Just over a year ago I was with a group of 5 other business students and we spent an entire semester creating a marketing audit for Nintendo. This included extensive research and analysis about the entertainment and video games industries and brands and where Nintendo fit into it all. It is fun to go back now and compare our recommendations with what Nintendo has actually executed. I'll share our executive summary here to give you the gist of it:
Nintendo is a leader in innovative, family-friendly video game entertainment. Nintendo’s strategy of offering more affordable hardware with a wide target audience has worked in the past (with the Wii), but is now losing effectiveness in the face of increasingly more attractive competition and substitutes. Competition is winning mainstream gamers with their higher quality consoles that offer more features and support more games. Meanwhile, rising substitutes including mobile and set-top box gaming are now capturing more of the casual gaming crowd with their lower costs. The biggest driver keeping Nintendo’s current console, the Wii U, afloat is its strong first-party games and brands.
A largely untapped opportunity for Nintendo and its competition is the growing mobile gaming market which has international appeal, especially in emerging markets. Furthermore, Nintendo has the brand power to expand beyond gaming and into other entertainment industries. This would also subdue the rising threats against Nintendo’s Amiibo, namely its limited market size of Wii U and 3DS owners compared to other toys-to-life competition spread across all consoles. In this rapidly evolving entertainment environment, Nintendo must expand and refocus its brands to ensure growth and success.
Our research and analysis indicates that Nintendo can still win over both the casual and mainstream gaming crowds, but not with a single product. We have also found that Nintendo’s strengths can be better utilized in the entertainment industry as a whole. Our key recommendations for Nintendo are therefore summarized as the following:
-Replace the Wii U with a premium, innovative console that primarily targets mainstream gamers with unique features and a wide library of games: A focus on unique features will differentiate Nintendo hardware from competitive hardware while a focus on quality will distance Nintendo’s console from console substitutes.
-Enter the app gaming market with software entertainment for casual gamers (e.g. mobile, tablet, and set-top box gaming). Diversifying Nintendo’s software offerings will allow it to capture a wider segment of the gaming market without confusing customers as to its new hardware strategy. This will also seize the growing opportunity of mobile gaming popularity in emerging international markets.
-Expand Nintendo brands into the movie, television show, theme park attraction, and other licensing industries: Capitalizing on Nintendo’s brand character strength will further differentiate Nintendo’s products through increased brand recognition and interactions. Nintendo characters will hereby become household names that cannot be replicated by competition or substitutes in the video game industry.
Our vision is to make Nintendo the leader in gaming and family entertainment with industry leading hardware, diversely specialized software, and engaging brand interactions. This is an integrated strategy which will reposition Nintendo (expanding it from a “video game” company to an “entertainment” company) where games, movies, tv shows, amusement parks, and more will mutually support each other to establish Nintendo as a leader in entertainment.
To achieve this vision and align with said recommendations, our objectives are as follows:
Replace the Wii U with a Console for Mainstream Gamers.
To ensure current customer satisfaction, Nintendo will gradually reduce Wii U software production as the hardware is quickly replaced with the ‘Ultra NES’ system. This new system will aim to capture new console buyers with superior technology and heavy third-party game support. It will also win over current console owners with a differentiation focus on compelling, exclusive first-party games and a new ‘NintenDome’ subscription service. This service will be the ‘Netflix’ of video games, offering hundreds of first and third-party games for unlimited streaming and downloads for paying subscribers.
Introduce App Software.
Nintendo will retain and expand its casual gaming fan base by introducing software on casual gaming platforms (e.g. smartphones, tablets, set-top boxes). Many Nintendo brands were built to succeed in app gaming before apps even existed. These brands already have casual gaming appeal due to their social, educational, or simplistic natures. They will therefore be refreshed and tweaked to be introduced on app devices. App software will generate revenue on its own while encouraging consumers to purchase Nintendo hardware. Direct revenue will come from a combination of affordable, up-front prices; freemium pricing (with non-free benefits that are communicated clearly within the games); and monthly subscriptions to NintenDome. Hardware sales will be strengthened by app software being a part of Nintendo’s larger ecosystem of hardware and software intercommunication and features. This will raise the exit barriers for gamers in the market. Furthermore, brands and characters established in both casual and mainstream software (e.g. Mario, Zelda, Donkey Kong) will help to convert casual app gamers into Nintendo console gamers.
Expand Nintendo’s Brands across the Entertainment Industry.
Nintendo will aim to become a powerhouse among family entertainment, especially in the areas of animated movies and television, sci-fi/fantasy live action movies and television, and family theme park attractions. Nintendo will consequently seek partnership and collaboration with leading firms in entertainment industries including Dreamworks Animations, Netflix, Nickelodeon, Universal Pictures, Universal Theme Parks, and more to utilize its brand power and recognition. Further licensing of Nintendo brands will flow as a natural result of brand expansion and popularity growth. Thus, brand interactions will become an ongoing relationship of fun not limited to a single entertainment category. People will fall in love with Nintendo characters through their main route of entertainment; this brand loyalty will in turn encourage them to buy other games and products involving those characters. Licensing will therefore make money off the characters while increasing the revenue of Nintendo games and products.
We believe that the entertainment market is poised to adopt a diversification and expansion of Nintendo brands and products. Nintendo can both outcompete its quality competitors through differentiated hardware and disrupt its cost and convenience substitutes with targeted software. Ultimately, Nintendo will use its strongest asset, its brands and characters, to reconquer the whole gaming market and successfully spread into the larger realm of family entertainment.
Our marketing audit recommendations: 1. Replace Wii U with console called "Ultra NES" that targets mainstream gamers but has unique features from other consoles. 2. Expand into mobile apps/games to reach the casual audience and generate interest in console products. 3. Create subscription service called "Nintendome" to be the 'Netflix' of video games (hundreds of games available to stream/download) 4. Expand brands into movies, tv shows, theme parks, etc.