Marketing Analysis for Nintendo Wii
Today the global company is led by Satoru Iwata, the fourth and current president, while the Nintendo of America president is Reggie Fils-Aime. Nintendo is one of the largest companies in Japan and was instrumental in re-creating the video game market. The name Nintendo can be roughly translated from Japanese to English as “leave luck to heaven”. As of October 18, 2010, Nintendo has sold over 565 million hardware units and 3. 4 billion software units.
Nintendo’s near monopoly on the home video game market left it with a degree of influence over the industry exceeding even that of Atari during Atari’s heyday in the early 1980s and today it seems that Nintendo sells less but makes more money. It has been profitable practically every year since it moved into the video game industry over two decades ago and has long held a dominant position in hand-held gaming, developed through a strategy of focusing on playability. The company has recently gone on record to admit that demand is simply much higher than supply for their current Wii and Wii Fit while the DS is up 142% over last year.
The company’s own employees have even been put on a strict Wii system purchase limit. The company says it wants to be the games company that puts smiles on the faces of people of all ages and genders, and following the sales of Wii and Wii Fit, there are likely to be grins all around at the HQ. Nintendo’s official website saw the largest increase in traffic recently, while the Sony PlayStation website saw a moderate decrease. The company’s products are actually cheaper than that of the competition and are one of the oldest and most successful console game developers.
If you want a console to play games or to use for exercise you won’t go wrong with Nintendo. Nintendo is taking a radical approach by attempting to change the very way that people play games. Instead of cramming as much graphic capability as possible into its system, Nintendo has focused its effort on creating an innovative controller that makes game play simple. A user can control a game by waving the wireless controller instead of moving a joystick or furiously mashing buttons. The Wii is a home video game console released by Nintendo on November 19, 2006.
As a seventh-generation console, the Wii primarily competes with Microsoft’s Xbox 360 and Sony’s PlayStation 3. Nintendo states that its console targets a broader demographic than that of the two others. As of July 2011, the Wii leads the generation over the PlayStation 3 and Xbox 360 in worldwide sales and in December 2009 broke the record for best-selling console in a single month in the United States. A distinguishing feature of the console is its wireless controller, the Wii Remote, which can be used as a hand-held pointing device and detects movement in three dimensions.
Another distinctive feature of the console is WiiConnect24, which enables it to receive messages and updates over the Internet while in standby mode. Nintendo’s core competencies lie among the company’s important resources including its research and development team, marketing team, manufacturing processes, and the company’s management, headed by Satoru Iwata. These resources create valuable capabilities, such as Iwata’s ability to predict the future of video gaming. The company’s Research and Development gives it a capability in innovative technology and game concepts, while marketing has allowed the company to create an effective brand.
Efficient manufacturing processes allow Nintendo to reach economies of scale and produce the Wii console at a cost lower than the production of competitor game systems. A product life cycle illustrates the phases that a product goes through during its existence. The Wii since its introduction in 2006 shows a continual upwards sloping showing no sign of decline. This shows that Nintendo has redefined what was traditionally thought to be the video game console life cycle. The Nintendo Wii, based on increasing but less significant sales, is in the Growth phase and possible early Maturity phase of the product cycle. The Market
The target market for video gaming at the time Nintendo Wii was introduced was primarily males eighteen to thirty five. The Marketing Theory explains that you have to identify uncovered needs in a market, segment or divide this market according to a criterion, decide which segments you want to go for and define a marketing plan and proposition coherent with it. It seems to be really easy, but real life shows that it is not! All industries are full of “me too” products instead of innovative approaches. Nintendo has been extremely smart in their approach as it has discovered and attacked a new and unexplored segment in the video-console market.
They have found users that want to have fun and do not look for best of the best graphic resolution (Playstation and X-Box target group), but for ease of use and simplicity. By doing this, they have been able to expand the video-game market, attracting new users that would not have purchase a console. They have attracted a very profitable segment, one with a higher purchasing power than teenagers and what is more important, less likely to get pirate games. They are the only player in that “ease of use” segment. So Nintendo has no need to have aggressive discounts and to share the market with your competitors.
The whole target market goal of the Nintendo Wii is mass market appeal. It appeals to people of all ages including non-gamers. While they offer games for a wide selection of people, they still develop games for specific markets. Nintendo Wii established their market by following a disruptive strategy. The strategy is when companies can carve out attractive positions by growing a market (rather than just trying to grab a piece of the existing market) by making it simpler, easier, or more affordable for more people to consume. The disruptive literature calls this “competing against non-consumption. This approach is powerful because it allows an entrant to stake out a position in a market while minimizing the chances of a devastating competitive response. After all, if the entrant reaches customers the market leader was not serving, the market leader feels no pain. The is using an undifferentiated market strategy, focusing on family friendly entertainment, redefined the definition of gaming, and emphasize the simplicity of use and having the goal of new gamers joining and old gamers using their system. Wii is even becoming a huge hit in nursing homes with the aging population and soccer moms.
The decision making process information search is aided by the Nintendo Company. Aiding the consumer in making informed decisions about what they purchase is always important. Nintendo’s Buyer’s Guide is designed to assist the consumer with making these decisions by providing information on such things as game ratings, researching game content, and determining which accessories the consumer might need for your systems and games. The consumer must then evaluate the alternative which is best accomplished by internet search.
There is a plethora of information on line comparing and contrasting the Nintendo Wii with its competitors. The next step in the consumer buying decision is the purchase. Nintendo has on their website alternatives for purchasing their equipment. Consumers wanting to purchase new systems, games and accessories may choose from a number of places where they can purchase Wii systems. Many retail stores that sell home electronics also sell video game systems, games, and accessories. These can include large national chains and smaller local retailers.
There are online retailers that carry Nintendo’s newest products. Many of these companies also offer phone and mail orders if the consumer does not wish to purchase the products online. There is also the Nintendo’s Online Store for accessories and replacement parts. Lastly, Nintendo’s quality service does not stop once the purchase has been made. Whether the consumer needs assistance with system setup or repair, want to know how to get help beating a game, or just need information about their purchase in general, Nintendo’s consumer service pages can provide many answers.
Nintendo does perform market research. Upon obtaining authorization from the consumer, Nintendo may use personal information for internal demographic studies, so that they can improve their websites and products to better meet their visitors’ needs. Nintendo may also share the information with other entities of the Nintendo group, in particular its branches in Italy, Germany and the United Kingdom and its European affiliates Nintendo France SARL, Nintendo Espana, S. A. and Nintendo Benelux B. V. to inform the consumer about their Nintendo or third party products and for internal marketing studies.
Their product packaging including the instruction manual and inserts use vegetable based inks. Recyclable cardboard packaging has replaced PVC/PET clam shells for all accessories. Nintendo has reduced the amount of plastic used to manufacture Wii game cases by more than 25%. Economic Forces The economy seems to be improving overall, a recent USA Today article states that sales of game consoles such as the Wii “have declined from $21. 4 billion in 2008 to $18. 7 billion in 2010,” despite an increase in the number of people who play video games. Further information from BBC News shows that Nintendo’s net profits decreased by 74% in 2010.
Sociocultural Forces Nintendo Wii is geared toward a family-friendly ideology, which could limit the types of games Nintendo produces, and may threaten the company’s competitive advantage. Furthermore, the company’s focus on non-gamers could threaten future game console designs because the focus demographic demands simple, easy-to-use equipment. Technological Forces Nintendo’s biggest opportunities lie in the global and technology segments of the general environment. Nintendo’s global presence gives the company the opportunity to continue developing products for many different markets.
Furthermore, technology is particularly vital to Nintendo’s success and presents the most opportunities for the firm. Because the company offers a technological product, and technology is always improving, Nintendo continually has opportunities to integrate new technology into its products. Environmental Factors Internal Environment Satoru Iwata – Fourth and current global president. Reggie Fils-Aime – Third and current president of Nintendo Board of Directors Nintendo Software Technology Video Game Designers Hardware Manufacturers Music Composers Translators Voice Actors External Factors
Customers Competitors Media Suppliers Distributors SWOT Strengths Emphasis on corporate culture Strength in finance and partnerships Innovative technologies Unique and innovative products Brand reputation and recognition Appeals to all ages Nintendo brand loyalty Less expensive that other console Ease of use Weaknesses Expand demographics Increase video game technology Improve third party games Short Supply for an in-demand product No HD Opportunities Greater presence in online community More quality in third party support Social networking and mobile devices Expand games beyond family-friendly
Threats Threats of substitutes (PC and online) Changing industry environment Loss of appeal X-Box Kinect Social networking and mobile devices Nintendo’s financial forecasts until March 2010 had investors and analysts questioning if the company cannot keep its streak from ending. The Japanese market, which tends to serve as a leading indicator for global markets, saw Wii sales drop by 47% when comparing Nintendo’s fiscal year of 2008-2009, to the previous year. While analysts predicted that game console sales in general will fall in 2009, Hall argued “Nintendo’s big advantages are isappearing” amid price reductions of the Xbox 360 and rumors of Sony unveiling a motion-sensing wireless controller. Distribution Nintendo has distribution centers around the world. The regional distributors deal in only the units appropriate to their area. The American distribution centers are located in Redmond, Washington and Atlanta, Georgia. Retailers get their inventory directly from Nintendo. Nintendo may sell some of their products online however their products are also sold at Wal-Mart and other mass merchandisers. Businesses are gaining approximately $10 per unit sold. The retailers make their money from the games and accessories.
Pricing The pricing strategy, when the Wii was first introduced in 2006, was no price flexibility because the Wii was already offered at a rock bottom price and was priced much lower than competitors. It was thought that the price of the Nintendo Wii will not fluctuate much since it was released to the public at such a low price. On September 23, 2009, Nintendo announced its first price drops for the console. In the United States, the price was reduced by $50 resulting in a new MSRP of $199. 99, effective September 27, 2009. Nintendo sold more than three million Wii consoles in the U. S. n December 2009, setting a regional record for the month and ending 9 months of declining sales, as a result of the price cut and software releases such as New Super Mario Bros. Wii. As of the end of that month, the Wii is the bestselling home video game console produced by Nintendo with sales of over 67 million units, surpassing that of the original Nintendo Entertainment System. As of March 31, 2011 according to Nintendo, the Wii has sold 70. 93 million units worldwide selling 20. 53 million units within 2009-2010 fiscal year. In April, 2011, Nintendo announced they had sold 86. 01 million Wii consoles, up to that date.
Promotion The promotional mix used by Nintendo Wii is demonstrated through mass selling and universal entertainment. Nintendo uses middlemen to get product out in the market by distributing the console to mass merchandisers, specialty electronic stores and gaming stores such as GameStop, Best Buy, and Wal-Mart. A combination of push and pull techniques are used in selling, however, the pull technique is the more effective of the two. Pushing is used in advertising through commercials, ads, circulars, magazines, and internet ads. Pulling is when the costumer gets the product at one of the retailers that offer the Nintendo platform.
Nintendo keeps the shipment number low to the retail stores and with such high demand this keeps the customer returning to check on its availability. In the beginning Nintendo had an innovative plan to reach the public. The Nintendo Wii ran a promotion with GameStop in local malls. They called it the “Wii Mall Experience. ” It was an effort to get men and women of all ages out to not only show off their skills on the system, but to show they supported the Nintendo system. Nintendo’s goal is to get more new people interested in playing games.
This is reflected in Nintendo’s series of television advertisements in North America, directed by Academy Award winner Stephen Gaghan, as well as Internet ads. The ad slogans are “Wii would like to play” and “Experience a new way to play. ” These ads ran starting November 15, 2006 and had a total budget of over US$200 million throughout the year. The productions are Nintendo’s first broad-based advertising strategy and include a two-minute video clip showing a varied assortment of people enjoying the Wii system, such as urban apartment-dwellers, country ranchers, grandparents, and parents with their children.
The music in the ads is from the song “Kodo (Inside the Sun Remix)” by the Yoshida Brothers. The marketing campaign has proved to be successful. Pensioners, as old as 103, have been reported to be playing the Wii in the United Kingdom. A report by the British newspaper The People also stated that Queen Elizabeth II of the United Kingdom has played using the console. Branding is involved in Nintendo. Nintendo created the Wii brand and brand equity. The name Wii was simplified so that it could be understood and remembered by people of all languages. The brand image promoted physical participation and family oriented gaming style.
The strategy was distinct and delivered an emotional message that conveyed the product value. The product identity is portrayed in all advertising, symbols, slogans and events. Nintendo also devised customer based brand equity that differentiated itself from its competitors. Nintendo devised marketing that included mom’s being Wii Ambassadors, encouraged Wii parties with 30 or more friends and promoted product through word of mouth to non-traditional gamers. General Observations A marketing concept that needs improvement is the response to demand. In the beginning, Nintendo Wii was a victim of their own success.
Nintendo was not ready for such a rapid growth that took their system to the top of the list. However, it should not have mattered if they could have met the high demand for their product. This marketing mistake is sending their video game buyers to their competitors. On April 26, 2011 at an investors meeting, Nintendo head Satoru Iwata stated “I now regret that we didn’t tie up with someone outside the company to market the Wii. If we had done that, the fate of the Wii might have been different,” Iwata said. Now I am aware that we should not rely too much on ourselves.
You will see what I mean by this when we market the 3DS and the Wii in the future. ” The marketing concept that is very successful is the targeting and promotion. Thinking outside of the box and listening to their customers, Nintendo created an innovative, cost effective and relevant product that exceeded customer expectations. Nintendo used a well-planned holistic marketing campaign which included integration, personalization, and internalization to prove that you do not have to produce a better version of an existing product to be successful in today’s market.
What’s the future for the Wii? Nintendo announced the successor to the Wii, called Wii U, at the Electronic Entertainment Expo 2011. The Wii U will feature a controller with an embedded touch screen, output 1080p high-definition graphics, and be fully backwards compatible with Wii games and peripherals for the Wii. The Wii Remote and Nunchuk controller, and the Wii Balance Board, will be compatible with Wii U games that include support for them.
The wireless, hand-held controller for the new system includes a six-inch-wide touch-sensitive screen right there between your hands. No longer will playing a home console game mean looking at a television all the time. Instead, the controller screen can complement or replace what’s on TV. If, for instance, one person in the household is playing a game on the living room television, and someone else wants to watch television, the gamer can switch play entirely to the controller, while the TV is flipped to the other show.