Nintendo Case Analysis
Nintendo-The Launch of Game Boy Color Peter MacDougall, president of Nintendo Canada, was highly anticipating the launch of the Nintendo Game Boy color version across North America and Europe on November 23, 1998. This launch was one of the most significant in Nintendo’s history; sales had declined from 1992-1996, but had finally started to recover in 1997. The responsibility of the Canadian release was paced on MacDougall, and although he planned on utilizing some elements of the U. S. launch he realized that that Canada’s launch strategy must be positioned in a different way.
The Canadian market varied in comparison to the U. S. market, and would require a unique, targeted, and specific marketing strategy. Nintendo led the market in the globally lucrative video game retail industry. Nintendo 64 was released in 1996, and quickly became one of the most sought after products in the market. Sales continued to rise throughout 1997, yet in 1998 Nintendo faced a problem as some third-party game developers shifted their focus towards the Song Playstation.
As Nintendo console sales began to wane, an even greater importance was placed on the market for Game Boys.
Handheld games were becoming a very significant contributor to profits across U. S. and Canada. Comparatively, the handheld market in Canada was not as strong as the U. S.
market. The size of the U. S. led to a more demographically balanced base of users spread apart over the country. This resulted in a larger support group of teens and adults in the U. S.
Another factor that played into the situation was that Sony had a more aggressive marketing strategy across Canada, directly competing with Nintendo’s sales. However, Sony’s marketing efforts were significantly lighter in the U. S.
The consequence of this was that Nintendo Canada had to allot a larger portion of their budget to focus on the marketing of consoles, rather than Game Boys. The burden placed upon MacDougall was heavy; how to appropriately segment, target, promote, market, and price the new Game Boy Color. With so many factors weighing in on the success of Nintendo’s new product, MacDougall had to find the perfect balance in order to gain the largest market share in the handheld game industry.
The biggest question facing Peter MacDougall is which target market to focus his limited advertising budget towards.
Should he target the parents of kids and tweens, assuming the risk of only selling Game Boy Color units during the holiday season? Should he rather target tweens who most likely already have the current Game Boy and want to upgrade? Or should he advertise to younger kids? This could potentially drive away tweens if they would viewed the product as a toy geared towards little kids. In making the decision, it is very apparent that the United States is doing something that the Canadian Market is not. Simply looking at the money that U. S. spent on marketing, a correlation is drawn between that and the success they achieved.
Sega, in the Canadian segment, spent an abundance of their budget on marketing and advertising in comparison to Nintendo. An increase in advertising dollars will be required for Nintendo Canada to spread the word via different media sources. The strategic goal of the marketing campaign is to get the consumers to see the device as a differentiated product when compared to offerings of the competitors. Money must be spent on obtaining marketing research to find exactly what Canadian consumers are looking for in handheld games, and what they do day-in and day-out.
Games should be geared more towards older generations in order to gain a new kind of consumer, to encourage brand loyalty, and to gain market share. A key attribute for the new Game Boy Color is that it allows the games from the Nintendo 64 to be played on the portable Game Boy.
This makes the game collection more expansive and geared towards various age groups. Marketing this unique feature would be beneficial to Nintendo in an attempt to catch the eye of the consumer. The marketing and technology strategy of the Game Boy color must be linked in order to achieve these goals.
Looking the population of Canada, there is an increase from male to female about 0. 04%-0. 05% in all ages from 0-19 years old.
Past research shows that Game Boys are more popular with the male gender, which could have some correlation in sales. Males and females should both have advertising targeted to them, but with a slight more emphasis on males due to their larger population numbers and past sales records. There is a high population of children in the ages of 10-14, making that a key segment of the population to target through advertising and marketing.
These same advertisements will spill over and capture the attention of the younger crowd as well. Advertisements which targets and older crowd will trickle down and still affect the younger age groups.
Sales in the Canadian market have begun to fall due in great part to the marketing. Marketing plays a significant role in the minds of the consumers, as shown by the decrease in advertising efforts during this period. Game boy needs to be top-of-mind when consumers think about a handheld video game systems.
The games designed mainly for the Game Boy Color need to be geared to all ages, but a main emphasis placed on the older crowd to gain a larger marketing share. The Game Boy conquered the portable gaming system market before the launch the color version of the Game Boy. Regardless of the competitor’s attempts to launch color devices containing high technology, consumer’s appeared to either be brand loyal to Game Boy or they did not want to trade battery life for technology and color.
The ability to lead in market share of the portable game system with outdated technology is an indicator that there is a lot more market share left to gain.
The three main competitors are: Sega’s Game Gear, Sega Nomad, and TurboExpress color handheld. They all had significant defects regarding their short battery life. Also, they had problems with screen displays and technology. The competitors have revealed their strengths and weaknesses to the market, leaving Nintendo a great opportunity to target the right people with the right product.
No one in the market was technologically ready to release a color screen possessing both a clear display and long battery life.
The Game Boy Color has a feature that no other competitor has offered; all previously released games for the Game Boy and Nintendo 64 consoles could be played on the new handheld interchangeably. This is a huge breakthrough advantage for Nintendo which will effectively differentiate them from their competitors. The product life cycle in handheld game systems are on the rise with tough competition. Soon after the launch of the Game Boy, there will be copied technology following close behind.
This only increases the significance of the Game Boy Color launch.
Competitors pose a significant problem in Canada because of the software being developed by Sega. Nintendo must look at where they are weak in comparison to their competitors, and make the appropriate alterations and changes. Nintendo needs to increase the incentives for developers to create games; else they will aid another company with their creativity. They could lose the chance to do business with some developers if they feel that there is more money to be made elsewhere.
Nintendo’s distributors are also not getting a high enough margin to make it worth their while.
Without a proper treatment, the whole supply chain could fall into a fast downward spiral. One characteristic of Nintendo as a company seems to be one of greed in regards to their earnings. Nintendo Canada should pursue a market leadership strategy. They have a better technology when it comes to the personal portable gaming consoles.
Game Boy currently has the best battery life among all its competitors, which is one main reason they possess the majority of the market share at the moment. The same technology will be carried over to the Game Boy Color.
This should allow them to maintain their competitive advantage. The biggest concern is the retail price placed on the product. They must also be a cost leader in the market, as most of the consumers are tweens and younger kids. Either parents will be buying the products for their young children or tweens will be spending their own money.
In order to maintain their capture of a large market share, Nintendo Canada should continue to offer the original Game Boy at a lower price to reach the lower end consumers while offering the new Game Boy Color at a reasonable entry price.
Because of the arrangement made with the large retailers stocking Nintendo, immediate success with the new Game Boy model is key. If the Game Boy Color was is not a success within the first few weeks, it would lose shelf space and would almost certainly doomed to failure. Although household consoles like Playstation and the Nintendo 64 were becoming the next best thing in the gaming market, the handhold portable system was still in demand, just in desperate need of revamping. Nintendo achieved this with the Game Boy Color.
They were able to make a superior product adding a new, modern feature while keeping the original superior battery life that was able to be boasted over their competition. As with any market leadership strategy, the key is to increase the company’s market share. Nintendo can do this by continuing to cultivate their relationships with software developers. As they did with Tetris, which was an exclusive game to Game Boy, Nintendo should continue to negotiate production contracts with companies to produce new games exclusively for Game Boy Color.
EA Sports is a wonderful example.
For a many years, EA Sports games were not available on Sega or Playstation. This is marketing strategy genius, to make a product proprietary. Many consumers will buy a certain gaming platform just to play specific games. Before the release of the new Game Boy Color, Peter MacDougall was faced with quite a few vitally important decisions. He was responsible for making sure that the launch of the new Game Boy was successful in Canada. Some of his most important decisions were based around marketing communications.
For this Game Boy to be successful, he had to make sure the maximum amount of people were reached by his marketing strategy. In turn, he had to decide where to spend the marketing funds and how much. Another important decision was how much to charge for the new Game Boy Color. MacDougall planned to spend approximately Cdn$4. 5 million on marketing communications in the first year. This included Cdn$3 million on corporate advertising, which focuses mainly on building a firm’s corporate image and creates product awareness.
This also includes Cdn$400,000 on in-store sales materials where the Game Boy will be sold. Finally Cdn$1. 1 million of the budget would go towards sales promotions such as contest and cross promotions with manufacturers of other products purchased by Game Boy’s target market. These numbers are significantly lower than the United States expenditures on Game Boy. This is partly because of the size of the U. S.
market and also because Canada had access to the same ads that the United States had created.
Most of these numbers seem to be reasonable, but the one improvement suggestion to help Canada’s marketing strategy would be to increase the corporate advertising funds. In turn Canada could create more of their own advertisements that are directed towards their own specific target segments. This would generate higher sales and more brand awareness among Canadians. Another major issue MacDougall encountered was how much to charge for the Game Boy Color. He could either price the Game Boy at the same price as the United States, which would convert to Cdn$120, or he could price the Game Boy around Cdn$99.
The main concern with pricing the Game Boy at $120 was that the price might be too high to drive high volume sales in the Canadian market. But, charging $120 would produce a retail margin of twenty percent which is enticing retailers. If Canada chooses to charge $99 then more people could afford to buy the Game Boy, specifically the kids/tween segment. The negative outcome of charging such a low price is that if people from the United States found out then they would try to get their Game Boy from Canada or there would be an increase of Game Boys sold on the American black market.
After review, the best price for MacDougall to charge is Cdn$120 because retailers would struggle to make a profit charging the lower price and possibly stop carrying the Game Boy altogether.
Also by charging the higher price the American market would not lose sales to Canada. Target Markets are those that have been deemed to be the most lucrative, or have the potential to be lucrative, from the development of strategies to reach them and earn market share. MacDougall knew that choosing the correct target market was crucial to the success of the Game Boy Color.
While the United States seemed to target all users from kids to adults, MacDougall seemed to think that narrowing his target market might be more beneficial in the long run. He wondered if he should focus on teens that were more likely to already own a black and white version of the Game Boy or target new kids/tweens non-users. He worried that if they targeted teens that had already owned the original Game Boy that the teens might look at the new version as old technology.
On the other hand, if the teens liked the new Game Boy Color the younger crowd would also embrace the new version simply as an imitation of the the older crowd.
Alternatively, if MacDougall decided to target the kids/tween non-users and they see the Game Boy Color as “cool” then the Game Boy could become a “gotta have” for the kid/tween age group. That could also have negative effects though. If the kids embrace the Game Boy Color that could turn away the teens that have already owned a Game Boy in the past and make them look at the new version as a kid toy. In the beginning stages of the Game Boy launch, Canada should aggressively target both target markets with individual promotional campaigns for each.
Attempting to narrow the target market to either just kids/tween or just teens will be the best idea. Choosing only one would decrease the opportunity for high volume sales because that would decrease the number of people that would even think about purchasing a Game Boy Color. Hopefully, aggressively advertising to both groups with individual strategies will get both target markets moving in the right direction, which is to the point of purchase. Then as time goes on if the Game Boy is successful in these two target markets then Canada could start advertising to the adult group.
