Case Study 1: LEGO: Successfully Reviving the Positioning Strategy and Value Proposition The LEGO Group is a family-owned company based in Billund, Denmark, and best known for its superior quality LEGO toys. The company was founded in 1932 by Ole Kirk Christiansen. The word Lego is derived from the Danish words "leg godt," meaning "play well." On average, every person on earth owns 86 LEGO bricks and a mind-blowing 400 billion LEGO bricks now populate the planet, enough to build a tower to the moon ten times over. The LEGO Group patented the brick with the familiar tubes inside and studs on top in 1958. Since then, all 2 X 4 LEGO bricks manufactured have been produced to the exact same measurements. Although the brick itself has not changed much, the brand, its positioning, as well as its value proposition have evolved over the years quite significantly. In the beginning, the LEGO bricks were just small plastic bricks for building. In 1978, the first mini-figure was produced, adding a touch of personality to the LEGO universe. Since then, more than 4 billion have been made. When the company entered the digital age in 1997 by adding computer games to its product line, all seemed well. However, this changed quickly by the end of the 1990s and in the 2000s due to fluctuating trends in the toy industry. Suddenly, The LEGO Group looked old-fashioned and outdated, and the company was forced to acknowledge that it had fallen out of touch with its customers. As children were increasingly in awe of contemporary and technological developments like video games and other sources of entertainment like the iPod and the Internet, most of the LEGO products seemed less appealing. In addition, LEGO faced competitors that imitated its bricks and sold them for a lower price. In addition to this, continuous brand extensions into different markets, such as the children's clothes and accessories markets, made the company and the customers lose focus on the brand and its core. As a result, there was deep-rooted confusion over what the brand signified anymore and what values it stood for. As a result, The LEGO Group encountered its first financial loss in 1998 and hit rock bottom in 2003, when it reported losses of $236 million while servicing a $787 million debt mountain. Although some product lines like LEGO Star Wars, LEGO Harry Potter, and Bionicle had been successful, sales of the first two only peaked in years when there was a film and fell off rapidly the following year. In the absence of those blockbusters, LEGO discovered how unpopular, unprofitable, and "non-core-like" in terms of brand identity its other toys were.The future looked far from splendid when the company brought in former Mckinsey management consultant Jorgen Vig Knudstorp to run the company as chief executive. In order to get back on track again, Knudstorp started to re-define the company's positioning strategy in 2004 by focusing its approach and returning to the core of its business-the plastic bricks. Most importantly, the company started to reconnect with its customers and listened to them again. Instead of selling the same standardized products to their customers like in the past, the LEGO Group changed their positioning strategy and value proposition by enhancing customer relationships and involving them in order to better tailor products to their specific needs. LEGO started testing new product ideas during the product development process by using focus groups for children and adult fans of LEGO (AFOLs). A recent example includes Cuusoo, just one of the company's many successes in crowdsourcing ideas after the year of turnaround. Launched in Japan in 2008 and globally in April 2011, Cuusoo has invited users to submit and vote for ideas for new LEGO sets. If a design wins more than 10,000 votes, LEGO reviews it for possible production; if the design is developed and launched, its creators get a 1 percent cut of the product's total net sales. In 201 1, a Cuusoo concept for a LEGO set based on online game Minecraft racked up 10,000 votes in just 48 hours, compelling LEGO to announce production of the set. Only six months later, LEGO "Minecraft Micro World" hit the market. The unifying purpose behind all subsequent moves has been to focus and structure innovation and customer orientation as key elements of the value proposition, taking ideas that were "obviously LEGO" and making them profitable within a short time. LEGO also returned to Christiansen's idea of a "system of play" when it cut the number of pieces it made in half, keeping only those "universal" pieces that were used in many different sets, thereby leveraging economies of scale and condensing the over-diversified product portfolio. The majority of its revenue still comes from refining classic LEGO lines such as LEGO City and LEGO Star Wars, licensing more recent mega-hits such as Lord of the Rings, and launching innovations such as LEGO Friends for the girls' toy market in 2012. LEGO continues to experiment with new offerings. For example, through its partnership with Chicago architect Adam Reed Tucker, it developed its Architecture line, which encompasses reproductions of iconic buildings rendered in LEGO. Additionally, the iPhone game Life of George, which was launched in 2011, is a mash-up of digital and physical LEGO play. Few companies have made a successful return to their roots and many who do fail because they cannot keep up with an everchanging marketing environment. Take Mattel, for example, which was once the king of the toy aisle, but in 2015 dethroned CEO Bryan Stockton just a few months after it was reported that the maker of Barbie dolls and Hot Wheels cars is no longer+ Page view A Read aloud | (T) Add text Draw Adam Reed Tucker, it developed its Architecture line, which encompasses reproductions of iconic buildings rendered in LEGO. Additionally, the iPhone game Life of George, which was launched in 2011, is a mash-up of digital and physical LEGO play. Few companies have made a successful return to their roots and many who do fail because they cannot keep up with an everchanging marketing environment. Take Mattel, for example, which was once the king of the toy aisle, but in 2015 dethroned CEO Bryan Stockton just a few months after it was reported that the maker of Barbie dolls and Hot Wheels cars is no longer the world's leading toy maker. Mattel has struggled lately as its iconic Barbie doll has fallen out of favor with young girls, who prefer electronics today and dolls based on Disney's hit animated movie Frozen-a similar experience to LEGO before its turnaround in 2004. LEGO has successfully re-defined its overall positioning strategy and value proposition, and has returned to core values that have resonated with its customers. Its overall positioning strategy is not to be the cheapest and compete with low-cost producers via the price but by being the best in terms of product quality. This positioning strategy, called more-for-more positioning, involves offering the most upscale product and charging a higher price to cover the higher costs. The truth, LEGO discovered, is that innovations, an overall positioning strategy, and a customer-focused value proposition need to exist synergistically not only with each other, but also within the context of the company's history, circumstances, and core values. Thinking "outside the box" pushed LEGO away from its customers and almost put it out of business. The LEGO Group regained its footing when it began to think once again inside the box, or in this case, the brick. In an industry and environment that can change so rapidly, constant vigilance and continuous analysis are key in the framework of successful positioning. Page 5Thanks to the repositioning of the LEGO brand and the incessant development of its value proposition, TLG continues to thrive. From 2005 until today, the company has reported profits and has gained even wider appeal through licensed partnerships. It got a particular bump in 2014 from the success of The LEGO Movie, an animated feature that grossed nearly $500 million worldwide. Full-year 2014 results showed a 13 percent increase in revenue to DKK 28.6 billion (about $4.291 billion) and a profit before tax of DKK 9.7 billion (about $1.456 billion). In 2015, LEGO topped the global ranking of the most powerful brands conducted by the consultancy Brand Finance. It looks like everything is awesome again for LEGO. Source: Kotler, P., Armstrong, G., Opresnik, M. O. (2017). Marketing: An Introduction (13th ed. Global ed.). Pearson Education.tioning Strategy and Value Proposition Question 1: According to the case, what stage of the product life cycle is LEGO in? Why so? (20 marks)