Marketing Management

Danish group launches toys-to-life game giving children the opportunity to put physical playthings into virtual worlds Imagine Homer Simpson driving the Batmobile down the Yellow Brick Road. Or Superman steering a DeLorean Time Machine through Middle-earth. What was once fantasy will become reality this week when Lego and Warner Bros launch their big-budget game Lego Dimensions. It marks a crucial step in the Danish toymaker’s digital strategy. The game – whose starter pack will be priced at a hefty $100 – pushes it into a new segment: the toys-to life category, worth $700m a year in the US alone. ‘Lego is the archetypal toys to life experience. We are just pushing those digital borders continually so we remain present and relevant in all the environments where children want to play,’ says John Goodwin, the finance director. Toymakers have been hit hard by the emergence of smartphones and tablets, as children spend increasing amounts of time in digital play on such devices. Lego has managed to buck that trend, largely thanks to the strength of its physical products as it became the world’s biggest toymaker by sales in the first half of this year. But, while it has developed a successful line in video games through Warner’s TT Games, the privately owned Danish company has struggled in other digital ventures with a number of flops. ‘I don’t think they have conquered the digital world. It’s hard to point to something digital that they have done that is successful. But what you are seeing now is the first attempts for Lego to create some kind of hybrid physical-digital experience,’ says Case study David Robertson, co-author of Brick by Brick: How Lego Rewrote the Rules of Innovation and Conquered the Global Toy Industry. That increases the pressure all the more on Lego Dimensions, a sprawling game that cost the same as a blockbuster film to develop and featuring different brands including Doctor Who, Back to the Future and Ghostbusters. For their $100, players will get a game for Sony’s PlayStation, Microsoft’s Xbox or Nintendo’s Wii, alongside almost 300 Lego pieces used to create a controller, as well as three characters: Batman, Gandalf from Lord of the Rings and Wyldstyle from The Lego Movie. Additional kits featuring other characters – from the Wicked Witch in The Wizard of Oz, through to Scooby Doo and Wonder Woman to Krusty the Clown – will cost $15–$30 and unlock new games levels and include vehicles for game play. The game works by recognising which characters and vehicles are placed on a controller and making them part of the action, which takes place over 14 levels – one for each brand involved. Typical Lego flourishes are included, such as an ability to rebuild each vehicle in three different ways. ‘I wanted to make a game like this eight years ago. With my own kids, I could see how they would play with Lego: Batman and Gandalf together. When I saw toys to life, I knew this was the mechanism,’ says Jon Burton, the founder of British developer TT Games. The game, which took 160 people three years to develop, is launching in a crowded marketplace. Activision Blizzard’s Skylanders game has dominated the toys-to-life category since it launched in 2011, but has been joined by Disney’s Infinity – which will feature Star Wars’ figures this Christmas – and Nintendo’s Amiibo lines. Liam Callahan, an analyst at market research group NPD, says the toys-to-life sector was worth $710m in the US in the year to the end of August, up 6 per cent on the previous year. He argues that, even though the price is high and there is plenty of competition, Lego Dimensions should be a success thanks to the toymaker’s brand and the huge number of other brands and characters involved in the game. ‘Our research shows that the main market for these types of games are young males; but with the range of toys for Lego Dimensions, there may be a wider age and gender for main consumer as well as a crossgenerational appeal for families,’ he adds. Mr Burton says that the broad pitch is deliberate as he pushed to include levels from Portal, a puzzle video game, and Back to the Future to appeal to adults as well as children. ‘There is a bigger market for this toys to life than just six to 12-year-olds,’ he adds. Mr Goodwin is eager to underline that Lego is not betting the company on Dimensions. But he is keenly aware of the importance of the toymaker making a success of its digital offering. ‘What is obvious is the digital and physical is something of a distinction we make but children don’t . . . From a Lego brand point of view, we continue to be anchored in the physical brick experience. But we are going to explore more ways that you can build strong linkages between the physical and digital worlds,’ he says. Lego took the decision to concentrate on the physical brick when it neared financial collapse in 2004. As part of its recovery under chief executive Jørgen Vig Knudstorp, over-diversification was diagnosed as one of its ills and its video games development arm was sold off. Mr Burton, who was also an executive producer of The Lego Movie, says each company decided to focus on what they were best at: ‘They handle bricks, we handle the digital side.’ Another recent collaboration is Lego Worlds, a game still only in limited beta release that many see as the toymaker’s answer to Minecraft. Players can build worlds, buildings and figures using Lego bricks with nearly all the freedom of the physical world, while new ideas are being incorporated according to what Lego’s online community suggests. Mr Goodwin and Mr Burton say there is more to come, especially around making the digital experience more ‘real’. The toys-to-life category works by the controller reading a chip in a character’s base, meaning that if Batman is placed on Superman’s base the machine will still think it is Superman. Similarly, only the exact model or vehicle will be imported into the game, not whatever the player imagines. Mr Goodwin hopes that will change one day. Mr Robertson says that Lego’s great success has been building a range of products and experiences around the physical brick – so that children cannot just play with the products but also watch a television show, go to an event or see a display in a toy shop. Its digital push should be seen in that light, he argues, although he also says Lego could gradually develop into more of a digital company. ‘Maybe you and I might be talking in 2020 about what is the core of Lego: is it physical or digital?’ Mr Goodwin dismisses such talk, arguing that if you ‘put bricks in front of kids they just love to build’. Losing strategies: Award-winning games but not sales winners Success is far from guaranteed for Lego Dimensions as some of the toymaker’s previous digital efforts show. Lego Universe, an ambitious and costly attempt to replicate the experience of playing with bricks in a game, developed by dozens of workers, was killed off within months of its launch in 2010. At about the same time, a single Swedish computer enthusiast working part-time developed Minecraft, which became one of the biggest-selling games of all time and is in Jon Burton’s words ‘a digital version of Lego’. John Goodwin says that failure led to Lego realizing it needed to be more agile when dealing with digital products than physical ones: ‘Other companies put their games out in beta [an early development stage] and constantly reiterate it. That’s not part of our DNA. We have a tendency to want to have perfection by the time it gets into consumer hands.’ More recently, Lego Fusion won a string of awards in the US but it was unsuccessful in grabbing children’s attention and that too was discontinued. It allowed players to create two-dimensional models with physical bricks that they then imported into the game using a smartphone or tablet camera. ‘One product was unusable, one was not fun,’ summarises David Robertson, a professor at the Wharton School in Pennsylvania. Mr Goodwin adds, somewhat ruefully: ‘It’s not about winning awards, it’s about delighting consumers constantly and we weren’t able to do that.’ 1 Evaluate and comment on Lego’s market orientation using the market orientation assessment form to support your analysis.

2 Which of the three approaches to marketing presented in this chapter do you think best describes Lego’s approach? Why?

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3 What marketing principles are in evidence in this case?

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