The Toy industry invests $billions every year in new product launches (inc. marketing, inventory & R&D costs).

Between 2.3rds & 3/4s, or 66.67% to 75% of Toy skus offered to retail each year are new. Not all are completely new, some are refreshes, tweaks or reintroductions, but nevertheless, a huge amount of what we do is about creating & selling new products. We can logically conclude then that as much as 75% of our output doesn’t work, or at least only works once despite all that work & investment.

There appear to be 2 opposite conclusions we can take from this: Firstly that as so much doesn’t hang around we can just chuck what we like at the wall and see what sticks, knowing full well that we get another chance to start afresh for the next selling cycle. (N.B. this is the approach followed by companies representing in excess of half of the total industry turnover in our opinion/based on our analysis). This approach is not necessarily doomed to failure either by the way, there are plenty of successful companies who do this.

However, there is a 2nd conclusion, and a 2nd approach, which is followed (mostly) by the mighty corporate companies, and less so by the rest. That being that where risk of failure is so high, and where launch risk/investment is so high, reasonable steps should be taken to maximise the chances of success/reduce the risk of launch failure.

Let’s do some quick math(s) here. Let’s presume an R&D/tooling investment of c. $50,000. Let’s factor in reasonable distribution in a couple of markets globally – let’s say 100,000 units for easy math. We’re then looking at c. $200,000 manufacturing cost. Plus let’s presume we have TV advertising to kids in 2 markets in Europe c. $200,000 (min). Plus let’s add in a License advance to the tune of $50,000.

We now have total launch risk of $500,000, on what represents a comparatively small launch versus many out there!

So how many of us would lightly risk throwing away $500,000 in other circumstances – not likely right?!

One of the most obvious ways to reduce launch risk, and to maximise the chances of that $500k+ investment paying back is to test the new products with kids via an expert market researcher & Toy tester (whether our good selves or another company).

Costs for testing toy concepts in a single country begin from as little as $5-10k.

Now at this stage there is no intention to start putting you to sleep with detailed description of Toy testing methodologies, but just as a general point, how does $5-10k invested in reducing launch risk compare with an untested $500k launch investment/risk?

Let’s know look at the ways in which Toy testing with Kids can reduce your risk/increase your chances of success:

1. Toy Testing Normally Identifies Massive Product Mistakes – Our consumers i.e. kids, are rarely that helpful in terms of coming up with practical, usable new ideas. However, they are brilliant at explaining why a product would be readily dismissed as ‘rubbish’ or ‘uncool’ or why it has a fundamental flaw. If your entire product concept is flawed, would you rather than know that before you ship 100,000 units to retailers whose good faith pays your bills, and before you blow the price of a family house on advertising, or are you happy to take the risk!?

2. Tweak, Tweak, Tweak – it’s often the small refinements & changes which make good products great, and give you the chance of a). Building long term Brand equity and b). Selling exactly the same product again next year for much higher profit as you already paid R&D costs!

3. Dexterity Is Key – it astounds us how often Toys which are literally not usable by the target audience are sold into retail in high quantities. If you haven’t tested it, you don’t know for sure, you’re just guessing. And testing with little Johnny whose Dad runs R&D, and who probably has highly developed Toy dexterity due to all the free stuff dad brings home, is not robust enough to test whether the majority of your target market can actually functionally use the product. Can you imagine selling a Vacuum cleaner or Toaster that didn’t suck up dirt or cook toast? Sounds completely ridiculous of course, but you would be surprised how many Toys are just not fit for purpose in some way. Testing dexterity fit pre-launch vastly reduces the risk of wasting the $500k launch investment.

4. A Kids Eye View of the Competition – advertising message & competitive positioning is critical in a very crowded market. Most Toy companies get this, but comparatively few actually test their observations & presumptions with the people whose opinion really matters – the target consumer who you want to buy and use the product.

We have tested adverts which ran on a global basis, whose message literally positioned the product as completely unappealing for the target market i.e. the mesage created by the purportedly ‘Youth’ focused agency was perfect for a teen audience, but totally wrong for 5-7 year old kids who it needed to influence. In that particular instance, the investment in ad production & media spend was in excess of $1 million. If we’d tested it before the spend for a cost of c. $5-10k we could have saved a completely wasted $1m…and that’s before inventory/retail good faith impact.

5. Identifying Opportunity – when we conduct Toy research projects, we do it as Toy industry folk and professional Researchers in equal measure. A great research supplier should be able to identify opportunity for you, but not just pie in the sky stuff like if you increased the spec by 100 times kids would think this was really cool…er really?! Having developed & launched hundreds of Toy products ourselves, we know the trade offs which have to be made, and we know in a practical commercial sense in which direction the opportunities lie. So useful and actionable insight can & will open up completely new opportunities.

6. Increase The Faith – let’s face it, those of us who sell stuff, have products we are really into, and products we ourselves are less convinced by, and of course the people we’re selling to can normally tell how much we believe in what we’re selling. Products which have been validated and improved via research are normally sold with more ‘ooomph’, because everyone within the organisation knows consumers get it, like it & that the product formula has been improved to maximise potential.

Clearly part of this article has been a thinly disguised sales pitch for our own Toy testing services (!), however, whether you choose to work with us, or another research supplier, you really should review your current development process, and the place that Toy testing could play within it!

As outlined above, research projects normally start at $5-10k. If you want to work with us, and are genuinely willing to invest those kind of amounts to reduce your product risk, please feel free to get in touch…

All the best

Steve & team

P.S. We just launched a new service – Toy Industry Consultancy insight via Skype at a rate of £250 / $400 per call. For more details, go to www.stevenreece.com/services

If you’d like to know more about this area, please feel free to get in touch…

Space Heroes Universe – A Brand Profile

Before we (Virtual World Licensing and our partners in this space – AT New Media) agree to work with App, Virtual World or Gaming Brands, we look at the level of ‘Toyetic’ appeal the Brand has, and how easily it will translate into other types of merchandise.

When looking at Space Heroes Universe, our analysis revealed a very high rating for Toyetic appeal & merchandising potential. Space Heroes is one of the most highly toyetic Virtual World brands we’ve looked at.

Once we were assured of this fact we began to investigate the story behind the Brand itself, and it’s a compelling narrative:

• Created by an award winning developer in Australia.
• A true multi-media Brand, with Virtual World, Apps, animated cartoons released via digital channels inc. YouTube.
• A roadmap for development that’s platform-agnostic evolving from a traditional web-based context to a mobile future
• Available in 15 languages.
• Strong back story featuring the perennially attractive themes of Space, Heroes & Villains.
• Strong character universe supporting all major merchandising categories.
• Ongoing heavyweight marketing campaign.
• A parent-friendly approach – focused on fun, but considering age-appropriate content,  safety and privacy
• Massively engaged user base.
• Opportunity for integrated marketing i.e. promotion of licensed physical products in the online experience.
• Recognition from kids and parents, having secured Creative Child Magazine’s 2012 Game of the Year as well as the Mom’s Choice Awards Silver Medal and a Parent’s Choice Approved Award.

Based on this heavy hitting Brand story, we’re currently working to rollout Brand Licensing across EMEA for Space Heroes Universe.

To find out more about how acquiring a Space Heroes Universe product license can work for you, please email:

Steve Reece
Simon Kay

Have you ever noticed how some people in the Toy industry seem to keep on being successful?

There are some people who just seem to achieve great results/great output on an ongoing basis.

There are reasons for their ongoing success normally. I’ve analysed the most successful people we know or know of in the industry and have come up with the following list of habits/characteristics of those people:

1. Determined and relentless – whether you are a sales person or a creative, a CEO or a marketer, we are all in the business of achieving results. We may have different specific measurables, but in the end we need to achieve positive results. The fundamental characteristic of people who achieve positive results in our industry and others is an inner drive to get the right results, no matter if it’s hard, if it takes months/years or whether our colleagues falter along the way.

2. Great ‘gut’ feel for Toy product – when you look at all the great and the good in our industry, it’s hard to find one without a good feeling for what will sell.

3. Strong emphasis on risk management – at the risk of sounding like someone’s accountant, really need to emphasise the importance of risk management – understanding what the downside is if things go pear shaped is critical to achieving success. Sometimes the best decisions you make in this industry are the products you chose not to launch, as much as the ones you actually did launch!

4. Relationship building focus – there is an inescapable truth in our industry which you can’t avoid. Not that many people move out of it. This is a great industry, so understandably far fewer people leave it than enter it. Therefore if you have the classic ‘hunter’ mentality of making a quick killing in your dealings, you may reap the negative karma for the rest of your career in some cases. To continue the clichéd analogy, if you choose a ‘farming’ approach instead of nurturing and building relationships first, with deals a close 2nd, then you are much more likely to have sustained success. Dump a load of junk on a buyer one year, forget about listings the following year.

5. Use the data – data is a critical component of planning and influencing in this industry. Whether it’s last year’s sales curve, past sales history, advertising spend versus EPOS analysis, product P&Ls or something else, the reality is even the most detached creative minds benefit from understanding the data. At the simplest level if you can’t reach implications about what makes a strong seller via reading sales data, you will struggle.

6. Negotiating and influencing skills – this one comes in towards the end not because it is less important, but more because it is one of the most obvious of the 7. The other half of selling after determination & relentlessness, the ability to positively influence/persuade another human being or organisation to take the action you need is crucial to prolonged success. You might be trying to convince the Walmart buyer to list your product, you may be trying to persuade your company’s management to invest in a product line, you may be selling a concept, but if you can’t influence other people, you won’t achieve good results.

7. Know your strengths & weaknesses, find the right help - one of the advantages of career progression is that the higher you get in an organisation, the more you can structure teams around you to fill the gaps in your abilities & aptitudes. But even if you are a one person operation, the same applies, because you still need a series of relationships/paertnerships to make things happen. First you must be capable of being honest with yourself about what you can and can’t do well, then you find help in the areas you need.

8. There’s nothing as valuable as a post mortem – insanity is purportedly doing the same thing as before while expecting a different result. Herein lies the importance of the post mortem. Human beings generally hate to make mistakes & to fail, especially in view of other people inc. peers/employers. However, the reality is that massive mistakes occur all the time. I’m not going to tell you where I made these mistakes, but I have two $1.5m mistakes on my Resume. Because blowing that kind of money makes you really analyse & investigate where things went wrong. In both of those instances, believe it or not, the mistakes were made for the right reasons. One was comparatively (!) small potatos versus the opportunity and was kind of inevitable if we were to get the big results we got. The second was the wrong product execution for the right reasons. Also in both cases there was a little inward looking organisational delusion, which a post morterm identified, reducing the risk of it happening again.

Some things work in the Toy biz, some things don’t, but we shouldn’t be failing for the same wrong reason time after time.

And so there you have it, my suggestion of the 8 characteristics of successful toy people.

All the best

Steve

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Here’s where I raise the hackles of the many gifted creatives and visionaries I have had the pleasure (mostly) and privilege to work with.

Because the more I look at this wonderful toy industry of ours, the more I begin to see clear patterns and clear formula for success.

Let me begin by stating clearly what I am NOT saying. I am not at all saying that creativity is unnecesary or leads to failure – far from it! I’m also not saying that we should all become boring drones.

The reality is that within the boundaries of successful formulae there is massive room & necessity for creativity & expression.

However, where I start to see signs of potential failure ahead for toy companies is when they try to ‘push the boundaries’ or ‘think outside the box’ purely for the sake of doing it. The purpose of everything product & marketing teams do should be to create Toy products that people want to buy & play with. For sure they need to do that in a way which makes their product stand out from the crowd, which makes it more likely retailers will list the products and consumers buy the products, but that’s the ‘how’ not the ‘what’! The ‘what’ i.e. the objective is about delivering commercially successful products.

So here’s the thing – our industry has been around for a lot longer than any of us as individuals have. It’s pretty much all been done before in general terms. We know dinosaurs work, we know heroes & villains works, we know pink & fluffy works, we know building things work as play patterns. So in effect these are known formula. We may call them ‘categories’, but in effect they are just an agreed formula.

To try to create a completely new waying of playing is inherently risky, and inherently likely to fail. I know, I’ve made a career out of working on ‘out there’ projects, some of which we brought home to success, and many more of which fell by the wayside.

The imperative is to deliver formulaic success first…and then, only then to push the boundaries to see what new formula we can create.

Bear in mind by the way, I am not necessarily talking about an R&D focus or an Inventor perspective being driven by formula, I’m talking about the overall business focus. In larger companies this may be non-formulaic R&D pushing boundaries & commercial dullards such as myself selecting the more formulaic ones, in smaller companies it’s an overall thing with management normally.

But please, a sense of perspective. Push some boundaries for sure, and let’s all get excited by truly new stuff, but let’s also churn through the stuff we KNOW will sell as well!

As a final point to end on, think about what we produce from the perspective of our end consumer…every 3 years or so, our existing consumer moves on and a new one takes their place. They have no idea what we did before, only what they like, what is cool to play with and what they therefore want to buy or have bought for them. Above all this is why there are so many perennials in the industry.

So don’t let me stop you being creative, but let’s also create cool stuff that we KNOW will sell!

Bubble Gum Interactive partners with Virtual World Licensing & AT New Media for Space Heroes Universe Licensing program in UK and EMEA.

Sydney, Australia – 2nd May 2013 – Bubble Gum Interactive, the award-winning developer of highly compelling games, today announced the start of a new licensing partnership with Virtual World Licensing & AT New Media to focus on their rapidly growing kids online game Space Heroes Universe!

With a true focus on storytelling Space Heroes Universe is a multi-platform brand experience with an epic intergalactic adventure being told via the virtual world, mobile games and an animated cartoon series. Nearly 2 million players from around the world have signed up for adventure. In the free-to-play game, kids can personalise their hero, adopt virtual pet Kritterz, make new friends and explore an ever expanding galaxy full of quests, adventure and fun. Rated E for Everyone and certified kidSAFE+, Space Heroes Universe is a hit with kids and parents, having secured Creative Child Magazine’s 2012 Game of the Year as well as the Mom’s Choice Awards Silver Medal and a Parent’s Choice Approved Award.

Virtual World Licensing & AT New Media are leading UK based licensing agencies specializing in the world of gaming and toys. With a team of interactive games and toy licensing experts they represent a growing portfolio of global game brands. Leveraging core brand strengths they create high performing toy and merchandising opportunities that extend these virtual brands to the physical world.

“Whether exploring the galaxy in our award-winning kids virtual world, jetting off for adventure in our mobile game or following the adventures of our space heroes in our online cartoons, our fans are continually looking for new ways to enjoy the Space Heroes Universe! story.” said Phil Mason, CEO, Bubble Gum Interactive “Virtual World Licensing & AT New Media understand the unique nuances of game brands and will no doubt bring some amazing Space Heroes Universe! merchandise to our European fans.”

“Space Heroes Universe is precisely the type of property we look for with a unique and compelling story that can translate into a successful merchandising program.” said Steve Reece, CEO, Virtual World Licensing “With its strong UK presence and a rapidly growing fanbase in the EMEA, we’re certain Space Heroes fans will be delighted to extend their experience.”

Kids can strap on their jetpacks, fire up their starjets and blast off for adventure at www.spaceheroes.com

About Bubble Gum Interactive

Bubble Gum Interactive is an independent game development studio headquartered in Sydney, Australia. Our mission is to create compelling and engaging gaming experiences with a focus on fun, creativity, quality and story. Our first game, Space Heroes Universe! is a multi-award winning kids virtual world in which players create their own hero and explore a galaxy full of fun and adventure. Our first game for mobile, Jetpack Jinx is available for Google Play and Apple iOS with more games launching in 2013. Discover more at www.bubbleguminteractive.com.

About Virtual World Licensing & AT New Media

Virtual World Licensing was founded by Toy industry veteran Steve Reece to facilitate the entry of digital brands into the toy market. Steve previously worked for Hasbro, Activision and Imagination. He has managed Toy companies and ventures trading in over 60 countries worldwide, managed in excess of 200 commercial & licensing contracts and worked with brands valued at $billions in value. AT New Media is run by Simon Kay, the company offers consultancy and agency services that are solely focussed on licensing opportunities within the digital games, and gaming market. For more information, please go to www.VirtualWorldLicensing.com or www.atnewmedia.com

One of the very notable features of the Toy industry is the high number of new products in market every year. In fact, on average, somewhere between two-thirds to three-quarters of all skus in market are new each year. Because of this, a bad year this year doesn’t need to stand in the way of a good year next. It’s nevertheless important though to acknowledge the risks with new product launches.

With a new hero range launch costing hundreds of thousands of pounds (or more for global launches) in terms of R&D investment and resources, marketing and manufacturing costs, it seems imprudent to just accept that some stuff will work and some just won’t.

Toy companies which experience lasting success tend to be expert at reducing the risk of product launch failure. There are several elements to this, including taking on board retail feedback, monitoring competitors and tracking what has sold most and why it has sold so much.

However, there is one massively under utilised tool which is extremely powerful if deployed effectively, and that is consumer research. The reason for it being under used is that there are so many other parts of the development and launch process that we have to manage, and can’t escape, that consumer testing often seems optional, or even avoidable. However, to not validate your concepts with consumers is to fail to manage the risk of launch failure. Because in the end, it’s the end consumer who has to take the product off the shelf and take it to the tills, or click through online and spend their hard earned cash to buy.

There are 2 primary challenges in selling high volumes of consumer products: first getting enough of the right product on the right shelves/e-commerce sites; and second getting enough consumers to buy the product to ensure sell through.

So to launch based on gut instinct and inward looking product selection debate only is to miss the chance to address half the risk of failure.

This is not a theoretical viewpoint either – a classic example would be the research project I conducted on a new Toy some years back. The concept seemed clever to a room full of adults in a Toy company, but the main feature was based on a flawed concept which depended on false presumptions about how kids actually play with Toys in reality. I advised the company not to launch this product, but they felt they were too far down the path, and launched it anyway. They created a strong advertising campaign and sold it in well, but it bombed leaving them with a major hangover in terms of obsolete stock, both in retail and in their warehouse. Which just goes to show you can lead a horse to water…!

One reason many companies give for not conducting more consumer research is that research findings and research inspired direction can be fluffy, unreliable or commercially impractical. There is also an argument that research costs too much, and there is too much work involved. In fairness, there is some truth in these perceived shortcomings. Some research agencies focus more on what they are expert in i.e. research methodology and understanding the consumer, and nowhere near enough on providing a commercially relevant interpretation of the findings. However, I would argue that the onus on commercial interpretation should be with the team developing the product, because consumer research can be imperfect, but imperfect isn’t the same as useless.

Finally, having seen and conducted research with thousands of kids, I have never seen research which hasn’t at least made Toy product teams question their presumptions based on how kids interact with their concepts, and that can only increase the chances of launch success.

Many independent Toy companies struggle away for years slowly and relentlessly building their businesses, until they reach a point where they have a very solid business, with great retail relationships, strong product line and are generating significant profit. However, what many companies miss when they only focus on sales and profit, is the opportunity to build Brands or intellectual property.

The benefits of building your own Brands  are numerous: Firstly, if you create a successful Brand, you are in control and are not responsible to any other 3^rd parties on derivative products and you will not be likely to lose the rights, in effect the opportunity arising from the Brand are yours to control and exploit. With your own Brands you do not pay royalties, so if a company usually pays an average of 10% royalty, you effectively save yourself that 10%, leading to greater profitability. Moreover, if you create a very successful new property, other companies may license rights from your company and pay you a royalty. Finally, your company may eventually be able to sell your Brand for a large one off payday – for instance the Cranium Brand was reportedly sold to Hasbro for $77m, and Mattel recently paid a reported $680m to buy the Hit Entertainment business and Brand portfolio.

So with all these benefits, why don’t more companies successfully build Brand portfolios? Well there are 3 main reasons in my experience: 1. It takes significant investment of both money, resources and focus, which not every company is willing to apply. 2. It is very difficult, and for every new Brand which is significantly successful, at least five or ten more fall by the wayside. 3. Short term P&L focus – some companies (rightly) focus on driving sales and profitability, but rather than over layering a Brand building approach they just think short term and fail to maximise long term value.

Those companies who focus only on the short term tend to exhibit an over reliance on licensing and/or transient technology, neither of which act to effectively lay down solid, dependable, long term foundations for their business. Technology can provide a short term boost to sales and a competitive advantage, but even patented technology has it’s limitations in terms of true protectability.  Licensing is a powerful and normally essential part of a Toy company’s product approach. However, once a company enters the licensing ‘treadmill’ it tends to rely on a significant proportion of it’s revenue coming from hot licenses, and retailers also rely on the company to supply less licensed merchandise. When the company has a weaker year for licenses, revenue falls as do retail listings on other non licensed products.

For the sake of perspective, we must be clear that the most successful Toy companies exploit the opportunities offered by licensing and technology, albeit prudently. The critical point though, is that few Toy companies enjoy long term stable success without their own Brand portfolios. If we look at the major corporate companies such as Hasbro, Mattel and Lego, they all devote significant resources to licensed products and technology driven products, however, they also deploy significant resources to nurture and grow their own Brands often utilising technology and licensing in the process! In other words, for them the end is not solely the sales revenue, they are ALSO heavily focused on building their own intellectual property.

So now we have established the need to Brand build, how can a company actually do it? That’s the difficulty, it isn’t easy, and it’s not possible to provide a full answer in a short article, however, here is one powerful solution which I have seen work magnificently: Focus and resources – one of the most powerful actions independent companies can take is to adopt a Brand management approach, which in practise means turning ‘Marketing’ people into ‘Brand’ people, and necessitates a message of Brand evangelism throughout the company and beyond. This one suggestion can have the greatest effect. If you give a talented marketing person the title of ‘Brand Manager’, then effectively you conjoin the success of the Brand with the success of their career. That individual will move mountains to ensure success, to persuade sales people and retailers to support your Brands and also be more likely to deliver winning consumer communications. For sure there is much more to building new Brands than that, but that is a very effective first step!

Today we announce a new venture on behalf of our Virtual World Licensing division. Here’s the official release:

Leading consultancy groups AT New Media, and Virtual World Licensing today announce a new venture.

AT New Media Virtual World Licensing will offer Consultancy services to Gaming, Social and Virtual Brands seeking to enter the world of Toy Licensing.

AT New Media CEO Simon Kay said

“At a time when the gaming and app market is what everyone is talking about, it is important to offer the market high quality solutions. This new venture brings together two parties with strong and complimentary skill sets and contact networks, enabling us to offer a powerfully effective solution to those gaming and social brands who want to increase their revenue via toy licensing. By working with Virtual World Licensing we will be able to focus on delivering value using our intimate knowledge of the Gaming world.”

Virtual World Licensing CEO Steve Reece said

“We’re finding more and more digital brands are seeking to enter the Toy market. The challenge for many of them is that they have normaly done a fantastic job of building their brands, but don’t have the knowledge, resources or expertise in toy licensing and publishing to enable them to efficiently maximise the opportunity, while managing the brand and ensuring a two way flow of benefits – the brand creating licensing revenue, and the licensing program creating further ‘buzz’ and buy-in from consumers. By partnering with AT New Media, we combine our intimate knowledge of the toy market in the UK, Europe, North America and beyond, with cutting edge insight and presence in the Gaming world.”

Both companies are keen to stress that is a Consultancy first, and Agency second. The new venture will first manage the brand licensing roadmap for digital brands to ensure the brand’s are ready for licensing, and to allow for tweaking to increase likely revenue, before pursuing potential licensees and licensing partnerships.

For more information, please go to:

www.VirtualWorldLicensing.com

or http://www.atnewmedia.com/

For those readers of this Blog based in the U.S., we are now live via Kindle store.

Here’s the URL: http://www.amazon.com/gp/product/B00C0ESOWK

Happy reading…!

For those interested in the quick growing area of Kids Tablets, you may find our White paper useful.

In it we look at competitive advantage factors for Kids Tablets.

It’s now available via Kindle store on Amazon, here’s the URL:

http://www.amazon.com/Kids-Tablets-Competitive-Advantage-ebook/dp/B00BY66UF8/ref=sr_1_1?ie=UTF8&qid=1363952716&sr=8-1&keywords=kids+tablets+moat

Any questions on the contents of the white paper, or the topic itself, please feel free to drop us a line…