Supply Chain Management

Most of Nintendo's products are produced by others factories with which the company makes a contract for a limited time. Nintendo's analysts carefully study the gamer population that they have, based on previous research. After doing so, they come up with estimates of future purchasers and design a plan in which they decide the appropriate number of factories with which they will sign a production contract.

In 2006, when Nintendo released the Wii console, the company had a relatively small market share for home consoles. That happened because the Game Cube -Nintendo's previous home console- occupied the second place in sales in Japan after Sony's Play Station 2. In the U.S, Nintendo's Game Cube console placed third after the Play Station 2 and the XBox.

Therefore, Nintendo changed their strategy. They decided to come up with the Blue Oceans business model, which consists in expanding their demographics and target market. The company took a risk by making contracts with several factories to produce Wii consoles. After releasing the product, the company's success was so big, that they found themselves short in inventory all over the world.

Nintendo's success continues now; placing first in sales ever since the Nintendo Wii  home console's released.

Marketing Channels

GameStop is an American corporation with more than six thousand stores across eighteen countries in Europe and the Americas. As the biggest video game retailer in the world, this company is an important intermediary between Nintendo and some of its final consumers.

After merging with EB Games in 2005, GameStop has gained a lot of power in the video game industry. But the relationships between these two companies have been jeopardized because of GameStop's strategy to buy and sell used games. By doing so, GameStop's makes a lot of profit. 48% of its revenue comes from the sales of used games. This strategy negatively affects Nintendo and other video game developers because they are not making any profit out of it.

Therefore, Nintendo has been promoting the internet distribution of some of its video games. The Wii Shop Channel and the DSi Shop are the direct channels by which Nintendo now attempts to reach its consumers and make pure profit.

GameStop is now threatened by Nintendo's new direct distribution channel, along with other video game retailers who do not know what their future will be.

Development of the Nintendo Wii

The first ideas of the console were develop in 2001, the concept mainly involved a innovative way to have a player interaction. By 2003, engineers and designers started to work on that concept. In 2005, on a big and well-known trade show for computers and video-games called the Electronic Entertainment Expo, Nintendo displayed the Wii console but not the controllers. The company mention there that the controllers were going to be a big surprise.
The controllers were not shown that day because even though the company expected them to be a great success, they were not finished yet. It was later on when Nintendo's president revealed the controllers. Nobody new at that time how profitable the product would be. Many people doubt it could be a success, and even more when it was expected to play mainly with just one button.

The ideas that encouraged the developers to design this type of control were the following: First they wanted to make it simple, they wanted anybody to be able to use it. Compared to the many buttons and the complexity of the XBox and PS's controllers, the new control should be the opposite. Secondly, they decided that the controls should look familiar to any member of a family. So they concluded it would look very similar to a remote control. The last of the ideas, that probably made this console the most appealing, was that the Wii developers went back on time to look for patterns on the way people played video games. After a while, they all agreed that the controls should be motion sensitive, because when people play video games they literally jump when is the character who needs to jump. Instead of pressing a button, the Wii control would recognize such intuitive reactions, becoming part of the game.

Nintendo's New-Product Development Process

Nintendo has different teams that constantly work to come up with ideas, analyze them, test them and develop them. During this process, the company conducts research and works on different prototypes to find the ideal product. One of the main characteristics that distinguish Nintendo from its competitors is that they have focused on expanding demographics. Also focusing in their corporative ideology to develop products that are fun, affordable and simple, Nintendo constantly achieves to be one of the most creative and successful companies of the world. 

These characteristics have offered Nintendo a great number of possibilities to create new products.

Nintendo has been working on diminishing the idea that video games are only for young males. Successfully targeting other markets, the company constantly increases the number of options they have to satisfy people’s needs.

Recent example of these characteristics are the "Brain Age, and Nintendogs" for the DS console, and "Wii Fit, an Wii Sports Resort" for the Wii console.

Sales Promotion: Coupons and Rebates

Nintendo is now starting to offer points cards for some of the games that consumers purchase. Those points are usually used by the Nintendo online store to download games online to the video-game. This time with the cards offered when purchasing certain games, the software may be downloaded for free from the DSi Shop, and the Wii Shop Channel. The most recently game released by the company was Super Marion Bros Wii, and Nintendo gave away point cards to those who bought the game at the Nintendo World Store in Manhattan during the first week.
Gamers have easy access from their consoles to these stores and redeem the points. Such cards act as five dollar discount coupon, that has 500 points and may be use either to buy a game that is worth those points, or to add them to each user's account and buy games that cost more. Nintendo not only desires to reward the fidelity of its consumers, but also encourage them to purchase their products online. By offering the cards, the company also attempts to teach consumers how to access and purchase games online with their own consoles.

In the online stores, Nintendo offers unique games that complement the features of the specific hardware. For instance, from the DS consoles users may only buy games that are for DS consoles. DSiWire is a line of video-games for the DS line of consoles that can only be found at this store at a low price.

On the other hand, the Nintendo Wii offers two lines of games. The first one is WiiWare, which offers games that feature the unique motion control characteristic of the Wii. And the second one is the Classic Virtual Console Games, where gamers can find all their favorite games from past Nintendo consoles.

Wii Shop Channel

DSi Ware

Loyalty Marketing Program: Club Nintendo

Nintendo has created the Nintendo Club with the intention to reward the loyalty of its consumers. The objective of this kind of loyalty marketing programs is to establish long-term and mutually beneficial relationships between the company and its key customers. Nintendo club is designed to reward consumers that buy their products and provide feedback of the experience they have with the them.

Camilo Freire, a current platinum member of the Nintendo Club says: "It is very easy to register, and everything with Nintendo is consumer friendly... the way they threat their customers doesn't make them look as a big capitalist company -even when they are." To count the points of each member Nintendo uses one of the features of their brand mark, the well known character Super Mario. Instead of collecting points, the members of the club collect coins the way Mario does in his platform video-games.

Nintendo offers three levels of membership that are categorized by the number of coins a member has. General (0 to 299), gold (300 to 599) and platinum (600 and above). Several gifts and merchandise are offer to members in each level and according to the numbers of coins redeemed.

To earn coins, consumers have to register, input the code of the game they bought an fill out a short survey right away. DS games offer 30 coins and Wii games offer 50. The club offers other options to make coins, for example, if you previously mention in a survey that you wanted to buy the game you just bought, you get 10 more coins. And a month later you receive another survey to give feedback about what you think about the game, earning another 10 points. If you bought a console, you may not get coins, but nintendo offers the option to get a free 90 days warranty extension for members of the club.

Advertising and PR

The Nintendo Wii video-game console gain consumers' attention ever since its launched in 2006. At the time, George Harrison was the person in charge to led the marketing team of Nintendo. With a budget of $200 million in late 2006, they effectively created costumers' value and built stronger consumer relationships through events, promotions and public relations. They were able to reach a larger number of potential customers of different ages and backgrounds.

I have followed and analyzed many of Nintendo's advertisement campaigns, so I decided to actually go to one of their marketing events today. I visited the Nintendo World Store, where the company was celebrating the release of the new "Super Mario Bros Wii." Children, young males and females, as well as parents and families were able to try the game. Some others participated in a contest, in which the winner was awarded with the game and some Super Mario's merchandise.

A whole set was prepared by Nintendo to receive visitors who could have a closer look to the different toys, clothing and other merchandise that has been ever made of Mario, Luigi, Peach, Toad and Bowser (Super Mario Bros characters)

As you will see in the following video that I made during my visit, Nintendo still spends time, money and dedication in their marketing events, and by the end of a rainy day, people are still visiting the Nintendo World Store.

Advertising: The Rise of Nintendo with the Wii

I have mentioned how Nintendo has successfully been on business for a long time. But from 2001 to 2006, Nintendo occupied the third place in sales several times. Only until December 2006 the company regained the first place, and it has maintained until now the position with a high difference over its competitors. The Wii console offered to the company a new market; now not only young male consumers were interested in the video-game industry, but parents, woman and other generations started to play.

Nintendo was required to have a strong advertising campaign to promote the new console, and to reach their new market. By creating Tupperware party-ish events, and setting up tournaments on cruise ships in different cities around the world, Nintendo accomplished its goal to expand its demographics. Everybody wanted a Wii.

On television, many of the adds from video-game companies are usually aired within the daytime during the children's television programming. But Nintendo started to have their adds on TV at different hours of the day having the acceptance of the adult audience, who started to see Nintendo's products as entertainment for the whole family.

Different stars have also participated in their advertising campaign. Beyonce Knowles, Lisa Kudrow, Nicole Kidman, Chace Crawford, among others, made part of different advertising campaigns. Mostly females are featured in their DS line adds in order to encourage women to try their games.

Pricing Concepts

Nintendo had an specific Price strategy when they released the Nintendo Wii console. Keeping low production quantities of the product, the company created a larger demand. It was first projected to produce 14 million units, and it has increased up to more than 16.5 million. On top of that, Nintendo has been able to sell its products at a lower price by offering several accessories that enhance the experience with their consoles. For example, Nintendo Wii's users may purchase games from past Nintendo consoles online; some of those games require different and specific controls that users may buy separately in order to match the need of those games.

As mention in the last post, the price for the games in the U.S are more stable than other markets. But Nintendo also decided to make a difference in this field. A few months ago the initial price of a video-game went up from 50 to 60 dollars, in contrast to its competitors, Nintendo kept the 50 dollar initial price for its games, making them more appealing and affordable.
Finally, another characteristic that allows Nintendo to keep a significant lower prices compared to Sony's and Microsoft's prices is the accessibility and simplicity of its products. While Sony has six different versions of the PS3 in the market (20, 60, 70, 80, 120 and 250 gigs), and Microsoft three (elite, pro and arcade), Nintendo offers only the Nintendo Wii, making the consumer decision-making process less complicated. For example, a parent who wants to obtain a video-game console for his child may find himself confused when analyzing which one to choose if the options are the Xbox and the PS3. The products will look physically the same for him, but with little characteristics and different prices. Whereas the Wii offers lower price and just one standard product, with more accessible characteristics.

Pricing Strategy

Nintendo has two main different strategies for their products. One for their consoles, and another one for their games. In Japan, prices usually change according to the game from 40 to 70 dollars per unit. Whereas in the U.S the pricing strategy has been based in a more stable price for the games when launched. All Nintendo consoles have always had an initial retail price of $199.99, an amount of money that is referred by Nintendo as the "affordable price," in which later on they go down in price from it according to the demand of the product. However, the Nintendo Wii had a different price when first launched, it was $249.99, because it included a game with it. And anyway the Nintendo Wii had an affordable price compared to its biggest competitors, the PS3 and the Xbox, who were respectively  charging around 600 hundred and 400 hundred dollars per unit.