Mads Nipper (LEGO): 'Failure is part of the digital game'
The rise of toy manufacturer LEGO seems unstoppable. The brand builds on its empire both off- and online, with TV series, online communities, video games and robotized toy creations playing an increasingly important role. "The real revolution is in the integration of the digital and the physical world, " said Mads Nipper (47), Executive Vice President, Chief Marketing Officer of the LEGO Group
The rise of toy manufacturer LEGO seems unstoppable. The brand builds on its empire both off- and online, with TV series, online communities, video games and robotized toy creations playing an increasingly important role. "The real revolution is in the integration of the digital and the physical world, " said Mads Nipper (47), Executive Vice President, Chief Marketing Officer of the LEGO Group.
About ten years ago, the Danish LEGO threw the helm radically. A threatening bankruptcy forced the manufacturer to reinvent himself. This meant, among other things, that the time-honored plastic pebbles and minifigures gave way to digital equivalents, the company was more than ever open to ideas from outside and partnerships with the major TV, film and gaming studios were closed. But also the custom of branded content and community sites had to make the famous stones top of mind again.
LEGO's business revenue grew by 25 percent last year to a sloppy 3.1 billion euros. This even surpassed the glory years of 2006-2010 - with an annual growth of twenty percent. The company also expects a turnover increase for 2013, albeit a little less than in recent years.
Nipper, who works for the company on a short trip after all his life, has been responsible for product development, design, marketing and sales worldwide for two years. According to the multinational, new product launches will account for no less than sixty percent of sales annually. According to the Executive Vice President, the largest growth is in digital business. "It is the place where children are active now and certainly in the future and interact with others. In addition to offering relevance and a good experience, digitization enables us to build an extra layer to build our original business. And with success. "
Will digital content eventually replace the physical stones?
"No, that will never happen. It will always be an enrichment of the offline experience. We will always stimulate physical play with LEGO bricks, which is also central to our conviction 'hands on / minds on', where the power is right in the combination of the physical and virtual world. The dividing line will fade now that smartphones and tablets have also reached the younger generation. I expect that the border will be stretched even further in twenty years, but as long as it fits with the children's perception, we have no problem with that. "
To what extent does the online sales contribute to the total sales figures?
"The only thing I can say is that ten percent of our total revenue comes from direct sales through our own online channels and those from our own brand stores. The share, like the online sales via our retail sites, increases every year. Turnover from online is growing faster than offline. "
What function does the brick store still have in the total mix?
"We try to increase our engagement with our products, just like online. Especially by using augmented reality and other interactive means, we want to show the consumer and experience what you can do with a specific LEGO product. A picture on a box alone says too little about the experience it can offer. And it also stimulates the creativity of the buyer. And yes, of course we get better financially, because without commerce we can not survive. However, due to the costs involved, it is not yet common practice in all toy stores. We are now experimenting with a number of our own brand stores, including one in Russia. Given the growing penetration of the smartphone, interaction through that road will certainly also be possible in the future. And not only in the store, but also at home from behind a screen. "
Online shopping is taking a big flight. How do you respond to this?
"That we are on the verge of major changes in that area is certain. Only we are not the party that will take the pioneering role there. We do not revolutionize online shopping. Or via social media or your mobile. We are also too dependent on external e-commerce experts and other parties through our partnerships. We promise you the best shopping experience on any platform. That is where our strength and therefore our focus lies. It would be terrible if buying our products became a mere transaction. "
Will cannibalizing online sales on traditional store sales?
"Yes, that will certainly be the case. But in the end we are selling more products than before due to the arrival of online. This also applies to our retailers and other partners. If that were not the case, we would not do something right. For the time being, we learn from all our online activities every day. The digital evolution is also going very fast for us. Sometimes we have to be content with online concepts that are still in a beta phase at launch and we still get offline after a certain amount of time. I believe that every brand must take risks online. Four of the five internet concepts that we will launch, are therefore unlikely to be rescued. Whether something is a success, we deduce for a large part the playing time that children spend on it. The longer that is, the greater the play value . In our business it is not about toys, but the 'business of play'. The real revolution is in the integration of the digital and the physical world. "
More and more LEGO products contain software, such as the robotic Mindstorms concept. Does the company gradually transform into a software company?
"No. By sharing our knowledge about the 'business of play' with third parties, we can realize very beautiful things. Our strength is not in software or technology. Other market parties are much better at this. We use that. Then we try to adapt as well as possible to the changing reality and to learn from it. We know our place here. For example, we know that we are currently insufficiently using all the input we receive from fans and other users. This leaves many good ideas and we innovate too little and too slowly. That is not possible anymore. Now it usually stays in discussions with large established parties, while we should also collaborate with innovative startups or creatives. In a continuous process. We already do a lot in that area, but the output can be much better. That has our attention, although we also realize that we will never be the fastest in that area. The interaction on online social media platform Rebrick and Cuusoo, where new LEGO creations can be introduced, are the first steps in the right direction. "
How do you promote the innovation process internally?
"Apart from departments that deal with this in various ways on a daily basis, our flat organizational structure encourages decisions that are good for both the target group and the company. We also thank a large part of our success. If someone makes a wrong decision in hindsight, that does not mean the end of someone's career within the company. Even if a product, both offline and offline, ultimately does not produce the desired result, and is taken out of our portfolio, for example, the aim is always to give the colleagues involved in the same position elsewhere in the company as before. Failure is an important part of our success. And belongs to the digital game. You must also cherish people who take risks. "
You have a marketing budget of about four hundred million dollars. Where does the most money go?
"TV advertising is still the most important means for us to generate interest. Television as a marketing channel is, contrary to what some claim, not dead, the share within the mix is decreasing. A further subdivision is difficult to make, as many marketing activities go cross-channel. For example, some marketing content is intended for both television and online. The fact that each channel makes a contribution is a basic requirement. The total marketing effort must always bear fruit. As long as that is the case, we are satisfied. Online is still relatively small, but it is growing the hardest of all marketing channels. Our main community, LEGO.com, draws around twenty million visitors a year. "
How do you manage the LEGO statements on all those channels, from gaming, TV series to YouTube?
"With regard to our own expressions, such as those on LEGO.com and our own TV commercials, that's easy. All other content is created in collaboration with third parties, and often also conceived. If we want to officially connect our name to something, then of course there are clear rules for what is and is not allowed. In addition, the border is sometimes sought. However, we retain the veto right to reject an end product. Always. That is sometimes not accepted, but that she is. We have a certain responsibility to take, both off and online. On the other hand, we are aware that we can only grow by relinquishing our brand. And it is also an excellent way to distinguish ourselves from the competition. The creative output that this produces, such as on YouTube, is extremely valuable. Recently, we also launched our own YouTube channel, so that all user generated video content about and with LEGO products can be found in one channel. "
Some of the LEGO apps on mobile and tablet are free. Why not all?
"Our own apps are logical contact moments for us with the target group: children. You are not going to monetize that. Our partners, such as Warner Brothers, Disney or Lucasfilm, may ask for money. That is also an essential part of their business model. The free play of a game or app developed by us is primarily intended to enter into and maintain a valuable interaction and a relationship with our brand. In addition, it enriches the child's experience, which is essential when playing with LEGO products. We do not measure how much extra turnover it yields and we do not measure it. This also applies to other content, such as the TV series on Cartoon Network, but also the cinema film that will be released in February next year. As long as it contributes to the experience of LEGO, it has a positive effect on our turnover, although this is not our main objective. "
The first Transformers cinema film rescued competitor Hasbro from the downfall and its spin-off yields them a lot of money to this day. Why did you wait so long?
"It is an idea that we have had for some time, but which we have never been able to give a good interpretation to. Until Warner Bros. approached us with a convincing script and concept. Here too we had to take the lead in hindsight, but that did not happen. The result nevertheless makes us hopeful. "
Will there be room for in-app purchases in the long run?
"I can not imagine that we are going to introduce that, but if that need arises - and therefore be embraced by parents - then we would be able to look at it. After all, we are always open to innovative revenue models. Our own applications will always remain playable in a basic way. A possible in-app purchase option does not change that. "
North America, Asia and Eastern Europe are your biggest growth markets. Three totally different markets in several ways. How do you manage that marketingwise?
"In principle, we use a global marketing strategy. This means that if, for example, there is less money available in Poland for marketing, the LEGO.com community site will simply offer a less rich experience there than the same site in the United States. The same applies to the apps that we release. "
And how important are innovative social media channels such as Snapchat, Vine, Pinterest and Instagram for LEGO?
"Like many other brands, we like to follow the consumer. However, the growth in the number of social media channels does not mean that we will be active on all platforms. You also need to be able to enter the dialogue in text or video at any place. If we can not guarantee that, we simply will not do it. Currently we choose to be active only on Twitter, Facebook and our own social media site ReBrick. You can not be anywhere the consumer is, however much we would like to. "
- Founded: 1932
- Number of countries active: 130
- Number of employees in 2012: 10, 400, spread over 30 countries (2011: 9374 employees)
- Number of designers: 100, spread over 19 countries
- Turnover 2012: 3.1 billion euros
- Sales growth 2012: 25 percent (between 2006 and 2010 annual growth of 20 percent)
- Expected 2013 revenue growth: growth, but less than in recent years
- Fastest growing markets: North America, Asia and Eastern Europe
- Brands LEGO Group: LEGO, DUPLO, Technic, Creator
- Best selling products: LEGO Star Wars and LEGO City
- Marketing budget: 400 million dollars
- Unique visitors LEGO.com: twenty million annually
- Toy market competitive position: number three of the world with 8.6 percent market share (in 2011: 7.1 percent)
- Competitors: market leader Mattel and the number two, Hasbro
Photography: Jonas Ahlstrøm (c)
*) This article was previously published in the September issue of Emerce magazine (# 124)