The Importance of Marketing to Organisations in the Twenty-First Century free essay sample

The Importance of Marketing to Organisations in the Twenty-First Century Nintendo Co. Ltd ‘Marketing is a social process by which individuals and groups obtain what they need and want through creating and exchanging products and values with others. ’ When most people think of marketing, they think of selling, distributing and advertising, as we are daily swamped with sale calls, Internet pop-ups, and television commercials. Although these tactics of marketing are true, they are ineffective with no the sound basis of knowledge about the market, the environment, and most importantly having a solid understanding of how customers behave, their motivation for purchase, their awareness and their preferences. All these strategies must be integrated to ensure that an organisation is successful in its operations. Nintendo Co. , Ltd. is a toy and home entertainment company that is famous worldwide for its popular home video games and revolutionary consoles. Nintendo has changed the concept of home entertainment all over the world. 1 Nintendo design, manufacture and manufacture a wide range of products ranging from the revolutionary battery-operated Game-Boy in the 1980’s, the Game Cube, and Super Mario Bros to name a few. Nintendo’s current line-up of video game systems includes the Nintendo DS Lite and Wii. Nintendo continues to create its unique software by ensuring that the ‘hardware and software are created with only one goal in mind, an enjoyable playing experience for all’. This approach has allowed Nintendo to produce products and characters beloved by people around the world. Marketing has become extremely important in the 21st century due to the changes in our modern society, where buyers and markets have become too diverse and complex to have one simple marketing strategy to meet the needs of them all. This is due to cultural changes and technological advancements, which has created a market that is fragmented. This change has been evident in Nintendo, as over the past two decades, the video game industry has grown ‘exceedingly, with annual sales rivalling box office eceipts for the movie industry’3. Therefore we can see that marketing is essential to Nintendo as due to the changes in their market size they have had to implement a strategy to persuade people from all over the world to play video games regardless of age, gender, culture, and even lifestyle. In order to understand the current significance of marketing to Nintendo, and other organisations we have to progress away from our prior understanding of marketing and move towards the new sense of ‘satisfying customer needs’. Figure 1. 0 Selling can only take place after the product has been produced; it is a forceful approach, which focuses on maximising profits through sales volume. On the contrary, marketing is instigated long before the company has even made the product. Marketing is an Integrated Plan, which includes product, price, promotion and distribution, backed up by a satisfactory environmental assessment, consumer research, and opportunity analysis with emphasis of maximising profits through customer satisfaction. During the 1960’s to the 1980’s Nintendo was a company that was product-led, it began a drive towards diversification and innovation, which eventually led to it becoming a household word in the late 1980s. They did this so that they could break in to the gaming industry and reduce their risks by having various products in their product line. However, Nintendo is a company, which has always been at the top of their game, even back then they understood that the success of marketing lies with the customers. An example of this can be found when they entered the United States, where the ‘of the U. S. home video industry had plummeted from a $3 billion peak in 1983 to a $100 million trough in 1985’5. However, Nintendo test marketed its games during the slum and found that the problems were caused by an excess of uninspiring, low-quality games therefore they took Seize of this opportunity and introduced sophisticated software to gain customer loyalty and enthusiasm. In order to look at how Nintendo’s marketing has changed in the 21st century, the core concepts of marketing will be taken into consideration and how Nintendo delivers value in each concept to those affected by its transaction. Figure 1. 1 The concept of ‘needs, wants and demands’ defines how individuals are influenced culturally and socially to satisfy a need which is not currently met. The demand is when the customers have necessary resources to obtain their wants. The second concept, ‘marketing offers’ are the value propositions companies offer ‘to satisfy human needs or demands’. The third concept of ‘value and satisfaction’ looks at how the product has satisfied consumer’s needs and it has met their expectations. This all leads to the fourth and fifth concept of ‘exchange, transactions and relationships’ leading to ‘markets’ where actual and potential buyers of the product, who have similar needs and wants meet. Nintendo has integrated these concepts of marketing in the 21st century to move away from the selling concept to the marketing concept. Think about the Nintendo Wii, which is outselling its rivals Playstation3, and the Xbox 360, the reason for this lies in Nintendo understanding consumer behaviour. Nintendo looked at how people who were not interested in consoles spent their time. Through market research they found that those people preferred to do sociable/physical activities, so they produced a physical product that requires a lot of exercise to play it. Thus their market offering of the Wii bundled the social activities of these groups, into one simple to use console. Through modern marketing approach of customer-led innovation they have given their customers value and satisfaction to ensure that they can but relationships with customers so that they become and remain loyal to Nintendo for the long-term. To understand the key concepts better and how firm must find ways to discover unfulfilled customer needs and brings products to the market to satisfy those needs can be understood by looking at the marketing process: Diagram2. 0 Situation Analysis Managers need information to determine customer-buying decisions so that they can tailor products to meet unfulfilled needs. The organisation also needs to examine the external (macro-environment) and the internal (microenvironment) environment so that they can meet opportunities and avoid threats. There are several frameworks that can be used to add structure to the situation analysis, however, the SWOT (strength, weakness, threats and opportunities) analysis will be used to assess the, most relevant problems and opportunities of Nintendo and how well equipped they are to deal with them. In regards to Nintendo, we have already seen that by analysing the market they have been able to find a gap in the market. However this is not enough for Nintendo as with only three main companies; Sony, Microsoft and Nintendo, the video gaming industry is highly competitive as the product life cycle of a console is about four to five years. 6 They must ensure that they offer different selections of innovative products, and features of their units, as threats of substitution and rivalry amongst the competitors is high. This is also due to the development of the ‘Digital age’ and the ‘Explosion of the Internet’ where kids can now play their friends on their PC’s. This is a main threat, is often unlicensed as a result companies such as Nintendo will need to take legal action which can lead to additional cost to the company. The weakness of the video gaming industry is that they do not appeal to older people and females. However, Nintendo have taken seize of this opportunity with the launch of the Nintendo DS which is designed for older demographics as well as females aged 5-17years old female gamers. Nintendo can match its own capability with the opportunities in order to satisfy customer needs better than the competition by implementing a ‘marketing strategy’. This is the second element of the marketing process, this is a three-way process of segmentation, targeting and positioning. Figure 2. 1 There has been a move from mass marketing to target marketing as buyers differ in wants needs and resources. Mass marketing is when the company treats the whole market as homogeneous group but offering the same product, promotion and distribution for all customers. Target marketing is when the total market is divided in to smaller segments, where products are developed to meet the characteristics of each segment. Segmentation is when the target market is divided in to smaller pieces based on meaningful and shared characteristics. Targeting is the evaluation of market segments to decide which to go for; an organisation must do this because they can not effectively serve all segments in the market. Positioning is developing a market strategy, which tries to influence how a particular market segment perceives a good or service compared to the competition. There are two ways to implement you position, by having a Unique Selling Point or by having an Emotional Selling Point so your product has a unique association to the customer compared to your competitors. The gaming industry is expanding for various ages, namely the older generation and even more rapidly for various ages within the female population. As you can see (figure 2. 1), Nintendo largely dominates the hand-held gaming industry for the male population between the ages of 5-17, however there is still a large gap in gaming as a whole. Figure 2. 2 Nintendo has adopted demographic segmentation. They have decided to target girls between the ages of 5-17 with their Nintendo Dogs and people over the age of 45 with their Brain Age Series on the Nintendo DS. The Brain Age series is said to ‘improve mental agility and even slow the onset of dementia and Alzheimers disease 7’ Targeting older gamers is proving a smart move by Nintendo as software makers are also trying to wean themselves off the shrinking teen market. However, Nintendo will have the advantage by being the only player in the market, thus having the ease of use, as they will not need to use aggressive discounts and to share the market with your competitors. Over the last century the demographics have changed dramatically; as about 20% of Japans 127 million people are 65 and older, and the number is expected to rise to almost 26% by 20158. This has added to the success of Nintendo, as without integrating the various elements of the Marketing Process they would not have been able to find this gap and sell millions of their products to segments which have been largely excluded. Another benefit of targeting the older demographics is very profitable segment as they have a higher purchasing power than teenagers and what is more important about this segment is that they are less likely to get pirate games. Nintendo success also lies in their use of differentiated targeting strategy. This is when one or more products are developed for several customer groups, this is extremely important for Nintendo as their customers are choosing amongst brands that are well known. Nintendo has chosen to position itself as a kid friendly brand to build strong relationships with the gamers as well as the parents. For example Nintendo’s approach to selling its new Wii games console, their guests were working women with families. These were women with a big say in the family decision-making, who could be persuaded of the family-friendly advantages of the games. 9 This illustrates that Nintendo have taken in to consideration the changes in our society where there is an increasing influence of mothers decision on family purchases. Figure 2. 3 Having this perception of the company is useful as it’s mainly the parents who purchase games for their children; as a result parents are more likely to buy products that are suitable for the whole family. This is incredibly important to modern marketing, as one of the functions of modern marketing is to ensure that your products improve both societies and customers well being. This is emphasised by the societal marketing process: The model argues that the pure marketing concept overlooks possible conflicts between short-term consumer wants and long-term individual and societal welfare. Figure 2. 410 Nintendo has recognised their responsibility and by offering educational and non-violent games thus, they can project a good image of the company, and thus gain a competitive advantage over their competitors, for example Grand Theft Auto has been widely criticised for being too violent. Furthermore, Nintendo uses various positioning strategies such as emphasising their product attributes and benefits offered, by allowing people to exercise their mind and body, to stay young and healthy. This also benefits the society, as the population of the UK is increasingly becoming over weight, therefore this allows people to have fun and loose weight. This integration of their marketing strategies helps keep their title for being the dominators of handheld gaming for kids, and also allow them to be market leaders in the future for products aimed at the female market segment. The third process of the marketing process is developing the ‘marketing mix’ which consists of the 4 P’s. This is everything a firm does to influence customers to purchase their products. Product Products are anything that is offered to the market for acquisition, use or consumption which may satisfy a need or want. 11 There are three levels of a product, and a company needs to ensure that needs are met on each of these levels. I will use the Wii as an example to illustrate how Nintendo meet the needs on each level. Figure 3. 0 Core product: The core benefits that consumers are really buying when they obtain a product. The core product is not the tangible, physical product as this is the benefit of the product that makes it valuable to you. For example the ease of use such as Wii sports allows women, children and seniors to take part, as games such as bowling only takes minutes to master. The wireless controller of the Wii allows users feel as if though they are actually playing the game. Although the Wii doesnt boast all the features and processing firepower of its rivals, its easy-to-use controller will gives it an edge. Actual Product: A products parts, quality level, features, design, brand ame, packaging and other attributes that combine to deliver core product benefits. Nintendo Wii is an actual product. Its name, parts, styling, features, packaging and other attributes have all been combined carefully to deliver the core benefit, which is a convenient and unique social gaming experience for the whole family. One of the main elements of the actual product is the branding. A brand is defined a s a name, term, symbol or design, or a combination of these, intended to identify the goods or services of one seller or group of sellers and to differentiate them from the competitors12. Branding is a vital part of a product, and it can be used as a differentiating, functional legal and symbolic device, it shows sign of ownership and can also be used as a risk reducer. Branding is especially important in the case of Nintendo, as they need to differentiate themselves from the competitors. Having a strong brand will allow them to create a unique position in the market as customers will believe that only they can provide certain benefits as a result customers will be willing to pay premium and refuse substitutes. Augmented Products: Additional consumer services and benefits built around the core and actual products. The Wii case it comes with consumer warranty, online support and help around the clock along with a free support number. In addition by being an international brand in a global market they are able to standardise their products and ‘sell in all national markets the same kind of products sold at home, or in their largest export market. ’ 13 this allows for Nintendo to keep the prices of their consoles low as they do not have to change and adapt their offerings every time they enter a new market. Price Price is the value customers give up or exchange to obtain a desired product. Pricing is important to marketing, as it is the only part of the marketing mix that brings in profit for the company. Nintendo’s products are innovative and provide benefits that competitors can not provide, therefore there are two pricing strategy they can take: Market skimming: using a high price, where there is uniqueness about the product over competition in order to generate maximum profit. Market Penetration: where Prices are initially set low, in order to gain market share. Figure 3. 1 Nintendo has used penetration pricing, as it has priced the Wii nearly ? 100 pound cheaper than it rival Playstation3. It has been able to do by having no HD, no DVD, no Dolby 5. 1, low processor speed compared to the Playstaion3, however, by having a strong value for innovation they have ensured that they do not loose out on sales. Promotion This is how the product is communicated to potential and existing customers. Marketing communication can take many forms from television commercials to blinking messages in football stadiums. Therefore it is essential that all part of the marketing communication to be integrated through a well co-ordinated marketing promotional programme. 14 This is essential as it ensures that a consistent, persuasive and unified message is projected to the customer. In order to ensure that effective communication can be carried out, a company must have a clear target audience, decide on which response is sought and determine which stage of the buyer readiness stage the consumer is at. Figure 4. 0 the Buyer readiness Stages. Awareness is when the communicator needs to build up awareness of the product through simple name recognition method so that customers will purchase the products. Nintendo created awareness designing an innovative Digital poster which is controlled and updated from Nintendo’s Head Office. 15 The technology allows for new promotional messages to be delivered to all stores remotely and in less than 10 seconds. This has allowed Nintendo to send a unified message to all customers and thus ensuring that their strategies are integrated. This shows that Nintendo have truly embraced the revolutionary impact of the internet as a result they are able to re-act quickly to competitive campaign and unforeseeable events, furthermore thy can re-enforce brand messages at the point of purchase to increase awareness and influence buying decisions. Other promotional strategies Nintendo use is the pull and push strategy. Figure 4. 1 Nintendos uses the push strategy to promote its products; this is where higher profit margins for retailers are used to encourage stores to promote a certain product. Nintendo will use celebrities such as Nicole Kidman to advertise their products, thus developing an attitude amongst its target audience that the product is a fashion statement or a lifestyle alternative; as a result this product has become desirable amongst its customers. Stores can push products by displaying the Wii more prominently on shelves and putting up special demo kiosks and supplementary display materials (as shown below). Wii displayed prominently in retail out-let. Demo kiosk of the Wii in retail out-let. However, Nintendo also use the pull strategy whereby the idea is to make the product seem more desirable to consumers first, through massive advertising and promotion by the manufacturer, which will then translate into customers going into the store and demanding that product Figure 4. 2 This strategy was used for the Wii as they are struggling to meet consumer demand for the Wii as the console continues to sell out at retail just as quickly as it arrives. 16 As a result customers will be demanding for the retailer to stock the Wii. Place The final element of the mix is Place. This is the distribution channel/ method the firm uses to make their products available to the final customer. It is critical for firms to be able to manage their distribution cannel as it ensure that products and services are delivered at the right time, right place and the right price. Most businesses use intermediaries to bring their products to market as Producers normally supply a narrow range of products in large quantities; however Consumers want a broad range of products in small quantities. In the marketing channels, intermediaries buy large quantities from many manufacturers and break them down into smaller quantities and broader assortments wanted by consumer, in order to match supply and demand. Figure 5. 0 Channel 1 is called a direct-marketing channel, since it has no intermediary levels. In this case the manufacturer sells directly to customers. For example Nintendo selling their products to the final customer through their website. The remaining channels are indirect-marketing channels. For example in channel 2 it contains one intermediary (retailer). An example of this is Nintendo selling to large retailers such as Curry’s and Dixons, who then sells it to the final customer. The final stage of the marketing process is implementation and control. This occurs after the marketing plan has been completed and the product has been launched and offered to the market. The company takes feedback of the product form customers and by making a competitor marketing analysis. As result the marketing mix can be adjusted if needed to maintain or sustain competitive advantage. Nintendo are constantly respond to what their consumers are saying about their products, furthermore they have frequently asked questions section and advice pages on their website, thus providing personal relationships with their consumers. Marketing in the 21st century Changes in technology have revolutionised marketing, due to the rise of E-business/marketing/commerce, globalisation and social groups. As a result a new marketing is needed for a new kind of society. This has created the notion of relationship marketing where companies are using he internet to tailor products as closely as possible to each individual’s unique needs. Relationship marketing views ‘the consumer as a highly active agent’ unlike the traditional approach which perceives the consumer as ‘passive and receptive object’. 17 . Nintendo have embraced these changes and changed the ways in the way they sell their products, ranging from internet to retail stores, whilst constantly updating their website to keep customers informed. Nintendo have embracing the changes the changes in the marketing environment and trying to build a long-term relationship with customers. For example Nintendo are planning to allow the Wii to stay connected to the Internet in a mode that allows activation on a 24-hour basis form Nintendo. This would allow Nintendo to send monthly promotional demos for the DS, to the Wii consoles in each household. The key merit here is having promotional material delivered to our homes, instead of having to go collect it themselves and it also keeps the company and the customer connected. In conclusion, it is evident that marketing is essential for success in the 21st century where our society culture and values are changing very fast. Marketing allows for a business to understand consumers, and it allows for the company to get feedback so they can understand who and why consumers reject or accept your product. Marketing allows for a business to understand that in the 21st century building relationships outside the sales context is crucial. Giving customers the capability to relate with you as a brand, rather than a business, will offer opportunities to bring those customers close, but to get the most value out of this it is crucial that each customer can direct and define their communications with you.