How Lego Leveraged Data To Save Itself
Today Lego is a huge global brand, producing more than 870,00 bricks a day. Not only are they a massive name in the toy industry but they have four theatrical films to their name, 85 video games and 11 theme parks.
As such it’s amazing to think that as near as 2004 Lego was bankrupt and in real jeopardy of going out of business completely. They posted a loss of £174 million, with executive vice-president of marketing Mads Nipper later saying “we continued to invest as if the company were growing strongly. We failed to realise that we were on a slippery path… Children were getting less and less time to play. Some of the western markets had fewer and fewer children. So play trends changed, and we failed to change. “
It is in the middle of this turbulent time that a new CEO, Jørgen Vig Knudstorp stepped in to save the company. But how do you go about transforming a company with thousands of employees, hundreds of different lines and a surprisingly diverse customer base? Data.
Looking for a way to dig themselves out of a hole, Lego implemented data analysis into every business function and within 6 months had made significant strategic changes.
Cost Cutting
Cost-cutting was inevitable for Lego, and while it would have been easy to simply identify Capex and remove that, data actually helped them forge a clear strategy of stripping back their production to a more limited selection of bricks. They stopped producing speciality bricks for sets and instead found innovative ways of achieving the same actions with the core bricks they had. They also decided that they as a company should focus on manufacturing and sold off the theme parks and licensed out video games, meaning they no longer had overheads in specialist roles. In time they would also relocate manufacturing to Mexico, further improving margins.
Product Data
By analysing sales data & incorporating market research, Lego saw that their most popular sets in recent history had been a tie-in with Star Wars Episode 1. They actively sought out other pop-culture brands to partner with, which quickly become their most profitable source of income. In 2008, about 60% of Lego’s sales in Northern America where linked to licensed play sets. This would pave the way for film’s like 2017’s The Lego Batman Movie.
Customer Closeness
Lego recognised that they had lost touch with what their customers actually wanted, and so started sites like lego Ideas. Here you can submit an idea for a playlet and should it get 10,000 social media supporters for your idea, LEGO will review your project and may decide to send it into production.
On 25 November 2019, The Lego Group announced the acquisition of Bricklink, the world’s largest Lego fan community so as to close the feedback gap and get more direct access to their fan base.
Marketing Analytics
With a clear strategic direction for the company, and popular toys, the next step for a data revamp of their marketing. Lego were one of the first major brands to implement attribution across their global business. While they still worked with a variety of partners and channels, they required all of them to report back the same metrics in the same way for like-for-like comparison and despite a 2009 recession Mads Nipper, Lego executive vice-president of marketing, stated that they were “delivering twice the return on sales of any competitor.”
Conclusion
So there you have it. Lego built back their businesses brick by brick by using their own first-party data, and then adding the voice of the customer into the decision making. It seems insane today when they first reported a loss in 2003, consultants advised them to abandon the brick and diversify what they did… it was taking this advice which very much almost killed them.
If you are looking to leverage the hidden gems sat inside your own first-party data but not sure where to start, contact 173tech!
Bonus Lego fact: As it sells 400 million car wheel parts, it’s technically the world’s largest tyre manufacturer!