The LEGO Group to launch media agency review

Posted by ,

Adweek reports that, after a disappointing 2016,

"The Lego Group has placed its global ad planning and buying business in review for the first time in more than 15 years, several parties confirmed this week.

"The Danish toy giant works with multiple agencies around the world, and Publicis Groupe’s Starcom has handled its U.S. media business since 2000. According to Adweek’s sources, the pitch is still in its early stages.

"A company representative declined to comment, stating, “The Lego Group regularly reviews all contracts with suppliers as a standard business practice. We have no further information to share at this point.

"While the U.S. remains Lego’s largest market, the company has stumbled in recent months after a decade-long turnaround powered, in part, by movie tie-ins. In March, Lego reported flat sales for 2016 despite a major marketing effort that nearly pushed the company past its primary American competitor, Mattel.

"Former chief operations officer Bali Padda was promoted to become the first non-Dane to run The Lego Group as CEO this January. He replaced Jørgen Vig Knudstorp, who took over in 2004 as the first chief executive not connected to the Kirk Christiansen family that founded the company more than 80 years ago. Knudstorp is now chairman.

"Representatives for all major media agencies including IPG Mediabrands, Havas Media, Omnicom Media Group, WPP’s GroupM and Carat (which won reviews for Lego’s European business in 2004 and the Asia Pacific region in 2015) declined to comment on the news—as did U.S. incumbent Starcom and strategic advisory firm MediaLink, which has worked with Lego in the past.

"According to parties with direct knowledge of the matter, however, most of the major holding companies are participating in the pitch with Starcom defending. OMD was reportedly unable to compete due to a conflict of interest with Hasbro, which consolidated most of its global media business with the Omnicom network in late 2013.

"Kantar Media’s latest numbers have Lego spending approximately $85 million on measured media in the U.S. last year, a significant increase over its $49 million total for 2015. Totals for other markets affected by this review are currently unavailable."

What do you think? Definitely an interesting development!

17 comments on this article

Gravatar
By in Czech Republic,

That is interesting.. and weird.. I remember reading cca a couple of months back in the news, that LEGO sales in US were so huge, that they HAD TO STOP the ads and campaigns, because they did not want the market (= their potential sales) to overheat, plus they were not able to supply the market demand.. and now I read quite the opposite, that they didnt cut the marketing costs but rather double them..

Gravatar
By in Canada,

To summarize, Lego isn't selling more for the increased amount of advertising. I've never heard of a situation where media is cut due to an overheated market. Advertising is for brand association and to keep their products in the minds of individuals who may at some point will make a purchase. I do find it interesting that sales are flat. I'm not really all that surprised. I would be interested in knowing what themes specifically were flat.

Gravatar
By in United Kingdom,

There must be a limit to how much Lego can be sold in any given country, and maybe they've simply reached it. Perhaps they've got to all the consumers who can afford to buy the stuff, and they're buying as much as they desire and can afford - even with a high disposable income, there must come a point where the best advertising in the world isn't going to make people buy sets they don't want (or not buy other items that theoretically detract from their Lego funds)...

Gravatar
By in United States,

I would say that the market here has nearly gotten to the point of, or already is, oversaturated. The situation is further hindered by a comblination of other factors including limited disposable income, stagnant and even declining wages, and high cost of health and child care. My own job security is in jeopardy and I may be unemployed this time next month. However, I can only speak for my own circumstances and cannot overgeneralize, although would venture to say my experiences are not uncommon. No amount of advertizing will change these underlying factors, thus they can triple their advertising budget with still no effect.

Gravatar
By in United States,

I can't speak for everyone, but the lack of creativity with their sets is the reason for my decline in Lego purchases. I went from my peak about four years ago,buying about 45-50 sets per year, to were I'm only buying about 25 sets a year. This year I've only purchased 11 and only have 4-5 more I plan to purchase. If Lego doesn't start to introduce some more fresh Ideas, I might see my annual Lego sets purchased drop to Single digits for the first time in 15 years.

Gravatar
By in Canada,

Wild guess time: The AFOL market was essentially created with the launch of Star Wars in 1999. Suddenly all these old folks could buy their childhood again and they remembered how great Lego was. That, plus the internet, led to them realizing that they were now AFOLs, a thing they didn't even know was a thing. And lo and behold, they also had jobs now, and money, and they started buying. Well, 18 years later they've all bought so much Lego that they don't really need much anymore, and they can take a breather from buying and finally get down to building. All these Star-Wars-induced AFOLs started at the same time (the AFOL-boom) and now the market only has the regular trickle of AFOLs coming out of their dark ages (the AFOL-bust). AFOLs don't care about the Lego Batman Movie and so that investment was a total flop. They also are cool to Nexo Knights despite it being a pretty good theme. All of the nostalgia properties are either locked up by competitors or exhausted, so from here on out Lego will start to decline, until their desperate attempts to cut costs reduces their quality so much that Mega Blocks look attractive. That, combined with kids who grew up with those properties finding themselves AFO?s, will lead to the rise of AFOMBs. Geopolitical events will eventually outpace building-toy religious wars, but only just barely.

Gravatar
By in United States,

I've never understood the mindset of businesses that if you're not growing/expanding, then you are failing. If you are selling a very high volume and making good profits, is that not a good thing? Lego is the only toy brand/system that gets an entire aisle at my local Walmart. Barbie, Hot Wheels, etc., are not even close. Is it not good enough to dominate the toy market and sell an extremely high volume and profit? If you maintain excellence, is that not good? Must you improve or expand beyond excellent or otherwise be a failure? As an analogy, Usain Bolt is not getting any faster, but he still dominates his field.

I admit, I am a scientist and not a businessman.

Gravatar
By in United States,

@Mr. Shiny and New,

I have to agree with most of your statement. I think a lot of AFOL's don't care much for some of the new themes and we are tired of seeing old sets rehashed. It has gotten to the point that most of the rehashed sets aren't much better than their predecessor, and in some cases are worse than their predecessor. I'm tired of seeing the price of Lego increase without seeing anything new.

Gravatar
By in United Kingdom,

^wow, party invites are actually dictating acceptable gifts now?! I'd get them mega bloks just to prove a point (not quite sure what point, but it would be something).

Sorry off-topic.

Gravatar
By in United States,

I'm a rabid minifigures collector, to the point where I'll drop a decent amount on a set I don't very much care for just for a really great fig. I spend a few thousand dollars a year on Lego sets. Yet I can't bring myself to even look at set 76078 Hulk vs. Red Hulk. It's a horribly uninspired set, and it's $60. It's so bad, I'm willingly skipping both She-Hulk and Red Hulk from my nearly-complete collection of super heroes figs. If a Lego addict like myself isn't even willing to consider that set, what are the odds that it will sell well? I'm no expert, but too many sets like that one could be a major contributor to the company's woes.

Gravatar
By in United States,

I got slammed on AFOLs of Facebook for predicting and looking forward to a shrinking Lego sales.

"More brick for me" hushed said has he greedily licked his lips.

Sales are going to decline at some point. The bulk lots I get are in better and better shape, with more and more unopened bags. As pointed out above, kids are getting more Lego than they can realistically use. That just means us AFOLs will get a chance at the brick at a discount. We can then build bigger and better for shows, which will drawn in the next generation of kids, increasing Lego sales in the future.

Gravatar
By in United States,

I used to work for Ketchum and that's when I became an AFOL; Star Wars was what sucked me in and I continue to buy those sets...when it suits me and I don't really pay attention to anything else other than what my daughters appreciate (and will enjoy). Having started my Star Wars collection in 1999 I will agree with the fact that I'm saturated -- I have so many archived sets in bags that I ran out of places to display things long, LONG ago. I continue to buy sets and parts for myself (and my daughters) to play with and build MOCs from but I don't purchase much more than that.

As far as a PR/marketing perspective goes, I don't think we can expect kids to "want" more than they already do. For many of us AFOL, LEGOs were a luxury and many of us thought that each set was worth more than gold; we'd collect each and every set and retain the boxes to show off what we had in our collections. Those days are gone; sets are so abundant and the pieces so ubiquitous that it's almost expected that kids get (at least) a set somewhere along the line as they grow up. Outside of the major Cuuso/Ideas sets and Star Wars, nobody wants Chima/Ninjago/Elves in massive quantities.

I'm pretty sure that LEGO isn't going the way of Xerox/Kodak and pandering to a dwindling market but it's obvious the market is saturated. They can only sell so many Death Stars or Millenium Falcons. We (AFOL) only have enough shelves for a couple Slave 1s, X-Wings, B-Wings, and TIE-fighters. The original draw of LEGO was it's ability to build anything from whatever parts you have; your imagination had/has to roam free. The limitations of a collection made us find unique ways to build things -- marketing and capitalism isn't built on restraint.

Gravatar
By in Canada,

@crayxmp Thanks for the link.

Lego has had a capacity/logistics problems for the past decade or so, which is why they have been making investments in their production capacity.

A good read for those of you who would be interested, is David Robertson's book entitled Brick by Brick (www.robertsoninnovation.com/brick-by-brick/) He provides much needed background information on the trials and tribulations of the company. I read it a year ago or so.

Gravatar
By in Czech Republic,

Wodanis: My very first comment on this marketing was, that LEGO deliberately chose to slow down the marketing efforts on US soil due to some issues of production limitations and also fears of "overheating" . and I believe that the Washington Post article just proves that.

gawd.. I wish my business had the same "issues" as LEGO did :DD

Gravatar
By in Sweden,

Management consultants would say that Lego has moved from star status (high market share-high growth) to cash-cow status (high market share-low growth) in the so-called BCG matrix. Management people are freaked out by such things.

Gravatar
By in Poland,

I just hope someone step up in Polish translations because they often just suck.

Return to home page »