So how, if at all, has the economic situation impacted the toy industry?  At a very top-line view, NPD’s monthly consumer tracking service of the toy industry indicates that this year, so far, a greater percentage of toy sales are being purchased via a “store deal” or a “price reduction.”  Conversely, for the 12-month period ending September ‘09, the percentage of toy purchases made which utilized “no special offer” declined 2 percentage points over the previous 12-month time frame.  While there was little increase in the use of a manufacturer rebate or a manufacturer coupon over these periods, there was an up-tick in purchases made using either a store promotion or store coupon.  The promotional vehicle seeing the greatest increase by far was with purchases made via a store sale.  From this it would appear that consumers are actively seeking price discounts when making their purchase decisions.

Our latest toy industry topical report, Toy Purchase Decisions, lends more insight into these findings, and the role that price and promotions play in the toy purchase process.  The biggest impact price plays is in the selection of the retailer.  The majority of toy purchases are planned, and of those planned purchases, for 78% of them, the buyer knew exactly where they wanted to shop.  So where do store sales and discounts come into play?  Well, a shopper could have two or more specific items in mind when they enter the store, and the presence of an in-store price reduction could sway their decision to one over the other.  Also, while a majority of toy purchases are planned in advance, the rest are not, and the study found that those that purchased toys on impulse were more likely to take advantage of an in-store price reduction indicating that price promotions are an important catalyst to unplanned purchases. 

And there is something new at play in this arena that I find particularly fascinating.  The impact of “social shopping” and the retailers and manufacturers use of social sites like Twitter and Facebook to communicate promotions to their fans and followers.  Just the other day, Toys R Us used the power of Twitter to communicate that the first 50 shoppers to their store that day could pick up Zhu Zhu Pets (which for those of you who don’t know is emerging as the hot hard-to-find toy of this holiday season).  The retailer also uses Twitter to promote their “Deal of the Day” which is usually a very compelling price reduction on popular items.  The sheer variety and creativity in the use of social media makes this trend a really fun one to follow, and certainly we’ll see an impact on how purchases are made because of this phenomenon.

While it’s certainly not new for companies to harness the power of the Internet, and specifically YouTube and now social networking sites as part of their overall marketing plans for their products, it might surprise some that they would be part of a marketing program for a product aimed at younger kids. But in truth kids are big users of a lot of these Web sites, and as detailed in our recent report Kids & Cross-Entertainment Behaviors, YouTube.com ranked in the top 5 Web sites used by kids ages 2-12. This same report shows that among purchases made for kids during the past holiday season, 58 percent of dollars spent were spent on entertainment-related product categories. So you can imagine that for companies involved in entertainment, understanding kids and how they’re consuming various types of entertainment is pretty important. But given the power of entertainment in kids lives, any company involved with products for kids in any category needs to understand where kids are spending their time and how they’re participating with and consuming entertainment and media in order to best promote their products and services. After seeing this new Barbie music and dance video it’s clear that Mattel understands just that.

But why promote to kids? Don’t parents make all the purchase decision anyway? Well yes, and no. While some product categories are heavily driven by parental decisions, most entertainment categories (including toys) are heavily driven by the child’s request or influence. Our new Toy Purchase Decisions report takes a deep dive into the mechanics which influence a toy purchase, and dolls is one of the categories in which purchases are most influenced by child request. So using the right media vehicles that kids in your particular target market are using is critically important to catalyzing that kids’ request. While seeing the announcement of the Barbie video got me thinking about this whole subject, in fairness to both genders, let me address boys for a moment. Boys are also big users of YouTube, and in fact our report shows that the Web site is used by boys more than girls. And while gaming content is very popular and consumed by both genders, it’s relatively more important to boys than girls. Our Kids & Cross-Entertainment Behaviors report goes into a lot of detail about how games are acquired and consumed by kids, and the importance it plays in the usage of a multitude of devices from computers to video game systems to phones. As we head into the all-critical holiday time period for many industries, toys and video games included, thinking about these issues and most effectively reaching kids and stimulating that “kid request” could very well be the difference between success and failure for many products.

When I read the news of F.A.O. Schwarz’s acquisition by Toys R Us, I immediately thought back to the movie “Big” and the famous scene where Tom Hanks and Robert Loggia dance on the big piano in F.A.O.’s New York store.  Of course the entire movie is about the magic of creating toys and the giddy feeling many of us, even as adults, feel when walking into a toy store.  Despite greater competition these days from other product categories like video games and consumer electronics, toys remains one of biggest categories for spending on kids, as outlined in our Spotlight on Kids:  Understanding Cross-Category Purchasing report we released about a month ago. 

The magic of the destination toy shopping trip continues.  While it’s true that today the majority of toy purchases are made in the mass market/discount channel, our newest toy report, Toy Market Dynamics, reveals that the annual spend by households that purchase at toy stores is 15% higher than what the average household spends on toys at a mass market/discount retailer. 

Toys remain near and dear to the hearts of young and old alike.  I get a little smile on my face even as I’m still finding little Nerf gun darts behind couch cushions and under my dining room table.

But clearly spending against kids spans so many more areas including apparel, consumer electronics, movies, books, room decor, and music, just to name a few.  In fact, during the 2008 holiday season, spending on the combined video game hardware and content categories comprised the largest spend on kids, followed by toys & games, and then apparel, according to NPD’s Spotlight on Kids: Understanding Cross-Category Purchasing report.  And, like us adults, the way we’re spending our money doesn’t tell the complete picture.  The way we’re spending our free time is important to understand as well in order to drive product and marketing decisions.  And the same is true for kids.  The major difference with kids is that they have a lot more free time than most adults do, and are always looking for new ways to fill that time, which is why in many cases, kids, particularly those on the older end of the spectrum, can be true early adopters and evangelists for new products and services.  Take Facebook as an example.  First intended for college-aged kids, which then quickly filtered down to high school aged aspirators, now the biggest growing audience sector for the site is us older folks.  And while that one example pertains to kids older than the 14-and under crowd I started this blog by talking about, it’s a high- profile example of the impact that youth and the youth culture can have on society at large. 

Kids may be one of the growth opportunities for various companies and industries so it’s really important to know how they’re spending their time and how money is being spent on them.  The mix of influence between these two aspects may be very different for any individual company.  Take TV for example.  While TV content is still largely enjoyed for free, the fact is that watching TV still commands the greatest share of a kids’ leisure time, as evidence by our Kids Leisure Time study.  This example illustrates that how and what kids are watching on TV (or TV content via a website which is an emerging trend) still plays a significant role in marketing to kids.  And the relative importance of knowing how money is spent against kids versus how they’re spending their free time (and how that has changed over time) is probably very different even within one company depending on if the current initiative is more one of product planning/strategy or if it’s executing marketing plans and tactics against products, whether new or more established brands.  Companies, services, brands, and properties,  much like the people they’re trying to service, are clearly multi-faceted and the information needs they have vary depending at what point they are in their product lifecycle.  One-size does not fit all kids, or the companies that serve them. Engage them now so they can grow with you in the years to come.