Tag Archives: toy marketing expert

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/

Toy Marketing: TVCs Versus Digital Marketing: Have We Reached Tipping Point?

TVCs VERSUS DIGITAL MARKETING FOR TOYS: HAVE WE REACHED TIPPING POINT?

TV advertising has been the core marketing activity for the toy industry since not long after TV adverts came about. So career toy people and career toy retail people have known and come to depend on a powerfully effective and above all simple (if not cheap) marketing solution.                        

Retailers have to buy our products at around 60-75% (ignoring sales tax – GST/VAT etc) of the price they sell them for (on average – there are exceptions!). So they are risking 60-75% of the net retail price to gain 40% to 25% of that price, sometimes on hot products due to promotional activity and discounting they are on far less, even losing money on occasion to bring more customers into store (physical or online). They have to cover all their costs from this, and if they are highly efficient operators they may be fortunate enough to earn 5-10% operating profit, but especially in today’s turbulent times, achieving profit is ever more difficult.                                    

Understandably therefore retailers are risk averse with regards to product selection. Historically, they looked for licensed products or TV advertised items with a known formula to reduce the risk of products failing and leaving them with an inventory problem, leading to no or at least low profit.  

TV advertising has historically been a big sign of investment and commitment from the toy company to give retailers comfort that we are equally as focused on selling products off of their shelves/e-commerce stores as we are getting them in. Therefore generally speaking the old model necessitated a big TV spend commitment to persuade retailers to take enough stock on our typically long lead time items to deliver the year both sides need.         

Fast forward to today, and the challenge we now have is that TV advertising is nowhere near as effective as it once was. The trend is ever increasingly towards kids watching streaming e.g. Netflix and informal/user generated YouTube content for hours on end. Theoretically this should not be a major problem. We should be able to utilise social media and content platforms like YouTube to market our products…but there are some real challenges for toy companies and their retail customers with this evolution:                   

Firstly, the major benefit of TV was that it was simple, broad reach, targeted and highly scaleable. With Youtube, Google, Instagram/Facebook etc it is harder to create predictable critical mass like TV used to deliver – to put it bluntly, TV was like pressing one big, effective albeit expensive button. Digital marketing on the other hand is like trying to press dozens of buttons at once while hoping/encouraging many other people to do the same – it is innately more intricate, more intensive and to a degree less systematically scalable. OK, we can do PPC, but can we reach enough of the right consumers? Maybe, but it was easier with the old TV focused model.  

One of the major factors in effective ‘digital’ marketing and especially ‘content’ marketing is the viral effect whereby people share or imitate/replicate content which encourages people to buy the producy features. BUT virality is not guaranteed, the hit rate on trying to create viral effect is poor – so you have to keep on grinding out new content to finally find something which works and delivers the desired effect – so it is not guaranteed that such an approach will lead to a viral effect in the key selling windows.

Secondly, retailers and toy companies are trying to effectively and prudently manage inventory. This is made difficult by the long lead time whereby product typically leaves the factory in July/August for sale months later. TV was far more (although not entirely) predictable. With a (non-TV) digital approach to toy marketing the challenge is how to make the impact equally guaranteed i.e. tangible and high impact. We need to give retailers this comfort early enough for us to order stock. Going forward, we can expect a growth in direct to consumer sales from toy companies, because if we have to drive each customer on an individual basis to buy, why not drive them to our own online channels where we don’t have to pay retail margin? Even then though, stock ordering/forecasting is the big risk, and as such I therefore see retailers part in the toy industry protected by the major opportunity they offer – stock commitments in advance of selling. We can though expect a vast array of direct to consumer businesses/brands/sites springing up over the next decade.             

A major part of the solution to these challenges is to build really firm foundations for digital marketing i.e. we need to create a virtuous circle of activity across platforms/media with a clear, consistent and motivating campaign. Some companies have or recruit the know how to do this in house, some will utilise outside resources and expertise. In the end a degree of trial and error will be required as different approaches will be needed by category, product, target audience etc.                                    

One thing is for sure, we may want the simplicity of the old TV driven approach, but kids viewing habits are not moving in that direction. TV may still be part of the picture – throughout toy fair season this year, marketers have been telling me that right now they feel they still need to do both – TV plus the digital stuff – but the %age of marketing funds being committed to off TV activity is increasing every year, and those who don’t move with this trend will be left behind.

One thing I have learnt as a foundational business principle over time is that we may make too many mistakes/lose money by being at the front of the pack, taking all the risks and making all the mistakes, but being at the back of the pack is not typically a winning formula either based on today’s trends.     If your company is spending £$€ on marketing, you will get best return by following your consumer, and in this case their viewing habits are ever moving away from traditional TV.

We recently launched a new brand and product management service. This service has been very popular, but we have one space coming up after NY toy fair – please get in touch if you are interested in working with us. Some of our brand and product management clients asked us to help them create YouTube content, so we recently launched a new strategic partnership creating content for toy companies. To find out more, click here:  http://www.kidsbrandinsight.com/toy-industry-veterans-launch-new-marketing-content-production-service-for-toy-companies/