Avoiding the Performance Trap

As Nintendo continues to lose market share to Microsoft and Sony, we highlight some of the predictable causes of the company’s latest decline. When I was writing the manuscript for Innovation and Marketing in the Video Game Industry in early 2009, I observed that “Nintendo could quickly lose its standing as an innovator” if it did not renew its value proposition (p.224). However, I never imagined that Nintendo would abandon some of the very key success factors that we praised in the book.

In the mid-1990s, Nintendo refused to adapt to a rapidly changing market for video games. In Innovation and Marketing in the Video Game Industry, we highlighted a number of factors that led to Nintendo’s decline, such as its refusal to move from cartridges to CDs, its lack of support for third party developers, and its lack of understanding of US consumers (see Chapter 2: Nintendo’s Dark Age). When the company launched its DS and Wii consoles, it approached the market in an entirely new way, focusing more on consumer needs than on product features and performance. However, I also cautioned that Nintendo would need to adapt to a rapidly changing market that included new competitors like Kinect (then known as Project Natal). If not, Nintendo could find itself in the same position as it was in in the mid-1990s, with rapidly eroding market share.

We offered several ideas that would allow Nintendo to continue leading the market, such as dynamic pricing, platform renewal, and the continued use of societal marketing. Instead, Nintendo abandoned some of the key success factors that we praised in the book when it began offering its Wii and DS consoles in a bewildering array of configurations and refused to adapt its offering to appeal to late adopters.

Therefore, it comes as no surprise that Wii sales have fallen behind competitors in all its major markets and will likely continue to decline. In response, Nintendo has hinted that it might drop the price of the Wii, but we have previously argued that Nintendo reacted too slowly to reach late adopters.