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Richard Stollery - Lego's customer strategy

Lego rebuilds customer loyalty, brick by brick

08/12/2009

A few years ago, Lego made the costly mistake of forgetting who its customers were. Today the customer is again front and centre of the company’s business strategy, writes Brian Skelly

With Christmas less than two months away, Lego, the world’s fourth largest toy company, is gearing up for its busiest season. It promises to be another happy Christmas for the iconic toy brand. Global sales this year are expected to be 23pc ahead of 2008, when revenue hit DK9.5 billion (€1.3bn), itself a record for the company.

However, five years ago it was a very different story. In its 2004 financial year, the company suffered a DKK1 billion (€134m) loss on sales of just over DKK6 billion (€845m). There were question marks over whether the family-run institution, established in Denmark in 1932, could remain independent.

Richard Stollery, Senior Director of Consumer Experiences at the Lego Company, describes 2004 as “a bit of a wake-up call” for the company. At the time, as now, the company dominated the ‘construction’ part of the toy market but it felt it could leverage the brand into adjacent markets such as action figures and even TV. In so doing, however, it took its eye off the ball.

“We got distracted and went away from what made us great in the first place,” he told a rapt audience at a recent Early Bird Club business breakfast in Dublin organised by An Post.

Lego survived its brush with disaster, if only just. Recovery, the company realised, depended on going back to first principles and focusing once more on its core construction business. In particular, it meant building bridges (metaphorically speaking) with its millions of users around the world and rediscovering the concept of customer experience.

“In the last few years we’ve gone back to listening to our customers and responding to them,” Stollery reports. “Customer experience means really understanding what consumers want and recognising that they don’t always know what they want. So it’s about experimenting and innovating and trying out new things and seeing what the response is.”

Lego is almost unique as a brand in that the positive associations consumers have with it start to form at a very young age, such that when those children become parents themselves, they are very well disposed towards it. This is a huge asset, but also a big responsibility for the brand, Stollery notes.

Although we have that preferential reputation built up over 77 years, there’s no way we can be complacent or abusive of that trust. We continue to act very genuinely and to place a lot of emphasis on things such as customer service. We know we’re in a preferred position but we can’t take that for granted going forward.”

There can be few consumer brands with as many consumer touchpoints as Lego has. Toy shops are just the tip of the iceberg. There are also Lego-branded retail outlets, Legoland Parks (of which the company has a 20pc shareholding), Lego.com, Lego home shopping, Lego Club, Lego customer service – the list goes on.

This multiplicity of contact points – a reflection of the longevity and global popularity of the brand – could be seen as complicating matters but to Lego each of them provides a different way to reach customers and engage with them.

The backbone of the customer communications exercise is the Lego Club. More of a global user community than a loyalty programme, the club’s membership consists of millions of people – mostly children – whose common feature is their love of all things Lego. Being a member entitles them to receive Lego Club Magazine, a free glossy mailed out five times a year and stuffed with information on different sets and updates about upcoming launches. The magazine was first launched in Sweden more than 25 years ago and is now distributed in nine other major Lego markets including the US, the UK and Ireland. Circulation is an astonishing 3.2 million copies.

Producing a glossy magazine with that sort of international footprint and distributing it for free is very costly for Lego, Stollery admits, but the investment is justified. “We find Club members spend three times more than non-members,” he points out.

A big challenge for Stollery and his team is how to integrate the magazine with all the other types of Club-related activity going on, particularly the Club area of Lego.com. The trick, he says, is to offer “a real mix of different experiences which a Club member can indulge themselves in” where the common thread is creativity and exploration. And while the magazine is still a very important part of the Club offering, it is now complemented by these other channels that give added richness to their Lego experience. “We try to create an integrated experience that’s authentically Lego,” Stollery explains.

Lego’s customer engagement strategy is guided by the philosophy of the ‘affinity pyramid’ which recognises the fact that any company’s best and most profitable customers (represented by the tip of the pyramid) who are passionate about its products. At the base of the pyramid are the great mass of consumers who may buy its products occasionally but have no great affinity with the brand. Lego’s key task therefore, Stollery notes, is to drive more and more customers up the pyramid.

“We find that the more you engage customers, the more they move up that affinity pyramid and it becomes a dialogue rather than a monologue. So it becomes about doing things with customers rather than to customers.”

In the world of business, customer experience is, Stollery argues, often the poor relation for brand managers who focus “too much on the brand and not enough on the human interaction”. But there are exceptions. He feels Tesco is “setting a great example that others are following about really, really engaging with their customers.”

Lego also frequently uses its customers as a sounding board for new ideas.

A few years ago it set up a user group called the ‘Kids Inner Circle’ which consists of several thousand children from America, UK, Germany and Ireland, with whom it can consult (with their parents’ permission of course).

“It’s like having your own customer test-bed that you can communicate with very quickly,” Stollery observes. “We can put questions up today and get responses today. We’ll pose a question, and they’ll tell us what they think and give us lots of inspiration.”

Similarly, Lego also regularly consults its adult users and even involves them in product development. For example, as part of Lego’s Ultimate Train Builder programme in 2006/2007, 10 power users from four different countries were invited to create designs for Lego’s new Hobby Train Set. The users came up with 76 individual designs. These were then whittled down, by a process of voting among the user-designers themselves, to the 30 final designs which appeared on the retailers’ shelves a few months later.

Stollery believes that customer experience is something that all companies can work on and improve. The first step is to test that experience regularly – a basic activity that many companies fail to do, he claims. It is then possible to methodically dissect and analyse that experience. Here, Lego uses tool called a ‘customer experience wheel’ to map the existing experience.

“We understand what is and what is not important to the customer in that experience and then we design a ‘wow’ experience to improve it,” he explains.

One way to achieve this, he adds, is to build an element of surprise into the experience. “We try to build some surprises into our customer experience whether it’s phoning a contact centre, going into a Lego store or visiting a Legoland Park.”

This element of surprise extends to the business cards that its executives hand out when meeting new people. Instead of the usual boring paper version, Stollery proffers a tiny blue and yellow Lego man with Stollery’s name printed on the front and his contact details printed on the back.

It’s enough to make you feel like a kid again.

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