Macdougall knew the younger the audience he targeted the less likely they were to already own a Game Boy product. The teen market was more sophisticated in a variety of ways. First, many in this segment already had a black and white Game Boy and a library of five or six games. As a result, they viewed the product as “old technology”. Many teens appeared to have moved past the handheld machines to consoles, which offered greater speed and game complexity. Also, teens tended to purchase machines with their own money. Their purchases occurred year round, in contrast to the purchases related to kids and tweens. Approximately 75 percent of all Game Boy users were male. If Nintendo Canada targeted teens that had used Game Boy in the past, they might view the Game Boy as a product that was great when they were younger, but not sophisticated enough to meet their current gaming needs.
If he were successful in getting teens to adopt, this might spur sales among kids and particularly tweens, who often aspired to use the same products as teens. On the other hand, if Nintendo targeted teens and was unsuccessful with them because Game Boy was something “I had when I was a kid,” then perhaps kids and tweens would avoid it as well. If Nintendo targeted kids and tweens and was able to convince kids/tween non users of Game Boy that Game Boy Color was a “cool” product, it could become a “gotta have” for the younger set. Furthermore, if he focused on the kids and tweens, it might turn off the teens because Game Boy Color was “a kid’s toy.” He saw significant risks associated with each option, and he felt it essential that Nintendo have a quick success to ensure retail interest in the product and to gain retail momentum.
MacDougall was planning to spend $3million on corporate advertising for Game Boy Color in the first year rising to perhaps $7 million in the second and third years. NC typically supported its retailers’ advertising efforts with a 2% cooperative advertising allowance. It appeared that NC would have access to a broad selection of ads from the US that could appeal to all the target segments he was considering. A major decision in the advertising area would be the selection of media vehicles, so that the ads could reach the target audience. MacD planned to spend around 80% of the Game Boy corporate advertising budget on television with the balance on print and out of home. Nintendo believed that $500 thousand of advertising targeted at kids and tweens (8-14 year olds) over a four week period would generate about 100 gross rating points.
In the merchandising area, MacD planned to spend $400 thousand in the first year and $800k in each subsequent year on point of sale materials. In addition, he would need $ 1.1 million in the launch year, and $2.5 million in years two and three to cover the cost of sales promos. This spending would be for contest and cross promotion with manufacturers of other product purchased by Game Boy Color’s target market. Ron, NC director of communications and consumer support, felt a crucial factor to Game Boy Colors success would be the consumer sampling program. Three major sampling approaches were being considered. The first approach was to place a low cost interactive display in high volume retail outlets. Teens might visit these stores alone, but kids and tweens would often visit these stores as part of a shopping trip with there parents. No sales support was expected for the displays.
Ron estimated that the retail interactive displays would be in use around 20% of store hours for an average of three mins per use. Each interactive display included on GBC unit and game and Cost $250. Ron estimated that there were 1,000 potential outlets and that Nintendo could achieve an 80% placement rate. Also considered was a sampling strategy call Mall Tours. Here Nintendo reps would visit major malls and set up kiosks that would be decorated with banners and would feature dramatic interactive displays and product info. Nintendo reps who were highly knowledgeable gamers, would show game insights and tricks that kiosk visitors could use to improve their scores on popular games. Mall Tour vistiors could also enter contests for Nintendo products. Each mall visit lasted one week and cost about $10 thousand per mall visit.
Nintendo had the capacity to run up to 25 mall tours per year. It was expected that the interactive displays would be used around 60% of the time with each visitor contact typically lasting six to eight mins. There was the option of a cross Canada tour, which would cost $150 thousand per year for major regional or national events. These events took place in the summer months. The approach would be the same as the mall tours, but with larger kiosks and with more freedom to promote in a bold manner. The usage levels, because of the high volume of people at such events, would be the highest at 80%. A final element of the marketing communications strategy was public relations.
Ron planned to have Nintendo marketing reps take the new hardware and software to leading gaming magazine and Web publications. The reps would visit each publication about three months before launch and let the writers play with the new product for five or six hours. The objective was to get favorable coverage and the front cover of the magazine two months before launch. The combined monthly circulation of the top seven magazines was 110 thousand Canadian readers. Nintendo Power a Nintendo Magazine had a Canadian circulation of 60 readers monthly.
Nintendo of America had decided to price GBC at $79. At mid 1998 exchange rate this translated to Canadian $120. The software was expected to retail at an average price of $43 with a retail margin of 20%. MacD expected Nintendo Canada would achieve its normal 40% margin on GBC cartridges. However, he was concerned that the hardware price would be too high to drive high volume sales in the Canadian market, particularly if NC decided to focus on the kids/tween market. However, if he recommended a price under Cdn$100, this would be the lowest GBC price in the world, and there would be the potential for such a portable product to be exported to other markets.
He knew this would be an issue of Nintendo US executives. In addition, at such a low price, NC gross margin would be only about 5% if Nintendo gave retailers their normal 6% margin. He also wondered if the resulting retail margin dollars would be sufficient to motivate Nintendo retailers to carry and aggressively push GBC. Since retailers often discounted the hardware, actual margins for hardware was often less than 6% for them. Product
If NC retained the old version of GB, MacD believed that the retail price could not be set higher than $49. At this price, the black and white version would not generate any profit. On the plus side, the backward compatibility of GBC games meant that consumers could buy the B&W GB and then trade up later without making games obsolete. A second issue was whether NC should bundle a game cartridge with GBC at launch.