Japanese gaming firm provides lesson

OPINION: "Gamer" brings to mind a pimply youth, pale and unhealthy from too many hours twiddling in front of a TV. These days it could just as well be a fit young woman or an older couple.

Japanese company Nintendo has been the key contributor to this change with a clever marketing strategy.

It is a story with relevance for many Kiwi exporters contemplating taking on overseas markets.

Nintendo has a long history in gaming. It was formed in the late 1800s as a manufacturer of playing cards, the PlayStation of its time. After forays into various ventures, including ill-fated attempts at selling instant rice and running a chain of the infamous Japanese love hotels, Nintendo settled on the gaming console sector in the 1970s.

Classic game titles such as Donkey Kong and Super Mario Brothers followed on various Nintendo platforms, from handheld devices to the TV-connected console.

Fast forward to the 21st century, and Nintendo was a long way behind Sony (with PlayStation) and Microsoft (Xbox) in the gaming console market. The two heavyweights were battling it out in an arms race of better graphics, controls and gaming titles. They served a demanding market of competitive young males, with Nintendo becoming increasingly irrelevant.

Therefore recent news that Nintendo passed 73 million in worldwide sales for the Wii gaming console should be surprising. Although only half the total sales of the PlayStation 2, the biggest seller yet, the Wii has hit its current mark a lot quicker than its fellow Japanese competitor.

On current growth trends the Wii is predicted to eclipse the PS2 and become the top-selling console.

How did this happen? How did Nintendo outflank its much more powerful opponents? The Wii had inferior graphics and a limited catalogue of games. Wasn't it the equivalent of turning up to a gunfight with just a pocketknife?

Nintendo, although a large company with a lot of experience in the gaming sector, did not try to take on Sony and Microsoft up front.

It didn't try to compete in the same market segment with a console and games that were cheaper, had better features or a different distribution model. That would have been a valid strategy, lower risk but less likely to deliver good returns.

Nintendo employed what has been called the "Blue Ocean" strategy. Coined by two European academics, it refers to the approach of targeting untapped markets - the undisturbed, blue areas of ocean. As opposed to the red zones, turned bloody by fierce competition.

Nintendo's blue ocean was market segments previously not interested in the types of gaming offering by PS2s and Xboxes. The Wii was easier to use, more interactive with its heavy use of motion control technology, and focused on areas such as games for younger children and fitness. Families could play together, older people could bowl and even young women could enjoy fitness games like Wii Yoga.

Think of happy families playing Wii tennis instead of lank-haired youths killing and maiming in Grand Theft Auto or Halo. This completely new market drove fast adoption and strong sales.

So can anyone use a Blue Ocean strategy?

The mistake some companies make is thinking a Blue Ocean strategy is created by building a completely new product, that coming up with something totally new is how you will tap into this fresh market opportunity.

Rather, the Blue Ocean strategy is about applying your existing knowledge, skills and technology to a customer problem that hasn't yet been fulfilled.

Nintendo didn't try to invent a completely new product concept to compete directly with Sony and Microsoft. There was no holographic gaming or similar to draw gaming fanatics away from their PS2s and Xboxes (in fact, the Wii has resulted in Nintendo losing some of its traditional gaming customer base).

Gaming consoles had been around for a long time, so Nintendo didn't invent a new product category. What it did was tap into a new market need, for example a young woman wanting tools to do fitness at home or families wanting a shared inside activity.

People who would have never dreamed of buying a gaming console before were lining up in their millions to buy a Wii. Having the courage to focus on a new market gave Nintendo growth.

It's a valuable insight for Kiwi exporters, particularly those in the technology sector. Inevitably up against big, powerful opponents, New Zealand companies tend to battle away with a better mousetrap at a lower price. The Wii story shows you can succeed with something that is not necessarily a better technical product, but a better way to satisfy a different set of customers' needs.

With some smart thinking, Kiwi companies could apply their knowledge, technology and skills to a different market problem, a Blue Ocean of opportunity.

Owen Scott is from marketing company Concentrate.