Hard game of a toy business

By AzerNews

I remember my early preschool childhood as a time filled with wonderfully colorful toys. Besides having a limited selection - I have spent my early childhood at the times of a soviet dusk - only a few of them earned a special place in my heart. A couple of dolls, a kitchen set, and small musical instruments - today they are part of a family legacy. Looking back, I still wonder, what was so special about them?

Nowadays, kids are drifting away from toys that have a physical presence, exchanging them for a digital one. Digital games played on laptops, tablets such as Apple's iPad or on mom/dad's smartphones are putting pressure on more traditional forms of play, such as board games and puzzles. Taking this into account, one can see that kids prefer new videogame consoles - this segment draws the buyers further away from traditional games and toys. Having said that, speaking from my personal observation, kids are getting more tech confident - toys that are labeled for children aged 8 and older grab the attention of kids aged between 6 and 9. This phenomenon causes the toy producers to wonder whether they will be able to grab the attention of kids, let alone the retailers.

According to Michael Kelter, an analyst at Goldman Sachs, "toys for preschoolers" (for 2-6 year old kids) is now about $1 billion smaller than it was 10 years ago[1]. Today, two of the world's biggest toy companies - Mattel and Hasbro - are working to make some room for their brands in the digital world. Hasbro, for example, sells a version of Monopoly that interacts with an iPad, but the profits are not nearly as rich in the digital world as they were in the physical one.

Some analysts suggest that instead of replacing the existing products and adjusting their business plans, toy business giants should invest heavily in emerging markets such as Russia and Brazil that represent the greatest geographical areas of growth. Of course, demographics are highly important for the toy industry. Yet, with the smart adaptation to the modern business environment, these giants or even small business owners can outperform the market in the long run - developed markets, such as Australia, Western Europe, Japan, and North America are leaders in terms of per-kid spending on toys[2]. The "Generation Give-In" style of parenting has been embraced by moms and dads who feel guilty for working long hours[3].

Research shows that amazing marketing techniques that have a great impact of buyers are connected to ordinary things which have been treated a little bit differently. In order to tackle the problem, one needs to understand a simplified model of a toy business, where we have: a) consumer - kids of 2-6 years of age; b) buyer - parent; c) retailer - some national brand store, and d) producer - some big (or small) commercial enterprise. In order to solve the task of how to effectively reach the preschoolers' toy segment, one need to understand what influences the purchase.

The main idea is that in order to market any product for a certain audience, e.g. the kids at their earliest stage of growth, one need to combine the knowledge of a child's development and consumer psychology with a commercial understanding of the market.

For example, based on the article in The Financial Times [4] one can learn from a child psychologist who was asked to look at a "first computer" type toy which was not selling. An expert on the developmental psychology of the preschool aged kids discovered that the product was very fancy, but the "on/off" switch was indented - meaning you needed to press it with a single finger. Young children use their whole hand, so they were not able to switch it on. Ultimately, it was taken off the market.

By studying the basics of a child developmental psychology, one can see that preschoolers prefer toys with realistic details and working parts, because at this age (average of 5) they have an increasing interest in dramatic and male-believe plays[5]. In order to make use of that and make a good profit, one can produce and promote puppet plays, construction activity sets- often with a plan or goal- as well as play scenes with small figures and cars. Here is a lesson for the producers - study your target audience on a proper scale!

With so much information available to parents, there has been a shift in attitude, as fathers and mothers study researches done on child development to select the toys that help their children to grow their abilities. For example, research shows that playing with blocks, puzzles and construction toys helps children with spatial development, while children with better spatial thinking are more likely to eventually enter mathematics, engineering, science and technology. Here is a lesson for the retailers - preemptively adjust your selection!

Retailers as well as toy producers should also study one of the main links of a financial transition "goods for money" - the buyers. Consumer surveys show that men are increasingly making the buying decisions for families, reflecting the growth in two-income households and those in which the women work and the men stay home[6]. This has the following affect on the toy business- consumer products have traditionally been marketed to appeal to women, and stores have been designed for women's sensibilities. Now, some brands and stores are catering directly to male decision-makers.

Competition from supermarkets which have continued to expand their non-food ranges into a number of different areas, including toys and games, has also affected toy store chains and independent operators, because supermarkets can often undercut toy retailers on price due to their economies of scale. To work with this and to attract the attention of buyers, a specific toy retailer can start positioning itself in a caring and thoughtful environment. Besides creating a good and friendly atmosphere in the store with the display of play tables and game rooms, one can offer a discount of 10% for each person that hands in an old toy and buys a new toy. This idea in intended to encourage people to come to a specific store, while demonstrating that the business community actually cares for its consumers. The old toys that ware received during such campaign can be donated to under-privileged families or orphanages.

Research shows that toy business is generally a highly visual world. By using a video messaging technique (long and short promo video rolls, product placement in a cartoons or sitcoms) one can offer proof that a certain toy business is the best, the cleanest, and the safest, because after all we are talking about children, and parents are specially careful when it comes to their safety. No matter how good your marketing team and marketing strategy is, no toy business will be successful without proper health standards observers. With the full observance of quality control, toys for preschoolers should be sturdy, should not break easily into small pieces or have sharp edges, should not be made of glass or fragile plastic, and should be made from nontoxic materials.

In my paper, I demonstrated the key steps to benefit from a properly designed and marketed toy in the long run - to effectively reach the children segment of a market. Children's developmental psychology in this context can be a very valuable tool. I remember how much I liked to copy the daily routine of my parents in my early childhood - to mimic running a household by playing with the kitchen toys or imitating how my mom handled my younger sister by playing with my dolls. Nowadays, kids at the preschool age do the same - they try to mimic the daily routine of their surroundings.

Having said that, I'd like to point out that children's physical and emotional status and their social and psychological development greatly depend on how their family operates - if a parent spends hours behind the computer at home, soon the kid will do the same. A quick fix like buying a gift or treat might provide a temporary solution to the problem, but it can also give rise to a bigger problem in the future. While electronic gadgets are becoming more and more popular with gaining a bigger share in the market, a key thing to remember in parenting is that: spending time is more important than spending money. Modern parents should remember this: no toy can replace parental care, attention and love, while spending time playing together can bring parents and children closer to each other.

This is what the real business strategy should aim at - on bringing families together, and creating a chance for parents and kids to play and experiment together, a chance to solve problems, think creatively, and be a family. In the long run, the toys or games that have been played together will become a family legacy, and promote loyalty to the brand. As the newest saying goes - "Don't Just Make Money....Make Memories."