Mattel Getting it Right is No Childs Play

THE MATTEL TOY DESIGNER HELD everyone's interest as he prepared to push the green launch button. The assembled Hot Wheels brand managers and Mattel top executives marvelled as a tiny plastic car, called Top Speed, leaped off the launcher, zipped through a plastic accelerator tube and whizzed around the race track's curves and loops. The managers were impressed, especially given that Mattel's designers had developed the new car models at Mattel's toy-design centre in El Segundo, California, in oniy five months. However, they knew that many challenges remained. They wondered if the new toy would be the market hit they needed, or whether it would turn out to be just another of the nightmares that were all too common in the toy industry.

Nightmares

It's ever;' parent's nightmare. Suddenly the kids start asking for something called Mighty Morphin Power Rangers for Christmas, First, they have to explain to their parents what a Mighty Morphin is, while giving them that 'don't-grown-ups-know-anything' look. Then the parents start looking for the toys casually on shopping trips. No luck. Then. Mum takes a day off from work to do some serious looking. Still, no luck. Over the weekend, Dad sneaks off to a major mall in another town or city while Mum calls out-of-town relatives to ask them to look. Again, they come up empty handed. It's panic time! Christmas is only two weeks away and all the kids are talking about is Mighty Morphin Power Rangers. How can Mum and Dad explain that Santa has run out of Power Rangers?

It's also every toy retailer's nightmare. Buyers travel to the region's annual Toy Fair, a trade show where toy manufacturers present their products. Thousands of retail toy buyers attend the show to place orders for the following Christmas season. As they wander down the aisles, they see the usual assortment of brand extensions for the perennial favourites, like Barbie, G.I. Joe and Hot Wheels. However, they also see 5,000-6,000 new toys each year, 80 per cent of which won't be around next year. The trick is to pick those that will be big hits.

So, a buyer places a small order for something new called Mighty Morphin Power Rangers. The manufacturer, Bandai America, claims that the toys will be popular after the September start of a television show about the Rangers. Later in the year, the toys begin to sell, even before the television show debuts. The buyer is not sure what to make of it and decides to wait until two weeks into the show to see how the new product moves. The delay proves costly. By the time the buyer places a new order in early October, ever;' other retailer has seen the same trend and has also reordered. Bandai is able to ship only 600,000 Power Rangers despite orders for 12 million] During the next two months, angry parents flood the buyer's store wanting to know how they will explain to their children that Santa ran out of Power Rangers.

This process is no picnic for toy manufacturers either. The annual Toy Show is a make-or-break event. Sometime well before the February .show, manufacturers have to decide which toys to present, which toys will be popular two Ghristmases away. Then they have to hope that they can manufacture enough toys between February and late summer to meet demand. To make matters worse, the major retailers like Toys '>!' Us and major department stores have moved to a just-in-time philosophy to replenish inventory. Instead of placing one big order for toys, they place small orders initially, then reorder based on demand. They want to replace toys on their shelves just as they sell out. This strategy improves cash flow and avoids storerooms full of dud toys. But the just-in-time plan has a significant disadvantage for both retailers and manufacturers. If a surprise hit appears, neither ean gear up fast enough to respond.

The Toy Industry

The toy industry is risky. If companies bet right, they make a lot of money. If not, they lose a lot of money. Toys are also big business. The Toy Manufacturers' Association estimated that the European toy market produced sales of ccu22 billion in 1996. The US toy market is even larger at over eeu23 billion. US manufacturers invent, engineer and market about two-thirds of all the toys in the world.

Analysts attribute toy industry growth to three factors. First, although birth rates in developed countries are declining, parents tend to buy more toys and more expensive toys for their children. Second, the increased number of divorced or separated parents often means the children have many adult relatives to give them toys. Also, many women are waiting later to have children, meaning they and their families may have higher disposable incomes,

Mattel's Top Speed

Mattel is one of the key players in the toy industry. With annual sales of S3 billion, it owns the 38-year-old Barbie and 28-year-old Hot Wheels brands. Barbie alone accounts for 35 per cent of Mattel's sales. Barbie's success, however, has created problems. In the mid-1990s, Mattel needed to lessen its dependence on the Barbie line. It also wanted to reverse a string of recent failures in its boys' division, including the Masters of the Universe and Demolition Man action figures.

As a result, Mattel prepared to launch its new line of Top Speed racers, the first Hot Wheels made from lightweight plastic rather than die-cast metal. The lighter-weight cars could zip around faster. The translucent plastic also allowed Mattel lo give the 6 cm cars iridescent body colours that it believed would appeal to 7 to 10-year-old boys.

Further, Top Speed cars, unlike traditional Hot Wheels models, did not resemble real ears. They had a futuristic design, more like Indianapolis-style racing cars. The cars featured detailed engines; a floating front axle to improve performance on the track; stylish moulded mag wheels; and a front-mounted launching hook. Special rubber bands contained in a launcher powered the lightweight cars, allowing them to be hurled along tracks and through clear plastic tubes at amazing speeds, Mattel planned to offer Top Speed ears in six different models, each with its own exciting name: Cryo Pump, Road Vac, Corkscrew, Shock Rod, Sting Shot and Back Burner.

Mattel planned to package the cars in pairs, including a tube and launcher, with each pair selling for about 85 at retail. This price compared favourably with a ยง2 per car retail price for traditional Hot Wheels models. Kids could also buy special tracks to run their cars on, priced in the S25-30 range. Or they could make their own obstacle courses or drag races with their friends.

As they prepared to launch the new product, Top Speed's brand managers knew how easy it is to underestimate or overestimate market demand for the new product and they did not relish explaining the resulting nightmare to top management, Not only did they have to decide how many Top Speed cars to produce; they needed to develop a marketing programme that would drive the product forward. And retailers had also to be convinced that it would be a winner. They knew that toy marketing would not be child's play.

QUESTIONS

What are the key product decisions that Mattel managers have to make to maintain the competitiveness of their product lines? Should Mattel leverage as much as it can off existing brands like Barbie and Hot Wheels, or should it try to create new brands to grow sales? Why? Why not?

How should Mattel and other toy manufacturers go about developing new toys? How would they decide which new toys to produce? If you were a toy retailer, how would you decide what toys to sell in your stores?

Suggest a marketing strategy for Top Speed.

Would the new-product development approach used be different for a new brand development as opposed to a line extension? Explain.

SOURCES: Allyson L. Stewart, 'Rules of the toy game different for Europe's kids', Marketing Ne-jas (25 October 1993), p. 6, Joseph ljereira, 'Toy industry finds it's harder and harder to pick the winners', Wall Street Journal (21 December 1993), p. Al; Eric Sehine, 'Mattel's wild race to market', Business Week (21 February 1994), pp. 62-3; David Miller, 'NAFTA pays way for all Latin America', Discount Store News (16 May 1994), p. 84; Gyndee Miller, 'Finding next big toy is not child's play', Marketing jVeu-s (23 May 1994), p. 2; Cyndcc Miller, Toy companies hope Co build on brand strength', Marketing Nevus (31 March 1997), p. 22.

Mattel Barbietarget Market Segmentation

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'Price: value plus a reasonable sum for the ivear anil tear of conscience in demanding it.'

AMBROSE PIERCE

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