Sales and marketing recommendations for Nintendo in the United States

2010-2011 AMA Case Competition

Nintendo

Monfort College of Business Marketing Club

CONTENTS
Situation Analysis ............................................................................................................................ 2 Company Overview ......................................................................................................................... 2 Target Market ................................................................................................................................. 2 SWOT Analysis................................................................................................................................. 3 Wii Ultimate Challenge ................................................................................................................... 3 Justification / Viability ................................................................................................................. 4 Why the Wii & Nothing else ..................................................................................................... 4 The Ultimate Challenge Event ..................................................................................................... 4 Prizes ............................................................................................................................................ 5 Tier 1......................................................................................................................................... 5 Tier 2......................................................................................................................................... 5 Tire 3......................................................................................................................................... 6 Marketing Plan ................................................................................................................................ 6 TV Advertising .............................................................................................................................. 6 Exposure ................................................................................................................................... 7 Social Media................................................................................................................................. 7 APPENDIX A Additional Research................................................................................................. 8 SWOT Analysis ........................................................................................................................... 12 APPENDIX B Promotional Advertisments ..................................... Error! Bookmark not defined. APPENDIX C FINANCIALS ............................................................................................................ 16

Nintendo is a recognized name that holds nostalgia for many. Many users have memories filled with four player paintball rounds on golden eye or their own incredible driving skill on Mario Kart 64. For others however it is not the past they think about, instead they jump to the present to make the difficult decision between Wii golf and Wii bowling to compete with their siblings and friends after school. The unique quality that Nintendo has over most of its competition is the attribute that makes them recognizable as a brand and product is innovation. The Notoriety of Nintendo does not result from making the best games or gaming system on the market, it stems from their ability to scoop up segments of the market most competitors can't or choose not to target. The reason for Nintendo's success in varying markets can be attributed to effective branding technique that stays away from what the competition is doing. Specifically Nintendo does not put much effort in to immersive gaming software like their competitors at Microsoft and Sony; rather it focuses its energy on creating a system and games that are fun when played mentally passively. To clarify Nintendo focuses on creating a fun or progressively challenging environment while competition focuses on creating Intense or realistic environments. The main difference between the two branding plans is that Microsoft and Sony attempt to woo those who already love gaming, whereas Nintendo will try to entertain those who just want a fun time.

SITUATION ANALYSIS
Nintendo has always been in prime position to increase market share by increasing market size, and fortunately for those who participate in this competition Nintendo has not changed that goal. Their wise executives recognize that it is easier to convert a non-believer than to convert a rival sect. The goal of this report is to suggest, to Nintendo, fully functional logical and realistic marketing activities that would attract non-gamers to Nintendo gaming devices and software, on a budget of 20 million dollars and in a time frame of six months.

COMPANY OVERVIEW
Nintendo develops and markets interactive entertainment products. It manufactures and markets hardware and software for its home video game systems. The company also produces playing cards, Karuta and other products. The company has global operations but a large portion of its operations are based in Japan. It is headquartered in Kyoto, Japan, and employs 4,306 people as of 2009. The company recorded revenues of JPY1,838,622 million ($18,423 million) during financial year March 2009 (FY2009), an increase of 9.9% over FY2008. The operating profit of the company was JPY555,263 million ($5,563.7 million) during FY2009, an increase of 14% over FY2008. The net profit was JPY279,089 million ($2,796.5 million) in FY2009, an increase of 8.5% over FY2008.

TARGET MARKET
In order to develop our target market we needed to know what a non-gamer is. The definition of a non-gamer varies to who answers the question. There is no case by case basis here coming

up with some kind of quantifiable statistic that would definitively answer the question of whether a person is a gamer or not. In an attempt to define a non-gamer we created a survey. The survey asked several questions to identify the qualities a gamer has. Our two top responses were: If someone owns a gaming console they are a gamer and if someone plays video games alone they are a gamer (complete survey results can be found in Appendix A). Through the survey we determined our target market to be people who don't own a console. According to the Entertainment Software Association 38% of American families had a video game console in 2008, which leaves 62% as not owning a video game console. Further in order to consider the data of non-gamers not playing alone, those who live alone should be factored in to our target, 26% or households in America are single person residences according to the us Census, assuming there is a rather even distribution subtracting 26% from 62% leaves about 45% of American people. Further segmenting, people who live alone characteristically live in urban centers, as opposed to in suburban/rural territories.

SWOT ANALYSIS
Nintendo is engaged in manufacturing and distributing of interactive entertainment products. It is one of the largest console manufacturers in the world and a leader in the hand held console market. The company has a strong brand name, which gives it an edge over its competitors. However, fluctuation in foreign exchange could prove to be a threat to the company as it could lead to a decline in its top line growth and put pressure on its margins. Below is the full SWOT analysis details can be found in Appendix A. Strengths Weakness Established brand provides competitive Declining advantage Dependency on suppliers Robust revenue growth provides Online gameplay greater stability Global presence and presence and geographical diversification with reduces the business risk Simplistic gameplay Opportunities Threats Positive outlook for entertainment Short products lifecycle industry Currency exchange fluctuations Increasing demand for online gaming Shift in consumer preferences Changing, and positive, trends in Microsoft and Sony mimicking consumption patterns interactive gameplay

WII ULTIMATE CHALLENGE

JUSTIFICATION / VIABILITY The Wii Ultimate Challenge was designed to capture the non-gamer market. These challenges tie into what many believe to be the extracurricular activities that often keep non-gamer to game. We believe that many non-gamers find alternatives in participating in physical sporting events for stimulation. These same target non-gamers are participating in extracurricular activities more because they dont own a gaming console to play. The Wii Ultimate Challenge targets directly to these individuals by providing them with a challenge that offer stimulation through playing the same physical sporting event through the Nintendo Wii. The games that will be played at these events are: EA Sports Tiger Woods PGA Tour EA Sports Grand Slam Tennis EA Sports Madden 11 EA Sports NBA Live The majority of people can identify with these sports. What makes this even better is that many of those that can identify with these sports are the ones playing them rather than playing on a video console. The idea behind these events is to create a friendly yet, competitive environment for all who wish to play. While the competition can be enough to get many to participate given the type of games being played, Nintendo will also have several prizes (see prizes, for prize details) to entice more participants. Through simulating these events through game play with the Nintendo Wii we will give participants to ability to achieve the highest accolade for each sport. By the end of the event the number one winners in each event category will be titled the champion of their respective sport, similar to the actual sports played by professional athletes. The Ultimate Challenge is easy way to get people to play the Wii. Nintendo will have direct access to many who overlook the Wii, as a gaming system that will not provide the same stimulation as the activities they are currently involved in. The idea to focus on sports as participants participate in playing the Nintendo Wii, was to assure that we removed any negative stereotype, that gaming has in there shooter, action, and adventure games. WHY THE WII & NOTHING ELSE Nintendo has many gaming platforms that can be used in this event. We believe that instead of using all the platforms Nintendo has to offer we would focus on the platform that we believe will provide the most turn out. The Nintendo Wii was the choice because it provides more free and open interaction between users. THE ULTIMATE CHALLENGE EVENT The sporting events listed above will be the highlight of each individual event. There will be seven events going on at a time. At each event participants will compete in the event that best tailors to their interest. Participants are only able to participate in two events during the challenge. Participants will be broken in to groups of ten. Each participant will play each other within the group of ten. The participant with the most wins at the end moves forward.

The ultimate challenge will be an event that covers all 50 states and can expand across seas if desired. Given the cost restraints we will focus these events within the states. Relative to population and which state Nintendo is in Nintendo will host this event in (1-5) cities in each state. Each state will hold its tournament. Groups of participants will be broking down into groups of 10 in their respective event. Members in each group will play their respective Wii game (EA Sports Tiger Woods PGA Tour, Madden 11, Grand Slam Tennis, NBA Live) and play each member in their group once. The participant with the best record of wins vs. loses will continue to the next round. These rounds will continue to go on until the top 5 records are revealed. The top 5 record holders will advance to the final round to compete for the tier of prizes. At this point there are no losers every participant that makes it to the final round will receive a prize. The Final round of game play each member will play each other 3 times. The best two records will advance to the Wii Ultimate Prize Finale round where they will compete for the top 2 prizes. The 3 participants that did not make it to the Wii Ultimate Prize Finale round will receive the prize listed in Tier 3. The two participants will play a championship game similar to how the actual sport is played. In some cases its a best of 7 series and in others is one game for the win. PRIZES The prizes associated with these events will be provided by Nintendo as well as local business that will entice non games to give this event a try. There will be a tier of prizes as Nintendo will do its best provide variety and depth to the winning participants at these events. TIER 1 FIRST PLACE WINNERS As Nintendo simulates the professional sporting events through game play. Top winners will receive tickets to the championship game for the respective sports they participated in. EA Sports NHL Hockey participants would receive tickets to the Stanley Cup, EA Sports Madden 2011 participants would receive tickets to the Super Bowl, and EA Sports Grand Slam Tennis participants would receive tickets to the Wimbledon, and so on and so forth. Tickets to these events will include round trip air fare and hotel stay. The final reward for these first place winners consist of a bundle of gift cards from companies worth $1,000 that relate directly to the event the participant participated in and other stores that will entice the participants to purchase Nintendo products. The tickets to these championship games will hit home for the targeted non-gamers, who find interest in following and playing the sports that they participated in during these events. TIER 2

SECOND PLACE WINNERS Second place winners will receive a Nintendo Bundle package of Nintendo products. The bundle will include a Nintendo Wii and DS. Giving these winners a Wii will allow them to continue to play the game at home. And by including the DS, Nintendo will provide another outlet for these winners to grasps the offerings Nintendo has. Participants will also get to select three games for each gaming console (1 of which include the game for the event they participated in) of the participants choice. By allowing participants to choose the games they would like to play Nintendo will increase the odds of them actually playing the game once they return home. The final reward for these first place winners consist of a bundle of gift cards from companies worth $1,500 that relate directly to the event the participant participated in and other stores that will entice the participants to purchase Nintendo products. TIRE 3 ELEITE EIGHT These individuals are those who did not compete for the two top tier prizes. The prizes for these individuals will consist of a bundle of gift cards from companies worth $2,000 that relate directly to the event the participant participated in and other stores that will entice the participants to purchase Nintendo products. By providing these participants with the gift cards Nintendo will provide satisfaction for winners and encourage them to do business with local business in the area. This will increase the Nintendo brand and strengthen their WOM.

MARKETING PLAN
Given that the Wii Ultimate Challenge covers 50 states our prime source of marketing will be through television. Simple ad will be used in efforts to again show non-gamers how simple Nintendo is. In addition to television ads our plan will include the use of social media. TV ADVERTISING The first message in our TV advertisements will be Win Tickets to the Super Bowl through Nintendo (the same message will be used for each respective sport; NBA Finals, PGA Golf, and Wimbledon). The idea is to get viewer to gain interest in how they can make it to these large event. These ads will piggy back off the current ads being run by Nintendo in efforts to cut cost. Our second message will utilized eight known athletes. These athletes will play their respective sport through the Wii. For Example Dwight Howard (Professional Basketball player for the Orlando Magic) would be playing a game against and with nine other average Joe (nongamer) playing in a 5 on 5 game. The genius of this commercial is that viewers will find Dwight Howard struggling to keep up and score against the opposing team. The message the will be portrayed is that an average Joe can compete and win against a professional athlete. Similar

ads will be run for each respective event and sport. Additional information on possible prizes to be won will also be included. The television ads with professional athletes will be run during the respective sport they simulate. The idea behind this is to attract the same viewers that participate and follow these events. In all ads viewer will be directed to Nintendos Ultimate Challenge Facebook page to gather additional details on how to win these trips. EXPOSURE By using national sports to spread the message Nintendo will have access to millions of viewers. According to John Fenny a staff writer for Football Reporters Online states Nine NFL game telecasts this season have been watched by 25 million viewers up 125 percent from this point last year (four) and matching the total for the full 2009 season, according to The Nielsen Company (16 regular season games and not including playoff and the Super Bowl). As it relates to NBA viewership, theirs as increased 74% averaging 2,546,000 through six NBA telecasts according to Nate Smeltz a writer at ESPN. As one can see there are several million viewers Nintendo will have access too. It is safe to say that Nintendo will not see all viewers at their even but even a small percentage would show a great turnout. SOCIAL MEDIA The Facebook page will be how viewers gain information and details on how to get involved in the events. Details will include possible prize winnings, locations to participate in the event and most important the cost to participate (no cost for participants). In addition to the details, most importantly there will be requirements for potential participants. These requirements will be that all participants must like the Facebook page. By doing this, friends of those participating will also be able to see details on the event. YouTube and Twitter will also be used to get this message out.

CLOSING
The proposed plan will increase the brand awareness and increase sales of Nintendo gaming console. Nintendo will be able to show the world exactly how simple and fun playing a Wii can be while rewarding people with prizes to increase sales and provide a stronger incentive to participate.

BIBLIOGRAPHY
Feeny, J. (2010, November 18). Football Reporters Online. Retrieved December 2010, from Football Reporters Online: http://www.footballreportersonline.com/2010/11/18/nfl-tvviewership-up-125-this-year/ Smeltz, N. (2010, November 8). This Week - November 8th 2010. Retrieved December 2010, from ESPN Media ZOne: http://www.espnmediazone3.com/us/2010/11/thisweek_20101108/

APPENDIX A ADDITIONAL RESEARCH

SURVEY

SWOT ANALYSIS Strengths Established brand gives a competitive advantage Brand Nintendo is widely associated with video games. Nintendo has been operating in the video game console market since 1977 with color television games, and is considered to be the oldest company in this market. It is one of the largest console manufacturers in the world, and a leader in the handheld console market. The company had released four generations over the past two decades, which include Nintendo Entertainment System; Super Nintendo Entertainment System; Nintendo 64; GameCube; Nintendo DS, Nintendo DSi and Wii. In the handheld device segment, worldwide unit sales of Nintendo DS hardware were 31.18 million

units in FY2009. Nintendo DSi which was released in FY2008 exceeded sales 100 million units faster than any console or handheld video game hardware in history. In the console business, Wii hardware achieved worldwide sales of 25.95 million units and Wii software, Mario Kart Wii achieved 5.4 million unit sales in FY2009. Nintendos well established brand name gives it a first mover advantage, bargaining power and facilitates easy customer recall. Robust revenue growth provides greater stability

Nintendo has achieved strong growth in its operating results in recent years. Its total revenues grew by a compounded annual growth rate (CAGR) of 37% from JPY515,292 million ($5,152.9 million) in FY2005 to JPY1,838,622 million ($18,386.2million) in FY2009. The companys operating profit grew by 49% during FY200509. Furthermore, in the same period, the net profit of the company increased at a CAGR of 34% to reach JPY279,089 million ($2,790.9 million) in FY2009.Nintendos revenue growth was due to strong performance in its electronic entertainment products division. Therefore, robust financial performance provides financial stability to the company which could be leveraged to seek more growth avenues in the future. Global presence and geographical diversification reduces the business risk

The company has a relatively diverse geographic presence. Nintendo operates in Japan, the America, and Europe. The company's manufacturing plants are located in Japan and it operates through subsidiaries in the US, Canada, the UK, Spain, Germany, France, Italy, and Australia. Furthermore, the global presence enabled the company to tap customer pockets across the globe. The company derives around 51.1% of its revenues from Japan; 24.3% from the Americas; 22.2% from Europe and 2.5% from other countries. This indicates that Nintendo has a wider scope in increasing its revenues by utilizing its global presence and reduces its business risk through geographic diversification. Weaknesses Declining cash position

Nintendo recorded decline in its cash from operations in FY2009.The company's cash from operations was JPY287,800 million (approximately $2,878 million) in FY2009, a decrease of 13% over FY2008. Furthermore, the company also recorded decline in its cash and cash equivalents. The cash and cash equivalents of the company was JPY894,129 million ($8,941.3 million) in FY2009, a decrease of 19% over FY2008.The decline in cash flows impairs the liquidity position of the company thereby eroding funds for future expansion plans. Dependency on suppliers

 Nintendo depends on outside manufactures for supply of key components or assemble finished products. Furthermore, many of these suppliers are located in overseas and any potential production interruptions caused by riots or disasters will have a negative impact on the companys business. The company may have difficulty procuring key components or products from these suppliers in case of any business disagreements. The suppliers may fail to provide necessary components on a timely basis. The shortage of key components could cause margin decline due to higher costs, shortage of products and quality control issues for the company. Opportunities Positive outlook for entertainment industry

The global entertainment and media market is expected to reach a value of $1.6 trillion by FY2013, growing at a compounded annual growth rate (CAGR) of 2.7% during FY20092013. Over the next five years, Latin America and Asia Pacific would be the fastest growing regions increasing at an annual compound rate of 5.1% and 4.5% to reach $73 billion and $413 billion, respectively, in FY2013. Nintendo has a significant presence in America, Europe and Japan; therefore it can leverage its strong global presence to distribute interactive entertainment products in the growing entertainment and media markets, which could boost the companys revenues and profits. Increasing demand for online gaming Demand for online gaming is increasing in line with the growing number of broadband connections. Worldwide usage of broadband is expected to reach 501 million by FY2014 from 422 million in FY2009. Nintendo has created a distinctive environment for online gaming and services. The Wii channels are specific portals that allow users to interact with continuously updated content, including up-to-date weather services and news feeds. Nintendo's wireless fidelity (WiFi) connection is a free online gaming service that can be used by both Wii and Nintendo DS games. The positive outlook in the online gaming market would increase the demand for the company's products and services and result in improved revenue. Changing, and positive, trends in consumption patterns

The US video games industry is witnessing a change in demography like the increase in age band of players and number of female players. Video games, which previously attracted children and teens, have begun to appeal to adults and women as well. The average age of gamers in the US reached 35 years in 2008. Entertainment Software Association says 65% of American households play computer and video games; 38% of American homes have a video game console; 94% of parents are present when games are purchased or rented; 88% of parents report always or sometimes monitoring the games their children play and 63% of parents believe games are a positive part of their childrens lives. Nintendo being a major player

in video game industry is introducing product with a strategy of expanding the gaming audience. The company's is encouraging video games through its unique hardware and software offerings to customers regardless of their age, gender, language, cultural background and game experience (expert or novice). The company's major product Wii features a user friendly remote which enables the elderly people and women to play. In addition, it has introduced a new software lineup, Touch! Generations, which expanded the usage of video games and it appeals both to traditional gamers and novices. In 2008, the company came up with new product launches such as Mario Kart Wii that uses the Wii Wheel accessory and Pokmon Platinum Version for Nintendo. Additionally in the same year, the company also launched 'Wii Fit' exercise game targeting women and older people. The expanding demography of gamers would lead to higher demand for the company's products and related software. Threats Short products lifecycle

The interactive entertainment software market is characterized by short product life cycles and frequent introductions of new products. New products introduced by Nintendo may not achieve significant market acceptance or achieve sufficient sales to recover development, manufacturing, and marketing costs. In the past, only a few interactive entertainment software products have achieved sustained market acceptance. Even the most successful titles remain popular only for limited period of time, often less than nine months. In addition, delays in product releases or disruptions in the release of one or more new products could adversely affect the operating results of the company. Short lifecycles of products have been adversely affecting the gaming business, and these trends are expected to further increase their impact in the future.These rapid changes in the gaming industry could have an adverse affect on company's revenues. Currency exchange fluctuations

Foreign exchange fluctuations could adversely affect the companys earnings. Nintendo operates its businesses in foreign currencies but publishes its financial statements and measures its performance in Japanese currency. In FY2009, Nintendo generated approximately 50% of the total revenues outside Japan and any weakening of the Japanese currency against major currencies like US dollar or Euro could negatively impact Nintendo's revenues.The company's exposure to currency fluctuations could have serious affect on its operating results. Shift in consumer preferences

 The companys business is engaged broadly in the entertainment segment. However, its business could be affected with the changing trends in other entertainment fields. For instance, the video game market may shrink, if consumer preferences shift to other forms of entertainment. Although, the company continues to develop innovative and attractive products in the field of computer entertainment, there is no guarantee that all new products will be accepted by consumers due to shift in consumer preferences. The shift in consumer preferences could have unfavorable impact on the companys operations and results Source: Nintendo SWOT

APPENDIX C FINANCIALS
FINANCIALS