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