2013

FISHER PRICE TOYS CASE ANALYSIS

Subject: Consumer Behaviour Professor: Prof. Sabita Mahapatra Group No: 6 Date: 28th June, 2013 IIM Indore, Batch of 2014

Prepared By:
Ashish Jain (2012PGPM008) Kapil J Anand (2012PGPM014) Nitesh Kumar (2012PGPM022) Sandeep Sayal (2012PGPM028 Abhijeet Panwar (2012PGPM035) Shifaz Salim (2011PGP873)

Table of Contents
1. INTRODUCTION SITUATIONAL ANALYSIS .................................................. 3

2. PROBLEM STATEMENT ......................................................................................... 3

3. ANALYSIS ................................................................................................................... 3 3.1 Assumptions 3.2 Alternatives 4. RECOMMENDATION & ACTION PLAN..........5

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1. Introduction Situational Analysis Fisher Price toys is planning to launch its new product, ATV Explorer The product was intended to be launched at $12 retail price, but the production staff realised that the mold costs will increase the retail price to $18.50 Internal management was reluctant to launch premium products as their entire product line was priced below $5

2. Problem Statement:
To come up with a strategy for countering the resistance faced in the development of Fisher Prices $18.50 ATV explorer product. This resistance was due to the fact that Fisher Price product line was generally priced below $5 retail and the internal stakeholders felt that such a premium product would not be received well in the market.
The protagonist also had to decide whether to launch the ATV explorer as an

independent product or as a new product in an existing product line .

3. Analysis: 3.1 Assumptions: The internal stakeholders had assumed that its customers are price sensitive and would not buy a premium Fisher Price product. Not meeting the market demand would generate Fisher Prices ill will among the trade. 3.2 Alternatives: 3.2.1 Lower the product cost by using a single mold: Pros Low price Reduced chances of inventory pile up Cons Would produce only 500,000 units and due to its low price. Chances of stock out Brand image will get affected

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3.2.2 Lower the cost by removing parts of the toy (horn, plastic passenger, secret compartment) Pros Reduced price Competitive pricing Cons Quality sacrificed Inconsistent with Fisher Prices corporate policy and history Brand image will get affected

3.2.3 Depart from corporate advertising policies and push the product on television as single product Pros Cons Effective medium Against the corporate philosophy of advertising as a line of toys Could create demand for premium products Increased advertisement expenses as well

3.2.4 Lowering its price by reducing its margin Pros Cons Competitive pricing Against the philosophy and history of Fisher Price Relaxed R&D team due to reduced cost cutting efforts in the product Increased load and reduced margins for the marketing team

3.2.5 Milking the explorer and using the added revenues for increase promotion Pros Cons Effective dedicated medium of Increased advertisement expenses advertisement Could create demand for premium products Against the corporate philosophy advertising as a line of toys Increased promotion efforts due to increased revenue No compromise on the quality of product

of

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4. Recommendation & Action Plan: We feel, Fisher Price should go with the 5th option, i.e. milking the ATV Explorer and using the added revenues for increased promotions. The ATV Explorer toy is being targeted at families that are in the kid stage of the family life cycle. It can be used by both the types of families, i.e. Joint and Nuclear and the decision making is relevant towards the Consensus family structure and not autocratic. The fisher price ATV explorer is a staple non-discount kid product and will have to pass through the gatekeeper / mother. As shown in the A.J. Wood study, 72% of the toys are purchased by parents and 33% of the dollar sales are from toys costing more than 15$. It can afford to go for a premium product as the consumer as well as the buyer/gatekeeper is not price sensitive towards the product. The product is safe, durable, of good quality, stylish, multi-colored, has intrinsic play value. This product also has an educational side to it and hence the parent won t mind paying a premium for a product that is critical for the development of their child. If the benefits are advertised properly, the 19$ will be considered as an investment and not as an expense by the parents. Fisher price has an increased number of salespeople who along with the increased advertisement budget would create demand and help in selling the product at a premium. Fisher price cannot compromise on its quality by reducing the product components. They also cannot reduce their marketing margin and put pressure on the marketing team and make the R&D team relax due to reduced pressure on developing cost-cutting designs. Public opinions have demonstrated that people are ready to spend money on toys (54.9%); price of ATV explorer should not be a barrier for success. A leading toy manufacturer with a wide range of quality toys at moderate prices and has relatively good market for specialty toys, which has grown substantially over recent years. The best know brand for toys, has the largest market share (64.7%), and is brought most often (82.7%) and ranks first in brand loyalty (60.5%). The full version of the ATV explorer enjoyed substantial success in the nursery school and high level of repeat usage. The proposed ATV explorer TV story is an attractive marketing and advertisement concept and has a good chance of success. Fisher-Price has a sound financial condition and therefore can afford the financial risk of the initiating the production of the ATV explorer. Fisher-Price offering such as Creative Coaster or Family farm, even with price above the $5 barrier, met with considerable success, because of its reputability, fine track record and attractive design. The same market reaction may be expected for the initial release of ATV explorer. In order for the company to grow, Fisher-Price should consider starting the production of the ATV explorer to meet the Christmas rush of the following year. Due to the sound financial condition of the company, it can definitely afford the risk to go into production of the ATV explorer to keep the competitive edge. Since Fisher-Price has good brand recognition, it would be beneficial for the company to launch ATV explorer at $19.5.

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