LEGO Case Analysis and Recommendations
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Transcript of LEGO Case Analysis and Recommendations
Team 13
Issues1. How should LEGO adapt to the surging digital era?
2. How can LEGO premium prices compete in the toy market?
RecommendationHow should LEGO adapt to compete in the surging
digital era?
● “Create the next LEGO” Social
Campaign
● LEGO free to play mobile gaming
RecommendationHow can LEGO premium prices compete in the toy
market?
● “LEGO Rental
● Cross Sell Items
How can Lego Improve?• One potential initiative for Lego to take is “Create the
next Lego.”• Link the initiative to Lego’s social media sites, garnering attention
from the friends of each entrant and therefore increasing traffic to Lego’s social media pages.
• The contest encourages creativity; one particular entrant may have the next “million dollar idea.”
• Gives customers a chance to become more involved with the company, promoting brand loyalty.
• It is a proven method of increasing sales for companies in all areas of business; one prominent example is Frito Lay’s “Do us a Flavor” initiative which boosted their sales
Expected Costs
• One of the biggest benefits of this initiative would be the relative low-cost of introducing it.
• Devote a section of the staff to sorting through ideas• Devote staff to maintain social media presence of the initiative• Finally, the biggest cost would be the actual process of creating
the new sets, which may require unique building blocks.
Opportunities
• It is difficult to precisely quantify the cost of such an initiative, however, the potential upside of the venture certainly makes the operation appear worthwhile.
• Lay’s – for example – saw a 5% increase in their market share after launching their “Do us a Flavor” initiative.
• Tim Horton’s, Orbit Gum, and Air Canada have also successfully created such marketing strategies.
• Ideally, inviting customers to create new designs - and rewarding them for doing so – could boost Lego’s market share considerably as it would make it one of the most interactive toy companies in the world.
Recommendation Transferring into the digital age via mobile gaming
Challenges of the digital age
● Physical toys are downtrending for the current generation of kids
● Digital games (ie. Minecraft) allow for creativity to be expressed infinitely without being tied to physical blocks
● Digital game market is becoming highly saturated and highly competitive
● Digital games can be brought anywhere, LEGO has a mobility issue
Meeting the Demand for mobility
● Mobile games implement creativity on the go
● Creating a game that uses LEGO brand recognition and sense of building can help introduce more kids to the brand
● Free to Play model keeps initial price low for consumers while still enabling profits from in game purchases such as character models.
● Allows creative department the ability to implement new ideas without high overhead costs
We recommend LEGO creating a Free to Play mobile game that allows creativity on the go while still maintaining profit margins
Concept
Allow players to customize characters to facilitate a investment into the world
Intricate worlds that enable varying gameplay experiences
Implementation Free to Play games offer players a portion of the game for free, then place a paywall on certain aspects of the game. A world building game with buyable characters and block types would allow average players the ability to enjoy the LEGO brand, while profiting from the more loyal player base.Advertising is another way to garner profit from a free to play model
Develop a creative LEGO brand mobile game with incentives to keep playing
Play test internally to eliminate problematic bugs
Release on appropriate app venues
Advertise appropriately to grow playerbase
Release time specific buy-in items or incentives that justify the money
Deficits from production begin to change into profits
Keep highly invested and average fans happy, to keep profits and player base up
Cost Analysis
Development CostAverage Cost for Free To
Play Mobile game is 300,000 dollars
Release and Advertising Costs
Marketing budget will vary, but a successful campaign may take upwards of 150,000
dollars
Note: Free to Play mobile games are a 1 Billion dollar yearly industry
Maintenance 100,000 a year in game and service upkeep to maintain playerbase.
Issue
Why?
1. LEGO sets price range from $20 to $3,000
2. Average customers make one-time purchases since they are
economically derived from purchasing another set
3. After long periods of time, children get bored of playing with
the same set
LEGO Products Premium Prices
Introducing: LEGO RentalHow it works:
Choose a membership plan that is right for you Choose your set or
customize your orderWe ship for free to your doorstep
Ship back and receive more sets
Monthly Fee $70 $60 $50 $30 30 Days
Free Shipping
Unlimited Exchanges
Small Sets (500 pieces)
Medium Sets (1,000 pieces)
Advanced Sets (2,000 pieces)
Pro Sets (4,000 pieces)
Membership Plans
Free TrialBuilder
Master Builder
Advanced Designer
ExpertDesigner
7 Stages
Implementation CostsWarehouse, LEGO Sorter and Sanitation Tools Fixed Costs
● $500,000
Distribution and Handling Network
● $200,000 per year
Online Website Development and Maintenance
● $50,000 per year
Marketing Costs
● $200,000 per year
“Inspire and develop the builders of tomorrow”
Expected ResultsRevenue Growth
● If “Builder” membership becomes the most popular membership plan
15% 20% 25%● “Advanced
Designer” and “Master Builder” become the most popular
● Best Case Scenario
● “Expert Designer” plan receives most popularity
2013 Revenue: $16,014 in DKK million
Supplementary Slides