Paper 2 Product Life Cycle, Competition, Branding, Pricing, Media and Messaging of LEGO

The LEGO Company was founded in 1932, in Denmark [1]. Today, more than 80 years later, the company is the synonym for construction block toys and one of the largest toy companies in the world [2]. In the construction toys business, LEGO has made its name and is the mostly known company. There still are some direct competitors of LEGO in the construction toys industry, e.g. MEGA Bloks, a Canadian company with a considerably large product line and some major franchises such as World of Warcraft, Need for Speed, Halo, Smurfs, and Hello Kitty, which gives this company some room in toy stores [3]. Even though LEGO has some direct competitors, these are not the companies that represent the bigger threat. There are some toy companies that are bigger than LEGO, which makes them the biggest competitors. Mattel and Hasbro are some examples; these three companies, LEGO, Mattel and Hasbro, are the largest toy companies in the world [2], and so, the larger competitors for a slice in the market share of the toys industry. This constant fight for market share is the reason most of toys companies need to keep innovating constantly, following their consumers trends. LEGO is in an industry that seems to be in a transition between the Growth and Maturity stages of the Product Life Cycle, as there are some existing characteristics from both stages. The constant need for innovation and the fight for consumers, and the increase of toy sales [4] are characteristics from the Growth stage. But the almost total control of a small number of larger companies (as Mattel, Hasbro and LEGO) in the market, the fight for new buyers and to hold market share, are some characteristics of the Maturity stage. Therefore, LEGO needs to be prepared to compete against these bigger companies, as it want to stay on top and keep its market share. Furthermore, nowadays children are learning to deal with digital devices in a very young age and they have more ways for recreation other than toys. So, kids discover video games and computer games in very young age, which makes these entertainment industries, LEGOs Secondary competition. Therefore, the company not only has to influence children to choose its toy brand, but also has the job to persuade them not to choose a video game or computer game instead of a toy. The LEGOs biggest primary competitors (the other toy companies, i.e. Mattel, Hasbro) have some characteristics that the company hasnt achieved yet. These companies were able to make products that were accepted by the public, memorable and, sometimes, very gender specific. This way, when parents were thinking about
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buying a toy for a girl, they would probably think about a Mattels Barbie doll, and if it was a boy, it would probably be a Mattels Hot Wheels or an action figure (e.g. Mattels Max Steel). If they wanted a board game, it would probably be Hasbros Monopoly. Although the parents minds have been changing and LEGO products are now one of the most sold toys in some stores [5], LEGO still doesnt have that one memorable product, that is remembered by the parents. And one of the company biggest problems for a few decades has been dealing with female specific products. The company new attempt to gain some female consumers is the LEGOs Friends, which focus on the stereotypical image of girls (pink, purple and baby blue bricks, with different minifigures as present in the other products and dedicated to activities like baking, hair styling) and reinforce the fact that majority of the companys products are made for boys (an approach that the company has taken for almost three decades), a strategy that has been creating distress among some parents [6]. Although the company has some issues with its products, the consumers know they are buying a product with a better quality than the other construction toy companies (e.g. MEGA Bloks). Therefore, some of LEGO products seem to have a price based on a cost-oriented or a competition-oriented pricing strategy. Due to a higher quality material and process control present on the LEGO products [], the cost for the process is higher than for the lower quality products, therefore, a higher price is expected, which explain a cost-oriented approach. But a competition-oriented approach can also explain some of the products price. As the company want to show that its products are better than the competition, an above-market pricing strategy could be the reason why LEGO products are set apart from the rest. This way, a basic tub of 500 pieces of Mega Bloks costs $26.99, meanwhile, a tub of 480 Bricks and More Lego bricks costs $29.99 [7]. But, there are some LEGO products that have a higher price than usual. This price increasing generally happens with special sets or the franchises sets. For example, a set from the LEGO Master Builder Academy Action Designer, with 576 pieces, costs $79.99 and an Umbaran MHC (Mobile Heavy Cannon), with 493 pieces, costs $49.99, even though 480 bricks cost $29.99. This higher cost is related with the exclusivity of these products, especially the franchise sets, which are generally time limited editions (most of them are made for a maximum of two years nowadays).Therefore, a prestige pricing strategy seems to be used for these special products. Furthermore, the company uses an odd-even pricing strategy (as shown in the prices above), which may be an attempt to raise demand for its products. And a higher quality product is not the only thing that the brand offers for its consumers. There are more than 30 LEGO retail stores in the US, each store provides a variety of products, as well as the choice for purchase of individual bricks, giving the
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customer an option for customization [8]. Furthermore, some stores have a playground for children to play with LEGO products, which improves the experience of going to a store for parents and children. The web store offers the same level of consumer experience. Its possible to choose most of LEGOs products and customization is also available, in addition, a VIP membership is available (which allows the consumer to enroll a point-reward program and get special offers and exclusive sets), there is a daily special offer and a social network for consumers to share their creations and build LEGO designs with an application. And the company is not present just in its own social network; there is also a LEGO Facebook profile (which allows consumers to share their LEGO moments, photos and videos), a Pinterest page and a LEGO Club channel on YouTube [9]. These are some reasons for the company growth in the last years, why it became a synonym for construction toys and why the company logo is very well known around the world. The LEGOs logo hasnt change for a decade, the same colors are used for more than half a century and the letters style remains almost the same. This way, the LEGO logo is recognizable through generations, and even though most people dont know what LEGO stands for (abbreviation of the Danish words leg godt, in English it means play well [10]), they know it is a construction toys company. But, even with a very familiar and famous logo that is responsible for the company recognition, its slogan is not very famous. The slogan was Just Imagine until 2002, after that it became Play On [11], but the company still doesnt promote or make use of it (the new slogan doesnt appear on the web site, on the products or advertisements), which should be a way to reinforce the companys vision in its products. Furthermore, the slogan is not the only element the company could work on. The LEGO bricks are not eco-friendly (they are composed by a non-biodegradable material [12]) and they are hard to be recycled in the same recycle process as common plastic. The company states that they expect that LEGO products are be passed from generation to generation, not thrown away, and that is the kind of recycling the company encourages [8]. Even so, a recycling program could be created: During manufacture, most of faulty pieces are crunched and they go back to molding, recovering the material [8], a similar process could be used to reutilize most pieces that people want to throw away. As it is possible to see, the company still has some issues it could work on, but it doesnt decrease the success it had at being able to create a very strong brand. LEGO has always tried to raise the awareness and interest of its consumers or prospective consumers through its promotional campaigns. The Build Together campaign is a good example. It has everything to do with raising the consumer brand awareness, as it just focus on the process of building with LEGO bricks without trying to promote a
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specific product. An attempt to raise consumer interest can be seen in most of LEGOs TV advertisement, in which specific sets are promoted by trying to make the viewer imagine a scenario and a story with the product. This attempt can also be seen in some of LEGOs special deals, which generally offer exclusive free accessories when a specific set of LEGO is bought, raising consumer interest for selected products. Focusing on those objectives is a good strategy, as there are several toys and ways of entertainment available for children and their parents to choose, and so, trying to raise brand awareness and interest becomes a major requirement to compete in the market. TV advertisement and giving free products with a purchase are some of the tactics related with the Integrated Marketing Communication tools used by LEGO. The first tool, and the one the company has been using for years, is advertising. With this tool, the company tries to gain the consumer attention, by focusing on its brand (Build Together campaign) or promoting a specific product. LEGO has used TV commercials for years, and they make it possible to see how the company and its focus have changed for the last half century. Magazines are also another media the company uses for its ads, and some of them became very popular (e.g., the 1981 What it is is beautiful ad). And children are starting to use computer and digital devices with an earlier age, so, internet has become the relatively new media that the company has been using to promote its brand. By using these three tactics, LEGO is able to be present in the daily life of children and their parents, as it has some presence in what they see, read or play with. As children are the focus of most the current advertising strategy used by LEGO, an attitude test could be used to measure the efficiency of this IMC tool. As kids are more susceptible to advertising messages (especially TV ads) and they can really persistent with their needs and wants, measuring their excitement and attitude with the brand or a product would be the best way to evaluate if the advertisement is having (or is going to have) any effect on consumers. If parents are the focus on the advertisement, an unaided recall would be one way to determine if the companys tactics was more appealing than the other toy companies, what would result in an increase in brand awareness and recognition, what is necessary if the company wants those parents to bring their children to the store or to buy its products. Another tool used by LEGO is sales promotion. The company uses this tool especially when they want to raise consumer interest for a new product or with a product that is going to be discontinued. Deals are usually used for products that are going to be discontinued, giving a last chance for costumer to acquire those products before they are gone. Free accessories are an example of Premiums, and this tactic is generally used with relatively new toys, an attempt to try to raise interest in the new products. The company also has a Loyalty Program, which is one of the features present in its VIP Program and is the kind of tactics used to increase the number of
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recurring consumers. Therefore, this sales promotion strategy can attract new consumers that may be looking for a deal or an exclusive product, or the loyal consumer, that not only has some exclusive deals and products for engaging the VIP program, but also will be able to exchange the VIP points. To measure the effectiveness of this ICM tool, an evaluation of the number of sales could be made for the Premium and Deals tactics. As those strategies are generally focused on specific products, a raise on sales of these specific products, when these tactics are implemented, is expected if the strategy is working. This way, it is possible to obtain a quantitative analysis of the effectiveness without the necessity of questioning consumers. To access the effectiveness of the Loyalty Program, it would be necessary to know the percentage of sales is made by different consumers participating in the program. If this percentage is very small, it may indicate that the consumers are not looking to participate or the number of recurring consumers is small, and some changes or better publicity may be necessary to increase the effectiveness of the program and ensure a larger number of loyal consumers.

References
[1] "LEGO Official Website." N.p., n.d. Web. 21 Jul. 2013. < http://aboutus.lego.com/en-us/>. [2] " Lego Shrugs Off Toy-Market Blues." The Wall Street Journal. N.p., n.d. Web. 22 Jul. 2013. <http://online.wsj.com/article/SB10001424127887323549204578317603729616028.html>. [3] "Lego clone. Wikipedia N.p., n.d. Web. 22 Jul. 2013. <http://en.wikipedia.org/wiki/Lego_clone/>. [4] "Despite Higher Demand for Toys, Global Toymakers yet to Convert Market Growth into Actual Sales in Emerging Markets. Euromonitor International N.p., n.d. Web. 21 Jul. 2013. <http://blog.euromonitor.com/2013/05/despite-higher-demand-for-toys-global-toymakers-yet-toconvert-market-growth-into-actual-sales-in-em.html>. [5] Top Toys -Target Website N.p., n.d. Web. 22 Jul. 2013. <http://www.target.com/c/top-toys-ways-to-shop/-/N-5cgh5> [6] "Legos and Gender." Love, Joy, Feminism N.p., n.d. Web. 22 Jul. 2013. <http://www.patheos.com/blogs/lovejoyfeminism/2012/04/legos-and-gender.html>. [7] Lego vs MEGA Bloks diffen N.p., n.d. Web. 22 Jul. 2013. <http://www.diffen.com/difference/Lego_vs_Mega_Bloks> [8] Everything You Always Wanted to Know About Lego. Leg Godt N.p., n.d. Web. 21 Jul. 2013. <http://lego.gizmodo.com/5019797/everything-you-always-wanted-to-know-about-lego> [9] See How LEGO Interlocks on Social Media. Business 2 Community N.p., n.d. Web. 22 Jul. 2013. <http://www.business2community.com/social-media/see-how-lego-interlocks-on-social-media0417023> [10] "Lego. Wikipedia N.p., n.d. Web. 23 Jul. 2013. <http://en.wikipedia.org/wiki/Lego/> [11] "Lego timeline. Wikipedia N.p., n.d. Web. 25 Jul. 2013. <http://en.wikipedia.org/wiki/Lego_timeline> [12] "Legos. Little Clickers N.p., n.d. Web. 26 Jul. 2013. <http://littleclickers.com/legos/>