategy. Besides simplifying the customer experience and decreasing marketing costs, bundling has also been known to be an agent of growth for average order value. For instance, a tech giant like Amazon uses an algorithm that bundles complementary items together in one listing. For example, when you want to buy a luxury shaving brush and a shave cream or oil, they get bundled in a shaving kit. See the picture below:

Source: Amazon.com

This strategy works best when the buyer is attracted to all of the products offered in the bundle but doesn't want to buy each individually. Large companies like Microsoft understand that the key to making bundling work is knowing their audience and understanding what types of bundles will appeal to them.

Is Microsoft A Threat To PLG Startups?

Over the years, Microsoft has been creating products that give others a run for their money, especially PLG startups. Product Led Growth (PLG) has been a popular topic in the marketing world recently. In fact, the reason is not far-fetched. The idea of focusing on your product or service to grow your business is rooted in the PLG philosophy.

PLG has been the focal point of mission for most SaaS products. Equally important, the products' mission is to drive business growth through solution-based offers. This is why PLG products prioritize user experience because the failure or the success of a PLG product lies in the real value the end user gets. These products include Zoom, Dropbox, Calendly, Evernote, Figma, Loom, Slack, Shopify, Okta, Cloudfare, Webflow, Twilio, and others.

Notably, because PLG SaaS products promote an experience of democracy, instant, and value, they have been the real deal in today's adoption of products. In fact, their market capitalization has, over the years, increased astronomically.  Below is a bar chart showing the growth of PLG companies over the years.

Source: bvp.com

Irrespective of the growth of PLG SaaS companies, Microsoft, a tech giant, has been giving some of them a challenge. For instance, Slack has been an indispensable member of the PLG class. Slack, an app that lets you communicate with your team in an efficient and organized way, was the fastest startup to grow from $1M to $100m over three years before Wiz broke the record in 18 months. Despite this unprecedented growth by Slack, Microsoft launched Teams, an app that does things similar to Slack, in 2017 to rival Slack.

Teams' number of daily active users(DAUs) increased from 145 million users in 2021 to 270 million in 2022, according to Statista. On the other hand, Slack, the pioneer in offering the services it now shares with Teams, boasts over 10 million daily active users. In fact, according to Statista, Slack is projected to have 75 million monthly active users by 2025—a figure far from what Microsoft's Teams presently records.

Further, Microsoft launched Microsoft Clarity, an analytics app that helps publishers analyze data and gain insights into users' interactions on their websites. Microsoft Clarity was launched in 2020, while Hotjar, another user behavior analytics app, started in 2014. With the momentum Microsoft Clarity is getting, it's become a challenge for Hotjar, which had been in business before the advent of its competitor.

A tweet showing tweeps comparing Hotjar and Microsoft Clarity.

Now, it appears to be Canva's time to share the brunt of the competition. For years, Canva, a drag-and-drop design tool that allows users to easily create great-looking designs without needing design skills, has been the deal for DIY designing. However, it appears Microsoft is ready to give it a challenge as it launches Designer, a design app that "represents an alternative to Canva," according to a CNBC report. Canva was valued at $40 billion as of September 2021, according to TechCrunch, and it presently boasts 100 million monthly active users.

However, while the new Designer app by Microsoft appears to be a competition for Canva, Canva has, on the other hand, been a competitor for Microsoft Office. From introducing Canva Docs to edit documents to offering free presentation slides to compete with PowerPoint, it's been an atmosphere of competition between the two. Without a doubt, a bundling of Designer to the Office suite could lead to a potential decrease in Canva subscriptions. With integration with DALL-E, an AI software that turns texts into pictures, Designer is looking to leverage Artificial Intelligence in the competitive market it's set to join.

Growth Marketing Strategies To Learn From Microsoft Bundling

There are growth marketing strategies you can learn from Microsoft bundling as a business strategy. Here are some of them:

1. Cross-Channel Marketing

Cross-channel marketing is a growth marketing strategy where you sell your product or service in multiple channels. Cross-channel marketing can be incredibly effective because it makes it easier for customers to get several things they need in one purchase rather than making them go through the trouble of buying each thing separately.

With Microsoft bundling, growth marketing enthusiasts can leverage the power of cross-channel marketing to increase marketing campaigns and profitability.

2. Disruptive Marketing

Disruptive marketing is a growth marketing strategy that takes a different approach to the old methods by initiating new ones. It's not about having a huge advertising budget or spending a lot of money on ads; it's about thinking creatively and creating something original that stands out from the competition.

Bundling can be used in disruptive marketing by offering something new and different—something people didn't even know they wanted or needed. Indeed, bundling is an essential component of disruptive marketing because it allows you to offer your product at a lower cost while still making money.

3. Conversion Rate Optimization

Conversion rate optimization is a growth marketing strategy that ensures that people who arrive at your website can convert into customers. When it comes to conversion rate optimization, there's a lot you can do. If you're looking to improve your conversion rate, one of the best ways is through bundling. Bundling helps with this both by giving users more information about what you're offering and by allowing them to make a decision quickly, which makes it easier for them to move on if they don't find what they're looking for.

Conclusion

Ultimately, it's important to note that competition is a natural phenomenon in markets, and Microsoft, a tech giant always hungry for more success. Microsoft is indeed a worthy competitor from which strategies to thrive in business can be learned. Competition is a crucial component of quality markets. Without a doubt, when there's no competition, it becomes a limitation.