02 May 2019 ~ 0 Comments

The Future Of Toys – Part 2, The Changing Marketing Landscape

In this latest instalment in our series on the future of toys, we take a look at marketing, how it has changed over time and where we seem to be headed. Needless to say, any predictions or forecasts we make for how toy marketing will be done in the future will be wrong in some ways, but this should at least be thought provoking for those toy companies looking to get and stay ahead of the pack…

WHERE WE’VE COME FROM

The Toy industry has benefited fantastically from a 2 levelled approach to marketing over time:

  1. ‘Hero’ items – i.e. big hit items with lots of focus and volume potential have traditionally been either TV advertised or have been licensed from a major blockbuster movie with all the resultant marketing noise that goes with that.
  2. Retail margin opportunities – those items which were likely to sell in lower quantities have typically been priced with more retail margin so that while the retailer doesn’t get the benefit of high sales volume, they do get higher margin per item. You could argue this isn’t really ‘marketing’, but last time we looked at the classic ‘5 P’s Of Marketing’, Price was one of them!

Over the last decade, the impact of TV advertising has been eroded as the media landscape has fragmented, and children move their viewing attention online via YouTube or to streaming services like Netflix. They have also moved to double or even triple screen content consumption. So whereas historically we could bang up the TV spend and be close to guaranteed to get a heavierweight impact & resulting sales uplift, things aren’t as simple today.

These days, ever major toy company is also a major content production and content marketing company. That completely changes things in many ways – it is in some ways more empowering, as the toy company now has control versus handing the baton to a TV network. The challenge is how to get ‘standout’ in an environment of content proliferation – 300 hours of video are added to YouTube EVERY MINUTE (that isn’t a typo!). There is a huge and growing array of content out there, hence companies need to be both content production experts AND content marketing experts, as well as having all the necessary toy domain expertise. Today’s global toy companies also need to know how to fully integrate a really compelling product concept into the content. Huge rewards await those toy companies that get this right, but it isn’t always easy!

Movies are not quite the surefire volume driver that they once were. While some continue to sell big volumes, there has been a tendency to over saturate sequels and prequels, and to release movies based on the same franchise so close together that toy merchandise from the previous installment may not have fully cleared retail yet, which makes things messy/less likely to be successful generally speaking.

Kids (and parents) are watching informal/self created content as much as, if not more than, professionally produced footage. Along with this has come the massive growth in ‘Influencers’. Influencers are particularly effective in toys because they show how a product works, which is really important in an industry where products come in and out so fast that it is often not deemed worth creating infomercial style content for every product – for the sake of a few boxes of free products, and comparatively cheap fees, YouTube channels/influencers with huge following can do more for your marketing in some instances than an expensive TV advertising campaign!

So that’s where we came from, and where we have got to. The big question though is where are we going, and how will that further disrupt toy marketing? Here’s our thoughts:

WHERE WE’RE (POSSIBLY) GOING

  1. The Future Of TV Advertising – we don’t see TV advertising going away. There are some types of products which TV is still really effective for. The toy industry is often quite slow moving/backward looking, so for some companies, where there is a continued audience, TV advertising will still make sense at least in terms of ‘if it isn’t entirely broken why fix it!’. The reality though is that we expect TV ad spend to wane in coming years although not disappear.
  2. Influencers/Regulation of Influencers – any new technology or media format tends to launch with hope, and should it be fortunate/good enough to achieve mass adoption, they tend to get a ‘honeymoon’ period of good will and importantly, lack of regulation. Because if you can accuse the toy industry of sometimes being slow to change, then the political system/machine in most countries is even slower. YouTube has been mass adopted for more than a decade, yet politicans in major toy markets are still debating and arguing over what level of oversight and regulation is needed! It has become increasingly clear that we, as civil society, can’t rely on these companies/platforms to responsibly regulate themselves, so further regulation is inevitable. And aside from the safety concerns of cyber criminals, unsuitable content and other negative concerns, there is a clear trend towards a lack of trust with influencers. The one prediction in this article we believe is most likely to come to fruition is regulation of influencers on social media platforms. Whereas influencers have operated in a kind of digital wild west so far, this period is heading towards a reckoning! If you are a child, a parent or other interested party, and your preferred influencer promotes a product which turns out to be crap, you are likely to lose some faith and especially likely not to buy again whatever they promote. Good influencers will begin to realise that elsewhere, long term success depends on having a good brand and a sustainable model, and at the same time will therefore benefit by a more ethical approach promoting product which fits the brand. This needs to be done in a transparent way which avoids the draconian punishments for infringing the inevitable regulation which is on the horizon & definitely coming one way or another.
  3. Toy Companies As Content Creators – we already looked at the idea that most major toy companies are now content creators as much as toy companies. The thing is though the top 10 toy companies account for c. one quarter of the total sales in the toy business. Despite all the noise, and shelf space, and marketing spend, the top 10 toy companies are far less dominant in terms of market share versus some industries. There are somewhere in the region of 15,000 toy companies in the world, so in that case 14,990 (approx) toy companies account for c. 75% of the total sales. And what we haven’t seen so far is those $5m-50m toy companies really embracing content as the driving force behind toy marketing. That inevitably has to come, as these toy companies realise that spending 10-15% of turnover on a fading media format (TV advertising) is not that prudent. If you are one of the 14,990 toy companies outside thee top 10, you do need to consider your future strategy to compete against the bigger companies with their teams of people, in-house studios and straight to cinema content production capabilities.
  4. Global (Non-Language) Content Will Become Ever More Important – Asia is set to grow hugely in importance, commercial impact and purchasing power over the next decade or two. This offers huge opportunity for toy companies, but also a major challenge – because culture is so different. Conceiving a product/content offering which can work universally is really hard. We’ve all seen those ‘funny’ screw ups where a car company launches a car with a universal name which means something rude in a non English speaking market (!). We shouldn’t be too snooty in our perception of these errors though, as there are plenty of these mistakes made in the toy business and childrens content industry. To put this in practical terms, the number 2 toy market in the world today is China, and surprise, surprise – China is culturally very different to Europe & North America. There is a reason why the genre of ‘Hollywood’ movies which tends to work best in China is action – because action needs little words! And having a fight against an evil baddie is a fight in any language, a punch is a punch, an explosion is an explosion, and a toy based on this is to most extents just a toy. There are of course some characters which are more easily understood in one country over another, and bearing in mind how many toys are based on the animal kingdom, there are some animals which are seen as revolting or not suitable in other key countries. As ever, cultural understanding and market by market insights are key.

So far we have avoided talk of bots, robots & AI, but we would be remiss not to cover this, as this area is likely to have a huge part to play in toy marketing in the future!

Firstly, there is no doubt that further automation is on the way for online marketing. Once the parameters of an online campaign are fixed, all the tinkering, testing and frankly farting about (!), can easily be done by bots these days. Hallelujah, please remove all humans from having to use those horrible online dashboards! More seriously though, the more marketing becomes automated, the less of an advantage/difference we can find.

Could AI plan and execute ALL marketing campaigns in the future? I.e. bearing in mind how formulaic the toy business can be, could AI not work out how to create a toy franchise based on a proven formula – all you need is a rough & tough animal or a super cutesy one, with a fitting content/advertising direction and an array of online marketing driving traffic to key retail partners? This is certainly possible, but I don’t think we’re getting there in a hurry.

I read an article recently about how AI can actually already do a pretty good job of analysing all movie scripts ever, and coming up with ‘new’ movie scripts based on this analysis. So in our opinion, AI will be able to conceive of and to a degree deliver toy and marketing development and execution long in advance of humans being willing to let them! Already toy companies can access a huge array of professional toy inventors and of advertising mind power, but in general, they don’t or at least they don’t do it effectively. AI will be hugely disruptive to the toy business as much as anywhere else, but I expect the inertia and intransigence of the human mind to prevent that happening in the next 5 to 10 years at least!

However you see the future though these are interesting times, and could get even more interesting in the years ahead!

Steve Reece runs a toy industry consultancy which helps people get ahead in the toy business. To sign up for our newsletters, sign up on the right hand side of this page, or go to the website below. Following the trend to toy companies becoming content creators, we offer a service producing compelling content for YouTube and other platforms. Most production agencies can make you something that looks good, but does it hit the right mark? Do they know the consumer and what the consumer is looking for? Have they interviewed thousands of kids and parents about toys? Probably not, so if you would like to discuss your content production needs with people who know both production AND toys, feel free to send us a brief or get in touch to discuss. More details can be found here: http://www.kidsbrandinsight.com/services/

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