By re-engineering their value proposition, management at Japan’s Nintendo broke free of the knife-edge margins that characterize the console gaming industry and generated a model for value creation in a market entirely new to gaming.

Nintendo’s Wii, marketed with the tagline “active, social gaming in your living room,” broke the mould in console gaming.

Traditionally, gaming console companies sold their hardware at a loss, hoping to make up the difference by selling game titles to console owners over the life of their units.

Competition in the console market was primarily based on technology performance. Companies attracted buyers by offering faster graphics processors, superior physics engines, chip innovation and other hardware tweaks.

For years, Nintendo had been suffering from declining market share and shrinking margins. The company’s newest console, the GameCube, was being out-competed by Microsoft’s Xbox and Sony’s PlayStation. Finally, management at Nintendo decided to take a chance on a new model for creating customer value.

The console they developed was relatively cheap to build and worked with a game controller able to track body movements rather than just respond to button presses. Nintendo realized that for many people the gaming “fun factor” wasn’t necessarily tied to hardware performance. Making the gaming experience easy and fun was a way to enhance customer value without the need for intense hardware performance competition, and so the Wii was born.

With the Wii, Nintendo hoped to attract non-gamer customer segments to the market. Nintendo targeted women, families and all those not typically associated with “serious” gaming. In the words of Nintendo’s president, the Wii market is “teeming with women, pensioners and repentant couch potatoes.”

Re-engineered value proposition

By changing their value proposition, which before might have been “delivering intensely realistic gaming experiences for the hardcore gamer,” to focus on delivering fun, interactive entertainment for the whole family, Nintendo revolutionized the gaming market and won a valuable new customer segment while earning superior profit margins.

The Wii was launched in 2006. By 2007 it was outselling Sony’s PlayStation three to one. A year later, Nintendo’s share value had quadrupled and the Wii was still outselling the Xbox and the PS3. To date, the company has sold over 67 million units of the Wii console, and avid Wii players reportedly include gamers as young as 22 months, and some as old as 103. Even Queen Elizabeth II of Britain is a fan.

Key lessons from the story of Nintendo’s Wii

  1. Customer value isn’t necessarily tied to the product attributes on which your industry competes. In the case of Nintendo, the company was able to unlock additional customer value by reducing its emphasis on hardware performance.
  2. Targeting non-customers with the right offering can open up new markets.
  3. Creating substantial customer value doesn’t have to come at a high cost. You can have very happy customers and healthy margins.
  4. Customer value can derive from emotional responses to your product or service, just as much as from price/quality combinations. Nintendo smartly chose to focus on the “fun factor,” rather than competing in the race for higher performance.

See additional learning materials for value proposition.


Nintendo. (2010.) Retreived Apri 26, 2010, from
Osterwalder, A. (2009.) Business Model Generation. Self-published.
Osterwalder, A. (2009.) Business Model Generation. Self-published.
Blakely, R. (2007, July 12.) Wii are swimming in a clear blue ocean. Times Online. Retrieved April 26, 2010, from
Schoenberger, C. (2008, December 1.) Wii’s Future In Motion. Retrieved April 26, 2010, from
Parker, A. (2007, September 14.) OAPs say nurse, I need a Wii. The Sun. Retrieved April 26, 2010, from
Cavelli, E. (2008, January 7.) Queen Elizabeth Adores The Wii. Retrieved April 26, 2010, from