There is a not so secret Key to success for Toy Companies, which many know, but fewer manage to implement successfully. The Corporate companies get this, and generally do it very well. The non Corporate companies though, often fail to capitalise on the best double payday there is in this industry.
Most non Corporate companies I come across are so focused on the sheer daily grind of Sales, cashflow and the P&L, that they don’t focus on creating true long term value and really solid foundations for their business. This is the treadmill mentioned in the title of this article, and that treadmill can get faster and faster and harder and harder to keep on!
The not so secret Key to success for Toy companies is building their own Brands to as great a scale as they can. The reality is that it isn’t easy to get retail support for non Licensed product with no heritage, and sometimes soft marketing only. But then most things worth having don’t come easily in business.
The trap many companies fall into is the Licensing trap. Now Licensing is a major and fundamental feature of our industry, so in no way am I denigrating what Licensed products bring to the party. The problem for Toy companies though is when they become over dependent on chasing the next hot license, or puts too many or all their eggs into the basket that is utilising somebody else’s intellectual property.
The treadmill effect works by way of giving you a boost in sales for each hot license you add to you range, but Licenses come and go, so it’s ok to make hay while the sun shines, but what happens when the License goes? The biggest downside is when companies have resourced and taken overhead based on Sales boosted by Licenses, that then eventually evaporate, leaving just a bunch of unrecouped MGs, an overblown machine with no critical mass and a lack of profit.
So how should Toy companies manage the need to have Hot Licensed products to ensure retail support / drive sales, with an understanding of and plan for how the business would work post hot Licenses?
The antidote to this is, and always will be, in the first instance is to commit to new overhead with a frugality and conservatism that borders on the ridiculous. But the 2nd part of the antidote is to invest time, effort and money into creating your own Brand I.P., or at the very least, partnering with companies who will give a share of Brand I.P…. because in the long run, 10% profit (if you’re lucky) will take a long time to generate significant wealth for shareholders.
The 1 big payday that established Brands offer, and / or the stability and security they provide to your business on an ongoing basis is something very much worth fighting for.
In the last 18-24 months, we’ve seen a number of companies whose businesses were based on other people’s Brands go under because they had no permanent foundations, and so while there are massive challenges in successfully creating your own Brands, and monstrous barriers to entry for creating IP in some formats (i.e. TV / MMOGs / Movies etc.), to not invest significant focus in creating and owning at least a chunk of an asset which could be worth $millions or $tens of millions is beyond short sighted…in fact it means you remain on the treadmill with no end in sight…
The companies I’ve worked with who’ve experienced most success are those who build long term Brand value. Simple as that.
All the best
P.S. Just to declare my level of objectivity – I’m a Brand Consultant, so of course I think Brand building works…but not based on hope or self interest, it’s because I have personally worked on Brands sold for in excess of $130m…Brands which started as just an idea! As ever, all and any feedback welcomed, good or bad…please add Comments below.
P.P.S. Still offering Free Guide on 21st Century Toy Marketing to ‘de-mist’ Social Media et al… http://toymarketingacademy.com