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31 Jan – 4 Feb 2018
It’s like when you heat a big pot of water on a stove: The temperature doesn’t change instantly. It takes time. And above all, it doesn’t happen homogenously. While the water further up and in the middle of the pot is still far from the boiling point, the edge and, in particular, the bottom are much hotter. It’s a gradual process for the temperature to even out across the entire pot, accelerated by convection.
Market activities are somewhat similar. The large mass appears constant. And impulses from the edges of the market sectors create a slow movement and change. Often imperceptibly slow. The more active the edges are – the more they all move in the same direction -, the faster the mass itself moves.
Manufacturers are usually either part of the active, bubbling edge or the slower middle. Only very rarely do hybrid strategies work when building a range. They thus either pursue a mass-market strategy or segmentation strategy, with which they can or seek to cover all or part of the relevant market.
The strategy a company pursues is usually deeply rooted in the DNA of the company and its brand, and the course or direction the company follows is set very early on.
On the one hand, the direction depends on the entrepreneurs’ mindset: Where do they feel comfortable, where are they credible, where are they at home? On the other, the company’s structure is a strong deciding factor. Is the company itself a manufacturer and marketer – or trading company -, perhaps with outsourced sales structures? Countless other factors are of course also critical here, such as company size, scalability and available capital.
Firstly the target group’s expectations of the items offered: The mass market makes little distinction when designing product features. The item sold has been “learnt”, i.e. it meets the expectations of the customers seeking it. Consumers generally only tolerate surprises to a small extent – and the greater the potential surprise factor – e.g. as a result of special colours or features, the more this limits the target audience.
Mass-market products are consequently comparable between one another – and this comparability often makes this product segment very price-sensitive, generally resulting in a high sales volume with comparatively low profit margins.
Range management for brands servicing the mass market can certainly be challenging. Every change can quickly lead to major losses in sales if it does not gear the range around the framework conditions. This is where the MAYA principle comes in, i.e. making innovations “most advanced, yet accepted” – and skilfully striking the balance between degree of innovation and acceptance. If a provider lets the pendulum swing too far to one side, they run the risk of losing customers who value the consistency of a well managed brand
And yet the philosophy of “either you go with the times, or the times keep going on without you” also applies here: Even the ranges of established mass-market players must constantly undergo changes in order to not be outrun by competitors generating high pressure to innovate.
Companies on the mass market are thus distinguished more by a skilful “me too” rather than innovation. To a certain extent, they react to promising activities in market niches – or feedback received from the retail market.
A branded company can thus certainly operate profitably for some time, but it does run the risk of stagnating as being simply “one of many” and averse to innovation. This results in a buyership whose consumption is driven more by impulses or needs, rather than brand loyalty.
This is where niche-market specialists have it easier: Their range is not exposed to the same, intense pressure from competition. In an ideal scenario, it indeed virtually monopolises its self-created niche.
The product range is limited to a certain target group, services a certain market sector, and has a certain look and quality rating. These are of course factors expected and learned by the customer. With the difference being that niche providers’ products highlight these very features as distinguishing elements. This gives them a certain degree of price elasticity, as they are not absolutely comparable with market players.
Customers primarily expect niche providers to be authentic; that, in addition to merely fulfilling a purpose, the products will also make a statement and convey emotion. Whether these arguments relate to specific craftsmanship, sustainability, quality, origin, company and family tradition, fashion and zeitgeist or product innovation and features, is very personal, and depends on the product itself, the announced sales channel, or the target buyers.
This individuality enables higher margins, as there is no pressure from competitors. The items and brands do, however, require more explanation.
The ranges of niche providers and established larger manufacturers who have the courage and opportunity to offer niche ranges are thus the parts of the previously mentioned cooking pot which heat up quickly and bubble actively. If supplied with energy for long enough, they have the potential to also stimulate the providers to join in the bubbling and activity, establish themselves, and start trends – which then impacts the slower-paced masses and gradually sets the entire system in motion.
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