Sue Allen: How Lego rebuilt from disaster to be a more powerful brand than Ferrari

Lego has learned to reconnect with both its youthful core market and adult nostalgia.
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Lego has learned to reconnect with both its youthful core market and adult nostalgia.

OPINION: Imagine a world without Lego.

Imagine not sucking those little bricks up the hoover or standing on them in bare feet in the middle of the night, or all those creative moments from childhood building houses, space ships and robots.

Well, 14 years ago Lego nearly went down the tubes. But thanks to a strong sense of brand, getting back to basics and some smart but targeted reinvention, the Danish toy maker has gone from strength-to-strength.

Today Lego is a more powerful brand than Ferrari, Visa and Nike, according to the 2017 report from brand valuation agency, Brand Finance. It's everywhere.

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Lego remains a guaranteed pleaser when I'm struggling to find a children's present.

Standing in a queue at Westpac in central Wellington, there's a giant Lego brick Life Flight helicopter promoting the bank's fund-raising activities.

Just last week, Lego was there again when I was thinking about going to the movies and the ads for The Lego Batman Movie were all over the internet.

The toy company's brand is now more powerful than Ferrari.
GETTY IMAGES

The toy company's brand is now more powerful than Ferrari.

So how on earth did Lego turn things around from its dark days of 2003 when it made a huge operating loss of US$240 million (NZ$346m) and was billions of dollars in debt?

When he joined in 2004, Lego's then-new chief executiveJorgen Vig Knudstorp was told by toy sellers not to mess with the brand or bricks.

Thank God Knudstorp had the sense to listen. He held off doing the classic rebranding exercise which many new chief executives fall prey to in order to look like they are doing something.

Lego's backstory is a real riches to rags to riches again tale, Sue Allen says.
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Lego's backstory is a real riches to rags to riches again tale, Sue Allen says.

Instead, he went back to Lego's core brand, its core product, re-connected with its main customer base – boys aged five- to 11-years old – and then he started to re-invent the company.

Of course, there was also a ruthless cost-cutting and financial tidy-up that went on to bring the company back into the black.

To find out what customers wanted, Lego started up events like BrickFest conventions, launched its adult ambassador programme tapping into grown-up Lego fans, and went on-line through Lego Click – a collaborative website that encouraged fans to share their own Lego creations.

Lego buddied up with some of the world's other most  powerful brands – Star Wars, Harry Potter and Batman franchises – to extend the brand's reach and customer base.

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More recently, it has embraced all forms of new technology from apps to virtual reality, in order to continue to remain relevant, while still sticking to its core products.

One way of looking at Lego's success is to look at the three ways in which Brand Finance calculates its most powerful brand rankings.

The first is 'equity', which brand valuation firm Brand Finance measures through surveys asking consumers questions like which brands they prefer and intend to purchase.

The second, 'brand input' measures how much money a brand spends on marketing. The more you spend, the higher you rank.

The third Brand Finance measure, 'output' looks at a company's profit margins and prices. A high profit margin for a product commanding premium price scores well.

For anyone with a product or service to sell, scoring well on these three factors would be the holy trinity of success.

You would have a great product which people actually want to buy, enough investment in marketing to ensure it's always top of mind and bursting with creativity, and it's something people are prepared to pay a premium to have.

If Brand Finance's ranking is to be believed, the Lego brand is in pretty good shape with an appeal which spans generations, still appealing to children but also the nostalgia of the adults who buy it. 

I probably won't be going to The Lego Batman Movie. I will, however, use Lego as a brand case study to show how a great product, strong brand, clear customer focus and a seemingly never-ending ability to innovate can keep a company on top of its game.

Sue Allen has worked in journalism, communications, marketing and brand management for 15 years in the United Kingdom and New Zealand.

 - Stuff

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