Lego is one of the most successful and well-known toy manufacturers. Since it was founded in the early 1930s, Lego has grown significantly, having diversified into a wide range of different products. Apart from its famous plastic bricks and pieces to assemble and build objects, Lego’s products include movies and shows, amusement parks, video games, etc. It can be argued that much of its success is due to the Lego management’s choice of marketing strategies. Lego’s place and price strategies will be analyzed in this essay as parts of the 4Ps marketing model.
Distribution is one of the key factors of a successful marketing strategy. Lego’s primary distribution center is located in Prague, and when toys are built and packaged in production facilities, they are shipped to Prague first (SupplyChainX, 2018). This center is a B2B warehouse that has been operating since 2006 and currently supplies markets in 130 countries. In addition, it takes care of product distribution to retail customers in Europe. From the main center in Prague, the products are sent to distribution centers operated by Lego’s partners in other countries. Lego’s main distribution channels are retail stores and online sales, but the company’s products can also be bought in theme parks, movie theatres, and toy stores.
The countries where Lego products are sold include Australia, Austria, Belgium, Brazil, Canada, China, Czech Republic, Denmark, Dubai, Finland, France, Germany, Italy, Japan, Russia, South Africa, Spain, the UK, the US, and others. The distribution center in Dallas, Texas, has been supplying the North American market sector since 2007. For the B2C customers, distribution facilities in Memphis, Tennessee, also supply the North American market area. For Europe and the rest of the world, these facilities are located in Billund, Denmark. Lego has located its distribution centers in places that best serve their customers by being close to them but also taking account of other important aspects, such as infrastructure, demography, costs, and the environment. This distribution strategy has allowed Lego to create a competitive advantage because it made its toys accessible to most people around the world.
Lego’s place strategies have a significant impact on the other Ps of its marketing model. For example, due to the manufacturer’s use of high-quality material from the best suppliers in countries like Saudi Arabia, Kuwait, and Thailand, Lego can charge relatively high prices for its products. In addition, having opened a sufficient number of distribution centers around the globe, they managed to cut the costs of logistics and ensure the global flow of goods and information (MBA Skool Team, 2021). Place strategy also allows Lego to use promotion strategies more efficiently by advertising to a wider range of target audiences. The same factor influences Lego product policies; because they successfully implement their place strategies, they have an opportunity to diversify their products. Movies, video games, clothes, books, and magazines are some examples of Lego product diversification practices.
Several recommendations can be made to improve Lego’s distribution practices and business overall. The first one is a thorough analysis of the ways to move the company’s products to the end consumer (SupplyChainX, 2018). Although Lego has successfully introduced its core product in the majority of the countries, some of its product lines do not have the same significance and are even unknown to the majority of consumers (MBA Skool Team, 2021). Thus, the company can focus more on improving the promotion and distribution of those products to its warehouses worldwide. In addition, the company may consider minimizing or eliminating indirect distribution to reduce logistics expenses.
Like place strategies, pricing depends on and impacts other 3Ps of the marketing mix significantly. It can be argued that the price strategy used by Lego is value-based pricing, which is an approach that implies setting prices for the product based on consumers’ perception of the product’s value (Liozu, 2019). Some characteristics of this pricing model include the production of a unique and valuable product, as well as the high quality of this product maintained over an extended period of time. In addition, the product has to be customer-focused, which means that the company should always take its customers’ wishes, needs, and recommendations into consideration. To ensure that the value-based pricing model is efficiently implemented, companies have to establish strong communication channels with their consumers, as these solid relationships allow for obtaining feedback and introducing positive changes.
It can be concluded that Lego’s marketing strategies in terms of price and place are efficient, as, even despite the COVID-19 pandemic, the company continues to successfully promote its products to consumers around the world. Compared to similar products in the category, Lego’s value-based pricing presents a number of important advantages. These include improving the quality of the company’s products and promoting customer loyalty. Using this price strategy, Lego has managed to gain popularity, which, in turn, enabled the company management to charge higher prices, invest more money in marketing and promotion, and utilize various distribution channels. Although the company has faced some setbacks and crises in the past, it has overcome them successfully and continues to grow, embracing new trends and diversifying its products.
References
Liozu, S. M. (2019). Make pricing power a strategic priority for your business. Business Horizons, 62(1), 117-128.
MBA Skool Team. (2021). Lego marketing strategy & marketing mix (4Ps). Web.
SupplyChainX. (2018). Brick by brick: Moving LEGOs from the Factory to the Store. Web.
The LEGO Group. (n.d.). Locations. Web.