Marketing Week (MW): Lego has lots of varying products, including Duplo for young children and Star Wars toys. How do you develop the strategy for different goods?
David Buxbaum (DB): We have a giant portfolio map that we use to determine the different segments we are going to pursue and in which ways. Then the product portfolio is developed based on what we’re trying to achieve.
If you take the example of Lego Star Wars, it has two different audiences, children and adults, so we’ll develop separate strategies to align with their needs. For adults, the classic film trilogy is much more relevant. Our marketing for them tends to be focused around fan websites.
With kids, we’ll decide on an age range, say Star Wars is for ages six to 12, and then decide where our sweet spot is. It tends to be in the older part, as if you make it for six-year-olds, it’ll alienate the 11 or 12-year-olds. So the sweet spot will be around age nine to 10 and we’ll focus most of our campaign around that.
What is most critical for us is what we call ‘insights to action’. The idea is that the actions that we take are best based on consumer insights.
We spend a lot of time making sure the tone of voice is age-appropriate. Everything we put out is tested with children to make sure it works as optimally and efficiently as possible.
MW: How will you grow the business?
DB: We’re trying to use engagement to drive affinity with our brand. We have been very active in terms of leveraging things like Legoland Discovery Centre, Legoland Parks and Lego Club magazine to capture the imaginations of kids. For the first time, we’ve had television content on air, on Cartoon Network, and have been very active in the digital space.
The second aspect is making sure we have a product offering for a broad base of consumers. That’s not just ages, but genders, needs and playing patterns. We make sure we’ve got something for all ages, from Duplo bricks to collectibles for our adult fans.
MW: Have there been any segments that you’ve especially targeted this year?
DB: Our core audience is fourto nine-year-old boys, but we also have a couple of other segments that are important. In many cases, Duplo bricks will be the first toy construction experience a child will have.
We’ve also tried to appeal to older age groups, with things like Technic, Mindstorms and Architecture, which is targeted at adults and aspiring architects.
Nostalgia plays a role in the strength of our brand. If you had a positive experience of Lego as a child you want to share it as an adult. This year we ran our first marketing campaign targeting dads. Lego House was all about the nostalgia factor of building together with your child. It doesn’t feature a specific set, rather it shows some of the little nuances of how they build differently – the son wants to put a big radar antenna on the top and the dad wants it to be nice and symmetrical.
MW: How does the UK market compare with the rest of the world?
DB: We tend to do most of our business with a younger age set in the UK than the rest of the world. Lego City – including fire, police and farm characters and pieces – is the third or fourth largest toy property in the market.
But when so many people associate the Lego brand with City toys they tend to think about the brand as a bit younger than it really is.
Part of our strategy has been to make sure that we have a strong portfolio of properties for older ages as well to make sure that the brand stays, not only age-appropriate, but aspirational as well.
MW: Is the marketing strategy different for your digital and online games to your physical building bricks?
DB: We have a number of different offerings in the digital and gaming spaces, from platform video games people can play on the Nintendo Wii or DS or the Xbox 360, to free gaming online.
We recently ventured into massively multiplayer online gaming (MMOG) with Lego Universe. It wasn’t successful, but we did learn a lot from it. We try a lot of platforms because different kids have different touchpoints to access our brand. Sometimes there’s a revenue stream, but these are also marketing vehicles. It’s possible that in 10 or 20 years’ time, the way that people interact with our brand will be very different to now. So I think it’s important for us to be experimenting in different digital touchpoints because that’s where the kids are going.
MW: Why did you find it difficult to convert Lego Universe users to full paying subscribers and what did you learn from it?
DB: When we started the initiative four years ago, there was a substantial PC gaming market but that has pretty much dried up. Consumers now expect things online to be free. There are a few successful MMOG models, but they are almost all targeted at adults.
Adults have their own money and they don’t have the limitations of homework. We’ve learned that speed to market is critical. From an IT infrastructure standpoint, we found out how to set up a gaming platform, how to interact on it and ultimately the things that make up our brand that resonate with kids in the digital space. These are all things we’ll apply in the future.
MW: How do you measure return on marketing investment?
DB: We recently carried out a year-long research project in a few core markets including the UK. We measured marketing return on investment (MROI) and marketing return on objectives (MROO). The latter was a little bit more ‘squishy’ because not everything you’re trying to do has immediate sales impact and some of it is about long-term brand-building. As a privately held company, we don’t have shareholders that we have to answer to every quarter. This allows us to take a much more long-term approach.
MW: How do you choose which film properties to take on under licence?
DB: Properties that have lots of vehicles, like Cars or Star Wars, or really dramatic play sets, like castle environments, resonate well and we can make great product ranges.
The film also has to be global in scope. That’s not to say that we haven’t done things that are local, but there are economies of scale if you can use something that works in multiple markets. We can invest more in the tooling and the elements to make it more detailed.
MW: How does social media fit into your marketing strategy considering under-13s are not officially allowed to have Facebook and Twitter accounts?
DB: Lego is very careful about its use of social media. We are hyper-sensitive about what is not appropriate and/or legal. We have a Facebook page and on Flickr you can find millions of images, but ultimately all the social initiatives we do are targeted at adults. The only exception to this is when we have a controlled environment, say the message boards on Lego.com. However, no child can post anything without it having gone through a live moderation process. We have an obligation to make sure posts are appropriate and we rely on children for our success.
MW: Do you use children’s social site My Lego Network as a marketing tool?
DB: The intention behind My Lego Network is to provide another forum where users can be social. Pride and achievement figures too – the idea is that there’s pride and joy in building and creation. Kids take a tremendous amount of satisfaction by saying: “Look what I did.”
MW: What will the challenges of 2012 be?
DB: The economy is something that is top of our minds. We don’t know what impact the Olympics is going to have, not just on Lego but the toy industry and maybe the consumer products industry in general. You still have to shop for food if you’re a parent but are you going to shop for toys while the Games are on?
Lego in numbers
- Net sales for the first half of 2011 were kr 7,355m (£852.2m) compared with kr 5,863m (£679.3m) in the same period last year.
- The operating profit was kr 2,030m (£235.2m) compared with kr 1,470m (£170.3m) for the first half of 2010.
- Lego’s share of the global toy market is 7%.
Lego – the real story
In the first nine months of 2011, Lego’s Minifigures and Star Wars range were the top two best-selling toys in the UK, according to NPD EuroToys. In August, the company reported strong interim results, with net sales increasing by 25%.
David Buxbaum, Lego UK’s senior director of marketing, attributes this success to experiential roadshow campaigns for Lego Ninjago, its Japanese-style ninja game which makes robots that ‘save the world’, and TV content in the shape of Lego Hero Factory.
The brand’s Ninjago Fire Temple also features in the Toy Retailers Association’s 12 predicted best-selling toys at Christmas and Buxbaum predicts similar success next year.
But it hasn’t all been plain sailing. Last month, Lego announced the closure of its online game Lego Universe.
Fears are also growing about whether parents will still spend on toys during the 2012 Olympics.
Lego real-time reader responses
Is using licensed TV and movie theme editions the only way classic brands can compete in 2012?
David Buxbaum (DB): Absolutely not. Our Star Wars, Harry Potter and Cars ranges represent only the minority of our sales. Ultimately it’s the strength of our brand, of our play patterns and innovation that drives our success, not just with the licensed products, but with everything else, whether digital, unique themes or great functions.
How much do the Legoland attractions contribute to overall brand awareness, sales and market feedback? How is this measured?
DB: We view having a successful theme park a massive competitive advantage and people don’t make the distinction between the Legoland Park and the Lego brand. It’s great for us because the millions of kids that go in there every year associate having a fun experience with the Lego brand.
However, Legoland Parks are owned by Merlin Entertainments, and Lego and Merlin are different companies. The revenue Merlin generates from Legoland Parks is not something we receive but we work quite collaboratively together as their success is very much linked to our brand. It’s a great partnership.