Introduction
The aim of this paper is to analyze a case study on Fisher-Price Toys, Inc. in order to determine whether the company should produce a new toy—ATV Explorer. The paper will also outline the following elements of a positioning statement for the product: accessibility, attitudes, opinions, and motivations.
Analysis
Production
It is clear that the production of the toy is associated with numerous advantages. Fisher-Price has a chance of entering into the production of a new segment of products—riding toys. This opportunity is associated with substantial profits because according to a study conducted by A. J. Wood Corporation, such toys account for 22 percent of total dollar sales (Case Study, 1985). Given an astonishing rate of brand recognition (64.7%) and its previous successes with braking a price barrier, the company should launch the new product. However, it is recommended that they start with a cheaper version of the Explorer and only invest in one mold.
It has to do with the fact that the number of children under six years of age is expected to decrease in the following years (Case Study, 1985). Also, it is highly unlikely that the demand for the toy will exceed production capacity since its previous best-seller, the Creative Coaster sold only 332, 000 units. Therefore, it is necessary to test the cheaper toy during the upcoming sales peak in order to generate a monetary safety buffer, which will help to keep the business in the sound condition if the future expensive version does not prove to be a success. Moreover, the cheaper product will help to pre-promote the more luxurious one. Generated revenues can also be used for advertising the upgraded Explorer.
Price
The following calculations will help to determine the product’s price:
- unit variable costs = direct cost + labor + administrative expenses = $4.21 + $0.73 + 1.56 = $6.50;
- the unit break-even point (BEQ) = $161, 000 + $18, 000 / ($9.20 – $6.50) = 66, 295 units.
Therefore, the price of an original unit can be easily set at $18.50. Even if the sales of the Explorer are lower by 50 percent than those of the Creative Coaster, the company will be able to break even. However, it has to be borne in mind that the total fixed costs of the riding toy do not include advertising expenses since it is not possible to derive a precise number from the total consumer advertising budget for 1970. By removing additional components, Fisher-Price will be able to reduce the price to $12, thereby attracting more customers.
A Positioning Statement
The following positioning statement will be used to clarify a marketing strategy for the product:
For the first-time mothers of two-to five-year-olds who are captivated by vehicles for space exploration, Fisher-Price presents an innovative ATV Explorer. Unlike traditional riding vehicles, the toy is a prestige item that meets all criteria of high quality and will last from one child to the next.
Accessibility
The target audience will be reached through the medium of television.
Attitudes
The product will be positioned as a prestige item.
Opinions and motivations
Elaborate point-of-sale (POP) displays will help to create positive opinions about the toy and encourage impulse buying.
Conclusion
The paper has explored the Fisher-Price’s prospect of producing the new toy. It has been argued that the company should start by making a cheaper version of the product, which can be priced at $12. The paper has also outlined a positioning statement for the Explorer and explained how it could be promoted.