312. Market entry strategies
Case III.2 Ka-Boo-Ki
licensing-in the LEGO brand
The Danish toy manufacturer LEGO is known world-wide for its LEGO bricks. LEGO is a
strong and well-knowri brand. At the end of 1991 LEGO management received the result
of three consumer surveys which confirmed this statement:
.Landour Associates completed a survey at the end of 1991 of the best brands' 'image power'
among 10,000 representatively chosen adults aged between 18 and 65 in the USA, Japan
and Europe (Belgium, France, the Netherlands, Italy, Spain, the UK and Sweden). 'Image
power' is a measure of brands' impact, where consumers' awareness of the world's
leading brands is combined with their judgement of the brands' quality. In the USA and
Japan LEGO was not placed among the top ten, but the results from Europe were
impressive. Here LEGO was placed at no. 5 after four car brands: MercedesBenz, RollsRoyce,
Porsche and BMW. LEGO was in front of brands like Nestle, Rolex, Jaguar and
Ferrari.
.An American survey, ma de in Europe, the USA and Japan, showed that LEGO is no.
13 in the list of most appreciated brands.
.A survey by aGerman market analysis institute showed that LEGO is one of the most
well-known brands in toys in the new German Federal Republic, with an awareness
share of 67 per cent. Matchbox is no. 2 with 41 per cent.
The LEGO management has decided to exploit this strong brand image. A managing
director for the new business area LEGO Licensing AlS has been employed. The company's
objective is to generate income from licensing suitable partners, which use the
LEGO brand in marketing their own products.
The LEGO management has noticed that Coca-Cola has an income of DKK3 billion
from licensing alone. Coca-Cola's strategy can be characterized as 'brand milking', where
a brand is said to the highest bidder in each product area.
Ideas become viable
In 1993 ideas of licensing the LEGO brand became viable for the Danish" textile firm KaBoo-Ki,
as it was given the rights to use the LEGO brand in connection with production
and sale of children's clothes (see Figure 1, plate 9). For Ka-Boo-Ki's managing director,
Torben Klausen, the idea of producing children's clothes is not new. He was earlier
employed in LEGO's international marketing department, where he was in charge of
coordinating the European marketing of LEGO bricks. From this position in the LEGO
company, Torben Klausen was able to follow the development of the licensing concept.
Since 1993 things have been developing very fast for LEGO children's clothes. Ka-Boo-Ki,
which has invested a considerable amount of money in the R & D of LEGO children's
clothes, at the middle of 1997 sells to approximately 900 shops, primarily in Scandinavia
and England.
Torben Klausen says:
We received a strong international brand from the first day. But from the sale of
LEGO children 's clothes follows an obligation to live up to the LEGO company's
Ka-Boo-Ki .313
unique quality demands. The LEGO company must approve all new models which
are, sent on the market and that is between 350 and 400 a year.
LEGO children's clothes distinguish themselves rom other brands by being functional
and havlng strong colours and an uncompromispg quality. This means a relatively high
prlce for the clothes and that the products are rat said in discount shops. The clothes
are soId on the basis of a shop-in-shop concept, where merchandising and display
facilities are very important.
You have just been employed by LEGO Licensing A/S in connection with development
of the licensing idea. Vou are given the fc,llowing assignments.
Questions
1. What are the most importantfactors determining future market demand for LEGO
children's clothes from Ka-Boo-Ki?
2. Which other products could be considered for licensing out the LEGO brand?
3. List same criteria for choice of suitable licensees and future products for the LEGO brand
(Iicensing out).
4. What values/benefits can the LEGO company transfer to the licensee (e.g. Ka-Boo-Ki)
apart from the use of the LEGO brand?
5. What values/benefits can the licensee transfer to the licensor?