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5 Things Small Toy Companies Can Learn From Big Companies

5 Things Small Toy Companies Can Learn From Big Companies

Apparently the grass is always greener on the other side. In working at major corporate companies and in working for toy companies with a handful of employees, there is often an over estimation of the advantages of being at the opposite end of the spectrum, and a lack of appreciation of the advantages from one’s current company size.

Perhaps it’s human nature to bemoan the challenges we face on a daily basis until they build into mountains from mole hills!

Anyway, to help companies & people in companies keep perspective, here’s 5 things small toy companies can learn from big toy companies:

1. Ruthless stock discipline – big companies are ruthless on stock. They still experience product flops and over ordering on occasion, but they manage the process efficiently and without emotion, because excess stock holding kills margin, increases warehousing costs and ties up much needed cash…in effect, excess stock is like gunk sitting in someone’s bloodstream straining the heart from beating and pumping out vitality. Seriously, if you look at the ever more prevalent bargain stores selling clearance product, you will notice top brands in there. So kill that excess stock holding before it can harm your company.

2. Brand focus – if you analyse the approach of the major corporate toy companies they are not focused on products to the same degree that smaller companies are – they are more focused on building, nurturing and exploiting brands. Brands are key in the toy biz because proven brands drive retail listings and consumer sell through on an ongoing basis often, leading to greater long term stability and prosperity…more’s the point, brands get sold for big bucks in the toy business – ever year sees brand acquisitions for tens or even hundreds of millions of $$$.

3. Process driven – in smaller companies things tend to get done in a more ad hoc, less structured way. In big toy companies process drives everything, there are routine milestone meetings to ensure sufficient product is delivered, that the product is right for the market, that all markets buy in, that the TV advertising developed is fit for purpose, engineering is driven by a process, manufacturing etc. Sometimes all this process gets in the way of delivering great products to market, but overall it greats a systematic approach which is less likely to screw up. Clearly smaller companies don’t have so many products and people to point in the right direction, but still, in most cases in our experience from the Consulting side of our business, more process is usually a good thing for smaller toy companies!

4. Longer term focus – the toy business is cyclical, and the cycle runs around a calendar year. Yet one of the major differences with big toy companies is their longer term process – they will be more likely to be looking at least an extra year ahead versus a smaller company focused nearly 100% on the current cycle. Larger companies need to avoid one good selling cycle being followed by a bad one because: a). they are often accountable to the stock market where such a roller coaster effect is frowned upon and b). because a sales downturn means organisational upheaval/layoffs. When working with smaller toy & game companies we find that pulling together a 3-5 year plan can, and usually does, lead towards more stability and both short term and long term success. As the saying goes, if you don’t know where you’re going you aren’t going to get there!

5. Consumer Testing – the major corporate toy companies conduct ongoing testing of their products and brands with consumers (we know this for sure, as our Consultancy business conducts playtestiing and qualitiative consumer research for many of them!). Smaller companies have a tendency to ‘chuck things at the wall and see what sticks’. Which is not logical when you look at the facts…published research suggests that between 65-75% of all new toy skus in market are new every year. YET, published research also shows that new skus account for just over 1/3 of total sales i.e. carry forward products account for around 2/3rds of all sales, and critically they tend to deliver more profitability as they don’t need new R & D expenditure, tend to need less marketing and less trade marketing spend. Moreover, proven products which sell year after year make stock ordering considerably less risky! The big companies know this, and so they conduct consumer testing to increase the chances of their products working and to increase the chances of getting carry forward listings. (For more information on how toy research works, here’s details of how we go about doing it for reference: http://www.kidsbrandinsight.com/?page_id=169

So there you have it – next time we’ll look at what big companies can learn from smaller companies.

P.S. Our toy review service TheToyVerdict.com has just opened entries to The Toy Verdict Awards, for more information and to enter, just click here: http://www.thetoyverdict.com/the-toy-verdict-awards/


by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading Consultancy to toy, game and kids entertainment companies around the world, which helps companies find the right toy & game factories, consumer research test their products with kids and parents and secure export distribution/market entry around the world.