Number of User Uploads to Lego Channel
Lego is a lockdown winner, with 2020 sales growing +13%, profits upwards +20% and market share gains achieved in its 12 largest markets (1). But these brusque term results are the reward for more a decade of core revitalisation. The company has grown in xv of the last sixteen years, with 2020 revenue 7.3 times what is was in 2004.
In this mail service nosotros wait at some of the key learning from Lego's programme of abiding cadre revitalisation.
one.Focus on the core
The strategic foundation for today'south growth was built in the mid 2000's by CEO Jørgen Vig Knudstorp. At that time, Lego had tried to grow by stretching away from the core. It adult in-business firm video games, launched a range of plastic jewellery, developed figures without bricks and ventured into clothing (meet below).
These new ventures failed to take off and also distracted resources from the core, which connected to pass up. "It became less fashionable inside the company to exist doing the core experience, you lot desire to be dong the new stuff such every bit books or theme parks," explained Jørgen in an interview (1). "All the talent, free energy and management attention goes that fashion." The business fabricated a heavy loss of $200 million in 2003.
Jørgen's core revitalisation re-focused Lego on what fabricated it famous: playing by building with Lego bricks (the name Lego is Danish for 'play well'). He sold off peripheral businesses such every bit theme parks and video games. He cut back the number of parts, which had ballooned from 6,000 to 12,000, causing a nightmare of logistics and storage. The focus was on Lego bricks that could be used in multiple creations.
2.Upgrade the core
Lego invests heavily to constantly upgrade its core product range. A swell example from 2020 was the tie-upwards with the games company Nintendo to create a Super Mario product concept. This new offer brings together concrete and digital play, allowing users to create their ain real-life game, based on a Super Mario figure with congenital-in functionality: a motility sensor creates different noises depending on whether he is shaken, falling over or jumping! The Super Mario starter set was Lego'southward summit-selling product, despite but being launched halfway through 2020 (1).
3.Refresh your brand to exist relevant
Key to Lego'due south core revitalisation has been staying culturally relevant and newsworthy. A cardinal core extension has been the licensed collections using movie backdrop such has Harry Potter and especially Star Wars. The latter accounts for an estimated 1/3 of all Lego sales. Lego invests heavily in these licenses, spending an estimated € 270 million a twelvemonth on them!
Another marketing masterstroke was the launch of The Lego Flick. This movie was a blockbuster success with box office takings of over $460million and a profit estimated here at a cool $229million. In a smart motility, Lego didn't try and get it alone in an area where it lacked adequacy. Rather, the company entered a joint venture with Lucasfilms. The team created a 5 infinitesimal pilot episode, aired on the Cartoon Network. The success of this small scale experiment gave them the confidence to create a full-blown moving picture.
4.Drive achieve
Lego's growth shows the power of increasing penetration by extending your brand's reach. The company has done this in several ways:
Consumers
Lego is a great example of driving achieve to as bigger group of consumers equally possible. Lego Friends was created to appeal specifically to girls versus the boy-oriented focus of the make before. Another of import source of growth are the adult fans of Lego, or AFOL for short. AFOL is "a global network of collectors, master builders, crafters and cocky-confessed brick addicts." (iv)
Geography
Geographic growth across the traditionally strong markets of the UK, U.s.a. and Germany is some other central way of driving reach. China is a key market place for Lego, with "more than than two-thirds of the world'southward 2 billion children expected to be living in East Asia by 2032," according to Bloomberg (five). The brand had 1 single store in China in 2016 but expects to have 300 by the finish of 2021 (5).
Omni-channel
As you'd await, Lego's ecommerce sales exploded in 2020, doubling in a yr. Big investments in the brand'south online presence paid off.
What is more than interesting is the company'southward continued commitment to concrete retail. "The company opened 130 new shops in 2020, 91 of which were in China, and plans further openings this yr, which will have its global shop count from 678 to 800," co-ordinate to the Guardian (1). Physical stores are seen as a fundamental marketing tool to drive trial in new markets similar China where parents did not grow upwardly Lego. "Kids go to meet what Lego is and play with information technology," current CEO Niels Christiansen observed. "Information technology's a brand built on the physical."
five. Involve your fans
Lego draws on the creative free energy of its big ground forces of fans around the world who come with new ideas for free. The ideas are displayed on The Lego Ideas website. If an thought gets ten,000 votes Lego volition wait volition await at it. The lucky few like the Friends Fundamental Perk set below go into production and earn 1% of sales for the creator.
Lego fans are also a fantastic source of social media presence. The brand is perhaps the globe'due south best example of stimulating and harnessing the power of user generated content (UGC). The company says a photograph of a Lego creation is uploaded every 2.vii seconds. An example is Evan Moana, whose EvanTubeHD YouTube channel has 6.8 million followers alone.
Lego strengthened its ability to harness the power of UGC by ownership Bricklink. This online platform has i.1million members, assuasive Lego fans to buy or sell parts and chat about their creations.
vi.Keep your organisation efficient
At that place are lots of great things Lego have done to create demand. Simply a lot of hard piece of work has besides been done on the toll side. Back in the 2000s this involved moving production to countries such as Republic of hungary and Mexico to get the cost base down (ii).
More recently, a major organisational re-set took identify in 2017 when sales declined by 8%. Jørgen explained at the fourth dimension how the company'due south structure had become overly complex, with too many layers and overlapping functions (3). In addition, inventory levels had become besides large, slowing down sales. The company took one big hit to sort itself out, cutting 1,400 jobs and reporting a profit driblet of 17%. This short-term pain paid helped create long-term gains, with acquirement and profits returning to growth in subsequent years.
In conclusion, Lego is a cracking instance of how abiding core revitalisation is the key to sustainable and profitable growth.
SOURCES:
(one) https://www.theguardian.com/lifeandstyle/2021/mar/10/lego-sales-soar-on-back-of-covid-lockdowns-and-nintendo-necktie-up
(2) https://www.ft.com/content/476acab8-c11c-11e6-81c2-f57d90f6741a
(iii) https://www.cnbc.com/2018/03/06/lego-results-2017-sales-fall-for-the-start-time-since-2004.html
(iv) https://www.wired.co.u.k./article/lego-60-anniversary-afol-customs-adult-lego-fans
(5) https://world wide web.bloomberg.com/news/articles/2020-12-16/lego-plans-physical-store-expansion-in-communist china
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Source: https://thebrandgym.com/legos-constant-core-revitalisation/
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