Court Rye

    Market Research

    Nintendo DS – Marketing Strategy

Problem/Situation Description: Ten years ago Nintendo dominated both the console and handheld gaming industry. Today the gaming industry

    has grown so much that it is competing directly with the movie industry! Growth in this industry is occurring in the demographic of 18-34 year olds. Nintendo is primarily focused on 5-17 year old gamers with its first party software, especially in the handheld gaming market. As the industry expands Nintendo is struggling to retain market share percentages as their primary market of young male gamers is already saturated. Marketing Objectives: Increase Nintendo’s market share and boost sales without losing touch with the current market of 5-17 year old males. Target Audience: The suggested target audience for Nintendo to expand towards is 5-17 year old females.

    Budget: The three tools suggested for reaching the target consumer most effectively are TV commercials, movie theater pre-show trailers, and the actual casing and packaging of the product. A high quality 30 second commercial is estimated to cost $100,000 to $350,000 dollars. Movie trailer slides are estimated to start at $1500+ for a four week period. Casing and packaging redesign costs are unknown but estimated to be relatively small when spread over the number of units being produced. Total costs for the Nintendogs Pink DS promotion would be nearly $30 Million dollars over the span of four months.

    Strategy: By combining packaging and targeted advertisements in Television and pre-movie ads Nintendo will be able to attract young females age 5-17. This demographic has not traditionally participated in video gaming outside of cell phone games and digital “pets” however the interactive DS platform combined with female targeted software such as Nintendogs offers a winning strategy to tap into this market. It is important not to alienate the young male demographic that is Nintendo’s primary market. Ads will be strategically placed and limited in their feminine content for certain listings.

    Results: The Nintendogs title is currently under development by Nintendo and is only offered in Japan (it was not yet released at the time of this report). Nintendo also does not currently offer special edition colored DS units. Our research is ongoing and because of the nature of this being an academic piece it may be hard to test the results of the strategy without the release of Nintendogs in the US and a promotional effort by Nintendo to target females.

    Nintendo DS – Marketing Strategy Integrated Marketing Communications Plan

    4/15/2005

    Court Rye, Ross Nudelman, Kimberly Fillnow, Ashley Andrus, Ryan Schick

    Advertising and Promotions MKTG 4550

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Executive Summary

    Nintendo’s DS (Dual Screen) gaming system is the newest in a line of portable handheld gaming systems offered by Nintendo. Since 1989, when it launched the first Game Boy, Nintendo has dominated the handheld gaming market and focused on a demographic of five to 17 year old males. Over the past 15 years Game Boy has been challenged by Neo Geo (Neo Geo Pocket), Sega (Game Gear and Nomad), and more recently Nokia (N-Gage). None of these offerings have been successful at stealing market share from Nintendo who has continued to improve its offerings with newer more powerful systems to challenge competitors as well as

    1thbackwards compatibility for its’ previously released titles. On March 24 2005 Sony introduced the PSP (PlayStation Portable)

    gaming device aimed at the growing demographic of 18 to 34 year old gamers. The PSP is still relatively new as of this report but

    2already there has been a shift in handheld gaming as over 500,000 PSP units were sold within the first two days of the US launch.

    Sony has been incredibly successful working with third party software designers in gaining support for its previous gaming

    3platforms (the PlayStation 2) which has put pressure on Nintendo and decreased their market share for the Game Cube system. When

    Sony entered the console gaming market with its PlayStation 2 in the United States on October 26, 2000 the pressure was so intense

    3between Nintendo, Sega and Sony that Sega was forced to exit the market. Just as Sony was able to enter the console gaming market

     1Nintendo. (n.d.) Nintendo History Retrieved February 14, 2005 from http://www.nintendo.com/corp/history.jsp 2.Yahoo Ne.s (April, 2005.) Sony Sold 500,000 PSPs in Two Days in N. America. Retrieved April 9, 2005 from

    http://news.yahoo.com/news?tmpl=story&u=/nm/20050407/tc_nm/tech_sony_psp_dc 3Williams Martyn. “Let the Handheld Games Begin: Nintendo, Sony ready rival portable gaming devices. Which one will gamers go for?” November 2004. PC

    World. Retrieved February 14, 2005 from http://pcworld.com/news/article/0,aid,118604,00.asp

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in the early 2000’s and rise to the top, dominating Nintendo and forcing Sega out, the PSP is currently threatening Nintendo in the

    3handheld gaming market. So this prompts our research question, how will Nintendo be able to continue to increase their market share in such a competitive market place?

    Faced with huge competition from the PSP in the 18 to 34 year old demographic, primary and secondary data indicates that Nintendo should reinforce itself as the primary offering for young adults age 5 to 17. Nintendo will continue to expand into the

    entertainment industry outside of gaming to increase its intellectual property with the PoKeMoN franchise and strong ties to Nickelodeon and Disney. This gives Nintendo leverage and a competitive advantage in younger demographic. New products such as

    GameBoy ADVANCE video have expanded the feature set of the original GameBoy and Nintendo needs to communicate this competitive advantage to its consumers.

    Since Nintendo has not traditionally contracted with third party software developers as strongly as Sony, Nintendo has a distinct opportunity to market itself as the original…first and only in the market. Furthermore, Nintendo has avoided violence in its’

    games (the majority of which are rated E for Everyone) which has pleased parents and maintained its image as being a kid-friendly

    brand. With Nintendo’s kid friendly background, the company has a unique opportunity to penetrate a growing market of female

    4gamers age 5 to 17 with offerings such as PoKeMoN and the soon to be released Nintendogs. Communicating these advantages and

    positioning itself as a kid friendly brand using “scuba” communications will increase market share for Nintendo and allow the

    company to dominate in an increasingly competitive market.

     4Children Now. (Winter 2000.) Girls and Gaming: Gender and Video Game Marketing. . Retrieved March 13, 2005 from

    http://www.childrennow.org/media/medianow/mnwinter2001.html

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Table of Contents

    Executive Summary ............................................................................................................................................................................. 3 Situation Analysis ................................................................................................................................................................................ 6 Industry ............................................................................................................................................................................................ 6 Company .......................................................................................................................................................................................... 8

    The death of GameBoy… not so fast ............................................................................................................................................ 9

    Competitors .................................................................................................................................................................................... 10 Customer ........................................................................................................................................................................................ 11 Trends ............................................................................................................................................................................................ 11 Perceptions ..................................................................................................................................................................................... 12 Behavior/Decision Making ............................................................................................................................................................. 13 Primary Research ............................................................................................................................................................................... 15 Reasons/Goals ................................................................................................................................................................................ 15 Method ........................................................................................................................................................................................... 16 Findings ......................................................................................................................................................................................... 16 Segmentation, Targeting & Positioning .............................................................................................................................................. 17 Strategy based on primary and secondary research and analysis ......................................................................................................... 19 Recommended Tools ...................................................................................................................................................................... 19

    Television Advertisements ......................................................................................................................................................... 20

    Movie Theater Pre-show Advertising ......................................................................................................................................... 21

    Packaging/Product Casing .......................................................................................................................................................... 22 Planning and Schedulin .................................................................................................................................................................. 23 Measurement Plan .......................................................................................................................................................................... 23 Budget............................................................................................................................................................................................ 24 Summary............................................................................................................................................................................................ 25 Works Cited ....................................................................................................................................................................................... 27

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Situation Analysis

    Industry The video game market comprises an intricate assortment of participants from a wide range of businesses, including major computer software publishing firms, video game hardware and software companies, publishing houses, motion picture companies, television production companies and education content providers. Underlying this complex network of contrasting industry cultures is

    a substructure of small and medium-sized software developers, product design houses, distributors and retailers. These participants

    are constantly attempting to combine their talents and strong points, to mix and match their offerings and achieve an optimum blend of

    profit-making activities. The end result is that the video game market is highly dynamic and strongly subject to corporate changes and

    technology development collaborations. Naturally occurring cycles are enhanced and magnified as the interactive entertainment industry rapidly evolves producing and releasing new and improved gaming devices.

    The video game phenomenon of the early 1980’s began with a huge increase in demand and has continued with steady

    increases in the following years. Consumers have grown away from “passive” entertainment products characteristic of television

    broadcast and CD audio entertainment. The ability to interact with a device capable of responding to real-time inputs from the user is

    a technology that consumers now demand. The gaming industry today supports a worldwide market of almost $24.5 billion and a US

    5market of nearly $13 billion.

    There is a direct correlation between the rise in demand over the last couple of years and the introduction of next-generation video game hardware. Video game console manufacturers, through technological upgrading, have progressively moved from 8-bit to

     5Rocsearch. ( 2005). Video Game Industry. Retrieved March 15, 2005 from http://www.rocsearch.com/pdf/Video%20Game%20Industry.pdf

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16-bit to 32-bit to 64-bit platforms, resulting in continued improvement in performance and game quality. For the user, higher

    performance translates to better video imaging, faster interactive responses and smarter artificial intelligence. For the manufacturer,

    the increase translates to growing markets and economies of scale.

    Traditionally, videogame users have been required to “tether” themselves to a television set in order to play, however in recent

    years lifestyles have changed and daily gaming activities have come to include the ability to play games “on the go.” The dream of

    widespread affordable portable gaming became a reality when Nintendo invented the GameBoy in 1989. Prior to the launch of the

    6 of the total video cartridge shelf PSP, Nintendo dominated in handheld gaming, taking considerable shelf space (approximately 25%

    space) allotted to hand-held game cartridges in big box retailers like Toys "R" Us. This statistic has shown decline upon release of the

    PSP.

    In many cases hand held video gaming has remained a male dominated adolescent stereotyped activity. These groups continue to comprise a dominant segment of the large and lucrative market, however, the introduction of the Sony PSP has considerably broadened the market from being solely focused on youth. It has brought in the “twenty-somethings” and “forty-somethings” of both

    genders. This broader range of consumers reflects traditional targeting by Sony games including the PS2; 18 to 34 year olds. Sony is

     6 Lexisnexis. (March 2005.) Video Game Market Share. http://www.lexisnexis.com/

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    currently leading in market share of US gaming consoles with 56.4% share followed by Microsoft with 24.9% share and then

    7Nintendo in third with 18.7%.

    US Gaming Consoles Market Share

    24.9

    Microsoft

    Nintendo

    56.4Sony

    18.7

    Company Nintendo of America, Inc., a wholly owned subsidiary of Nintendo Co. of Japan (J.NTD, NYSE), is based in Redmond,

    8Washington, the headquarters of Nintendo Co.'s western hemisphere operations. Once the undisputed global leader of the video

    game category, Nintendo now competes with Sony for the number-one spot in the industry. Nintendo manufactures and markets hardware and software for its home video game systems, including the hand-held Nintendo DS, which controlled roughly 90% of the

     7 Edwards, Cliff, et al. "Game Wars." BusinessWeek 28 Feb. 2005: 59-66. 8 Hoover’s Online. (February 2005). Nintendo.- Fact Sheet-. Retrieved on February 20, 2005 from

    http://premium.hoovers.com/subscribe/co/factsheet.xhtml?ID=41877

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    9, the 16-bit Super Nintendo Entertainment System (SNES), and the performance-driven GameCube, U.S. hand-held market in 2003

    the fastest-selling video game system in history. The GameCube’s superior 3-D graphics and well-known games (50% of Nintendo's profits derive from software) have enabled it to remain in the thick of the video game competition. Worldwide sales for Nintendo in

    8fiscal year 2004 were $4,869.4 million, a 15.8% increase over the previous year.

The death of GameBoy… not so fast

    To extend the product life-span of Game Boy, launched in 1989, Nintendo gave its hand-held blockbuster a slimming-down makeover

    as Game Boy Pocket in 1996, which doubled unit sales in the United States to over 2 million. By that point, Game Boy had pushed

    hand-held competitors from Atari, NEC, and Sega out of the running, despite their color monitors and more advanced technology. As

    summarized by Jim Willcox, senior editor of consumer electronics trade journal TWICE, "Nintendo stuck to its guns ... they released

    killer applications like Tetris, kept the price point low and demonstrated that the technology was really subservient to the games or

    10applications." Nintendo marked the 10 anniversary of it hand-held blockbuster with 60 million sold worldwide, and a library of 450

    games. Through such efforts, Nintendo doubled Game Boy sales in the United States.

     9About.com (2005). Handheld Wars: Sony PSP vs. Nintendo DS. Retrieved February 23, 2005 from http://nintendo.about.com/od/editorials/a/pspvsds.htm 10 Puget Sound Business Journal, June 15, 1998.

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    According to the official Nintendo website the “Nintendo DS, dual screens and touch-screen technology allow you to interact with games like never before. Wireless communication allows you to experience real-time multiplayer gameplay, while built-in PictoChat

    software gives you the power to draw, write and send messages wirelessly. Nintendo DS revolutionizes the way games are played.

    With impressive 3D rendered graphics, Nintendo DS delivers cutting-edge portable games for fans of any genre. Plus, you can play all

    11” your favorite Game Boy Advance games in a single-player mode.

    Competitors Nintendo’s primary gaming competitors are Sony and Microsoft however, neither of these two companies target five to 17 year old gamers as consistently and effectively as Nintendo. Nintendo remains unchallenged in the segment of younger gamers

    and low price handhelds. Sony Computer Entertainment America (SCEA), based in Foster City, California, is a division of Sony Corp.

    of America, Inc., which markets and distributes PlayStation in North America, develops and publishes software for the PlayStation,

    and manages third-party licensing. Sony Corp. of America is a wholly owned subsidiary of Sony Corp. of Japan (NYSE), the giant global electronics firm, which has in part organized its video gaming operations as an affiliated entity, Sony Computer Entertainment

     12(SCE). For fiscal 2002, Sony Corp.'s sales revenue reached $50.7 billion, an 11% increase over 1997. The global PlayStation business accounted for $5.5 billion, or approximately 10% of Sony's total, and $886 million in operating income, almost 23% of

    12Sony's total.

     11 System Nintendo DS. (n.d.) Nintendo Retrieved April 24, 2005 from http://www.nintendo.com/overviewds 12 Hoover’s Online. (February 2005). Sony Electronics, Inc.- Fact Sheet. Retrieved on February 28, 2005 from

    http://premium.hoovers.com/subscribe/co/factsheet.xhtml?ID=112902

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