Promotional Strategy Presentation

Strategy and Positioning Analysis (Lego Boost)

MKT/421

Mar 27, 2017

How marketing efforts and marketing mix will change each phase in the product life cycle

Just like any other product, LEGO BOOST is expected to go through a product life cycle which comprises of four stages namely introduction, growth, maturity and decline. Since the demand for the product changes as the product moves along the life cycle, it calls for the necessity to modify the marketing strategies and the marketing mix. The LEGO Company, therefore, comes up with strategies in each of the mentioned product life cycle stages as follows (Bilir, 2014).

In the introduction stage, which is the first one, LEGO will have to conduct vigorous advertisement for the product. Apparently, the product is new in the market and therefore, people have to know about it where they will have to hear it in radios, televisions, newspapers and newsletters, in social media such as Facebook and tweeter. Typically, demand for LEGO BOOST at this stage will be small, and thus, distribution will only be done in few channels. During this juncture, it is likely for LEGO Company to lose money in selling this product mainly because, the cost of advertisement and production is high, while the sale is little. It is much likely for Lego to use skimming-pricing approach due to limited competition in the market.

Growth follows the introduction. At this stage, LEGO will have to focus all its energy and resources on building up sales, trying to impress customers, so that they could have more of them. From vigorous advertisement on the first stages, sales increase rapidly, which in turn would lead to greater cost for the product. On this juncture, purchase of LEGO BOOST may be faced be competition from products from other companies, which may compel LEGO to lower the price of the LEGO BOOST package. At this stage, production and distribution would increase. At this juncture, LEGO will be profitable due to lowering of the cost of advertisement and production and increasing sale.

From there, LEGO BOOST gets to the maturity stage after it survives the growth stage. The maturity stage usually lasts long where sales for LEGO BOOST would remain high, growing and at some point, come to stabilize. However, at this juncture advertising will continue to be done to ensure that LEGO BOOST remains distinct from its competitors. Also, there may be experienced price wars for LEGO BOOST, but profits will be expected to stay high as sales will continue to be healthy. LEGO Company may consider conducting some modifications on LEGO BOOST package to suit changing customer preferences.

At the last stage of the product lifecycle, the decline stage, LEGO may face lowering sales and consequently profit of LEGO BOOST. This may be caused by customer preference and competition. Children may not prefer playing with LEGO BOOST, claiming that it is too old and outdated and at the same time, its competitor might have come up with a more sophisticated toy. To cope with this, LEGO Company will have to reinvent LEGO BOOST. Reinvention can prevent, buy time or recover the product from entering this final stage, the decline stage where sales go down as well as profits (Nagchaudhuri, 2002).

How the packaging for Lego Boost will add value

The presentation and marketing of a product really do matter. The people who support and advertise your product make all the difference. Also, what makes the difference is the packaging. Packaging and modeling of a product can draw people to your product and make them buy. It can also turn them away. Some of the best products out there right now package very well. Alienware computers who are now owned by Dell, do a wonderful job at packaging. They model this alien face with a heavy duty cardboard box, with a fantastic graphics job. Inside is another cardboard box which houses the computer and components. This attention to detail lets the consumer know that the company appreciates their purchase. At Lego, our product is amazing. The ingenuity and technology is cutting edge with our new Lego Boost. How are we to sell this product with just the idea alone? We need to have the best packaging and friendly instructions.

The proposed packaging will consist of the traditional recycled cardboard. The cardboard will have the Lego Boost graphic on all sides. The packaging will also include a small area that shows upcoming products. The outside of our boxes is always immaculate with fantastic graphics and other images. What will set apart our Lego Boost is actually the inside packaging. Each bot that can be formed with be in its own plastic packaging. This will make it much easier for the user. The instructions for the bots will come in the packaging as normal, also the user can download our Boost application and find instruction there too.

The really great asset to our packaging is that we use all recycled material. Lego recycles all but 1% of their plastic (Wilson, 2006). This cuts costs so that we can lower our prices or gain a better revenue from our products. We take a really simple packaging and make it grand with great graphics, and simple print.

Pricing strategy for Lego boost and the price at launch

Pricing decisions influence both total revenue (sales) and total cost, which makes pricing one of the most important decisions marketing executives face (Roger A. Kerin) Lego’s are a well know brand and a recent survey revealed they are the most popular toy to every be manufactured. So, when it comes to pricing, Lego Boost has to be price well enough to sell but low enough for the average house hold income can purchase. Since Lego already has Mindstorms, a similar product but more advanced, it important that Boost be priced competitively enough to attract new and less advanced customers. Since Boost is a new product it is important to find an estimated price range to use as a realistic starting point. The pricing strategy that will be used for Lego boost will be Skimming pricing, setting the highest initial price that customers who really desire the product are willing to pay. These customers are not very price sensitive because they weigh the new product’s price, quality, and ability to satisfy their needs against the same characteristics of substitutes (Roger A. Kerin). Since Lego’s are so well known and liked it is a good strategy because there is sufficient potential buyer who are willing to pay for the product straightaway at a high initial price. In addition, the higher price will hopefully keep the competitors at bay. If needed reducing the price will only have minor effect on raising the sales volume and dropping the unit costs. Lastly the higher price level demonstrates to the customers that they are paying for a better-quality product. Currently Lego has increase the number of its complex, high-priced sets to ramp up their profitability and Lego boost is one of those higher priced sets. Before setting the price, doing research about the competitive landscape for Lego Boost and make sure that strategy aligns with company goals is what we are looking for in an initial price. Pricing at launch will be $149.99.

The channels of distribution and description of each channel partner will add value

Now that we understand the market that our product will enter, the packaging that will be used for the Lego Boost product and the final price that has set a value on the product, let's discuss distribution. Distribution is probably the single most important element when introducing a new product. It usually consists of a chain of businesses or intermediaries through which a good or service passes until it reaches the end consumer. Think of it as a middleman before a final sale. As an producer, you want your products price to be worthy of its intended value and once you know its value, turn your focus more towards how and where you will sell your product and who will be buying it. The choices usually derive from market research. Why? Because your competitors are clearly distributing their products based on its intended market because both wholesalers and retailers only distribute products based on the market they are in. There are actually four main channels of distribution that can be used for product traveling. The first is manufacture to consumer. This means the manufacturer produces a product then sells that product directly to its purchasers. Usually sales are made one by one. This is the simplest method of distribution and actually falls under the retail channel as well. The second channel is wholesale. This method could be used if Lego decided to distribute this product in bulk. This is an effective method; however, it guarantees that the product will have more shelf time and the products posted price is usually lower than the price other channels stamp on a product like Lego Boost. The third is direct retail. This is equal to the first example of direct distribution. The fourth is a little different from the others. The middleman is actually an agent or a broker who chooses the next stop for distribution. Let's just say they are the deliverymen. Lego can choose any of these methods to successfully distribute their new product and success is almost guaranteed if the right channels is chosen.

Reference:

Roger A. Kerin, S. W. (n.d.). MARKETING. McGraw Hill.

Bilir, L. K. (2014). Patent laws, product life-cycle lengths, and multinational activity. The American Economic Review, 104(7), 1979-2013.

Nagchaudhuri, A., Singh, G., Kaur, M., & George, S. (2002, November). LEGO robotics products boost student creativity in precollege programs at UMES. In Frontiers in Education, 2002. FIE 2002. 32nd Annual (Vol. 3, pp. S4D-S4D). IEEE.

Tracy V. Wilson "How Lego Bricks Work" 28 June 2006.

HowStuffWorks.com. <http://entertainment.howstuffworks.com/lego.htm> 26 March 2017