The main problem facing Jack Asthalter, Fisher-Price’s marketing vice president is whether or not to move forward with the production of a new ATV Explorer toy. The extensive market research that Fisher-Price performed with children and their parents was very positive in favor of producing the ATV Explorer. Unfortunately, the production costs were going to exceed initial estimates of $12.00 retail and instead require a wholesale price of $9.20 per unit and retail price of $18.50. Typical Fisher-Price toys were under $5 retail and similar competitor products to the ATV Explorer were in the $12 retail range. Retailers and consumers may not support the higher priced product.
II. SITUATIONAL ANALYSIS
oBrand – It is the best known brand name in preschool toys (64.7%) and scored 75% on brand awareness in the survey. oBrand loyalty – 60.5% Buy one brand most often and the brand purchased most often is Fisher-Price oStrong culture and corporate creed – intrinsic play value, ingenuity, strong construction, good value, and action. oExperience – four decades of designing and building toys and promoting from within. oA professional management team from multiple industries. oRecent acquisition of Fisher-Price from Quaker Oat’s company allowed financial stability and support. oProfitability – 742% increase in last 10 years; consistent margins oOnsite preschool test center allows for extensive market testing & research oProduct variety
oSuccessful marketing campaigns
oExisting management is reluctant to embrace change.
oExisting managers are very risk averse in pricing any toy over $5 retail. oTelevision is a new medium for Fisher-Price. It allows more exposure but it also requires a larger expense. oMarketing the entire product line has been successful to this point but may need to be changed to promote the new toy. This new idea may also be met with resistance. oLarge investment in manufacturing the ATV prevents agility to stop production without losses or meet demand in case a second mold is not purchased. oThe last two products that have been launched that were over the $5 retail price were a huge success and huge failure. This past experience also confirms management’s idea that pricing over $5 retail will constitute a failure.
oA high profitability for riding toys in marketplace (22% of total dollar sales) oThere is a need by parents for safe and durable children’s products. oExpected increase in number of first births, creating a need for new toys versus hand-me-downs. oAmerican affluence was increasing with personal income increases of 72% between 1960 & 1968.
oTwo buyers from large retail chains have remarked that they would not purchase the product at a higher price point. oThere are cheaper riding toy products offered by competitors, although their quality and options are not as revered. oEconomy – price sensitivity
oDecrease in children under 6 in coming years
III. MAIN CONSIDERATIONS
The main consideration for Fisher-Price is the initial investment production, namely the mold to create the product was higher than originally estimated. This will create a need to have higher price point in the market compared to current product lines and similar products offered by competitors. The higher price may or may not be supported by the retailers or consumers. Additionally, if Fisher-Price does not make the additional investment in a second mold they may be at risk for not having the ability to supply retailers if the product should be in demand. An ancillary consideration is the advertising expense to showcase the new product versus the entire product line if they choose to move forward.
IV. STRATEGIC ALTERNATIVES
•Move forward with product launch
Consistent with Fisher-Price’s...