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Sky Render said:

From the perspective of the dedicated gamer, the SNES was indeed a strong system and a welcome upgrade. To the mainstream gamer, it was an insult as it was asking them to buy yet ANOTHER system; what was wrong with the NES, they asked? (No, I'm not kidding, people did ask that.) For Nintendo, it set up a chain of events that almost ended up destroying them, so it wasn't exactly their best move when they decided to release it. Take your pick of perspectives.

Sega coming out with the Masterdrive/Genesis and kicking the NES' arse for almost 2 years was what was wrong with the NES.  Nintendo suddenly had competition and it was competition with new and better technology.  Nintendo's marketshare started declining and Sega's started skyrocketing.  That is why they created the SNES.

Consumers weren't confused at all.  Sega's amazing marketing push of that time made sure of that.