The video Game Console Wars

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18 February 2016

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Compare and contrast Nintendo’s marketing strategy for the Wii with Sony’s strategy for PS3. By the end of 2006, two game console industry giants, Nintendo and Sony had launched their respective new products; the Wii and PS3. Various marketing strategies were implemented by both rivals and this writing attempt to analyse common and differing elements. Similarly, both companies had a product differentiation strategy, with the aim of being distinctly set apart from their competitors by the viewing market. However, different elements of this strategy were focused on by the firms. For instance, Nintendo differentiated via product form and design. Instead of the traditional controller where buttons are pressed, the Wii had a wireless motion-sensitive controller, which recognises the player’s arm movements. Thus, actions such as golfing, tennis and even dancing can be detected by the game. It is assumed that the rationale behind this is the fact that “new things and ways of doing things” always grab attention, whether good or bad. Thus, Nintendo’s aim would have been to gain the market’s attention and then convince them positively about the Wii.

Conversely, Sony attempted to differentiate through performance quality. Heavy investment was made on a new processing chip and a laser diode, which would rev up the speed drastically and offer superior graphics quality. The video gaming industry prides itself on graphics; hence differentiating in this area may significantly increase demand. One believes however, that Nintendo’s product differentiation strategy had a stronger impact than Sony’s. This is because Sony followed the industry norm, of each new generation of machines being faster and more powerful than the preceding generation, as the case states. Thus, the market was already expecting the enhanced features, compared to the curiosity of a completely new game design by the Wii. With reference to the Ansoff Matrix framework, Nintendo implemented a marketing diversification strategy, whereby they offered a new product to new markets (in terms of untouched customer segments).

Nintendo’s designers, according to the case, deliberately developed a machine that is simpler to use, since the complexity of current games appeal only to advance gamers. This thus, would allow market reach to a broader demographic of new segments, thereby beginning to challenge Sony’s market share dominance. For instance, males and female above and below the common age bracket of video game players may now demand the Wii. On the other hand, Sony implemented a product development strategy, by launching a new product in their existing market segment of customers, as the Ansoff theory advocates. Hence, Sony’s PS3 targeted their current customer segment for the PS2.

A marketing strategy of Sony may have been to have first mover advantage, by launching in November 2006 in the United States before the Wii. Most studies indicate that the market pioneer gains the greatest advantage, however sometimes it can be risky and expensive. In Sony’s case, they would have easily been able to capitalise on the fans of the playstation and PS2 and new customers entering that market. Their downfall however was inadequate launch preparation and planning with regards to their diode technology, as mass production issues caused shortages. Thus, achieving the Christmas season’s full revenue potential was lost. Even though Nintendo was the second mover launching a month after in December, they had an international marketing launch strategy being executed. They made the Wii available in the United States, the Eurozone and United Kingdom. As a result, the benefits of being the first mover would have been gained in the Eurozone and United Kingdom. It is noted that Sony launched the PS3 four months after in Europe.

Being the second to enter that market, Sony may have researched any problems Nintendo may have encountered and adjusted accordingly, for a smoother launch. Nintendo appears to have implemented a market-penetration pricing strategy. The Wii at a cost of $250 is 50% less than the 20-gigabyte PS3 (smaller hard drive machine). At this lower price, it is easier for the product to penetrate the market due to affordability in most segments. This aligns with the assumed company’s aim of maximising market share in the current and new segments. To achieve this, Nintendo ensured that the Wii was less costly to manufacture. Moreover, a higher sales volume may lead to lower unit costs and higher long run profits. Conversely, Sony is believed to have a market-skimming pricing strategy. The company invested $2 billion in technology, so this strategy aims at recovering the maximum amount of revenue to cover the high costs incurred in the early stages of the product life cycle. Additionally, Sony has a strong brand due to the success of their previous machines (PS2 and playstation) and the high price assists in communicating the image of a superior product with quality.What is the key to the Wii’s popularity?

The key facet responsible for the Wii’s popularity lies in the innovative design, which “calls to action” the player with physical movement. The writer views the wireless motion sensitive game console as a new, simple and fun method of gaming for all age groups. As a result, it may appeal not only to the traditional expert video game player like the PS3, but other individuals outside that segment. It thus makes marketing sense, if Nintendo promoted the game as a family requirement for cultivating an enjoyable, quality family time with members. It seems also a great game for various informal social events.

Furthermore, since different types of games can be played, the Wii has the potential to appeal to a vast number of different market segments. For instance, The Wii Fit is an exercising game, where aerobics, yoga and other body strengthening activities can be done. Thus, the Wii Fit may have been positioned as a convenient way of losing or maintaining your weight, as it can be done in the comfort of one’s home and a more enjoyable method compared to simply following an instructor on a DVD. Likewise, sports fanatics may gravitate towards the Wii sports for the games of their interest.

There also is the possibility of the Wii being used for rehabilitation after a stroke or injury, due to it body strengthen capabilities. It must be noted, that Nintendo’s international marketing strategy of launching in three distinct major areas, was a contributing factor towards the quick popularity gained. The areas were the United States, the Eurozone and the United Kingdom. This means that great strategic marketing focus had to be made on the different areas, to accommodate international cultural differences and legalities. As a result, Nintendo may have had to implement global product strategies for market adaptation in areas such as price, sales promotion, colours, labelling and advertising execution, to name a few. 3. Do you agree with Sony’s decision to incorporate a Blu-ray DVD player in the PS3.

The writer agrees with the decision to incorporate a Blu-ray DVD player in the PS3. Firstly, Sony is considered one of the market leaders in the consumer electric industry; where the brand is known for high quality and advance technology. Since the consumer market started demanding more high definition TVs and viewing of DVD’s in high definition, it made good marketing sense to satisfy that need for high definition imagery in the video games, which ultimately reinforced the company’s brand. A “spin off” from this implementation of Blu-ray, is that the PS3 can actually be used by consumers to watch Blu-ray DVD movies, for those who may not own a Blu-ray DVD player. Thus, the value of the PS3 may increase, due to more product uses than the main function.

Secondly, it was wise for Sony to include the Blu-ray DVD player in the PS3, due to their current product range developments. Sony had already launched the Blu-ray video format in their DVD players, thus the inclusion in the PS3 was a commendable and necessary marketing move, in order to keep as many products in the range up to date with the latest technological advancements. More importantly, this was a medium to push and promote the adoption of the Blu-ray in the market, reflecting strong strategic planning for profit maximisation. The draw back to the implementation however, was the issue of mass-production difficulties of the diode for the Blu-ray, resulting in shortages for the U.S holiday launch, as the case explains. Thus, it is assumed that there was a deficiency in proper operational planning and execution. This can be a critical concern with new product planning, since shortages can greatly impact forecasted revenue streams and significant opportunities may be lost. In Sony’s situation, the launch was around the Christmas season, where many PS3s may have been gift considerations and individuals generally spend more on commodities at this time, due to Christmas bonuses and advances.

Thus, Sony would not have been able to capitalise on this, due to low supply of machines. In the final analysis however, if Sony had anticipated any production issues to cause marginal temporary shortages at the launch, one is of the opinion that this is not drastic a problem enough, to decide forgoing the implementation of the Blu-ray. This is because consideration is given to the return on investment with the Blu-ray inclusion and the technological drive in the industry at large. The Blu-ray would have generated greater demand than the HD-DVD and take longer to become obsolete, thus having an extended life-span.

Some industry observers have noted that the battle between HD-DVD and Blu-ray is reminiscent of the showdown between Beta and VHS videocassette formats in the 1970s. What was the outcome? The videocassette showdown between Beta and VHS in the 1970’s mainly was a clear example of “listening and responding” to what the market wants. It began when Sony produced Bata, a video standard which had a recording time of 60 minutes. Almost one year later, JVC launched the VHS, which is another video standard that had a recording time of 120 minutes. The two videocassettes were different in size and completely incompatible. The VHS was cheaper than Beta; however the longer the recording time resulted in a degraded quality of image.

The market nevertheless, wanted a longer recording time, which allowed for longer movies and football matched to be recorded. Sony held their end for more years supplying the more upscale market with the 60 minute high quality videocassettes, but eventually in the mid 80’s they had to offer videocassettes with a longer recording time to remain competitive. By then however it was too late and VHS already held dominance in the market. VHS won the battle and in 2002 the last Beta machine was produced. Sony’s mistake was not listening to what the market wants and not willing to compromise the quality to satisfy the market. The battle between HD-DVD and Blu-ray is quite similar, however this time Sony is not the defender, but the challenger.

To forecast who the winner may be, the same underlying factor exists, regarding listening to the market and responding. The case explains of the continuous electronic industry’s upgrade towards high definition TVs and DVD movies. Thus, one can assume that consumers want a player which provides the greatest quality of high definition. A common element between HD-DVD and Blu-ray is that they have 1080 lines of resolution (the highest quality video playback possible) on their widescreen HDTV set, as the case shows. Thus, consumers are going to look for other factors which can determine which player provides better quality. Firstly, the fact that Sony’s Blu-ray technology is incompatible with Toshiba (assuming other rival products as well) and can only be used on Sony products, signals that Sony is trying to maintain a type of niche market, which in essence aims at guaranteeing that using Blu-ray technology on Sony products will produce the best quality. This is similar to what Apple does with their range of products. Secondly, over the years Sony has positioned and built their brand to represent “high quality” and thus brand loyalty is strong among customers in the electronic industry.

Lastly, price sends market signals and the common understanding is that high price tends to reflect high quality. The case states that Sony BDP-S1 and S300 cost $999.99 and $600 respectively, compared to Toshiba’s models ranging from $399.99 to $799.99. Thus the higher price of Sony can be assumed to have better quality. Conclusively, HD-DVD and Blu-ray battle is almost mirrored in Beta and VHS rivalry. VHS won the battle since they satisfied the market’s demand for longer recording time with the videocassette. With HD-DVD and Blu-ray, the market is assumed to want high quality on their high definition widescreen HDTVs. The writer believes that Sony with their Blu-ray technology would win the battle, given that they can reflect a better level of quality over Toshiba, through “non-1080 lines of resolution” factors.

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