Topic: To examine the existence of“Global Kids” segment and explorethe challenge of targeting thismarket

Subject Code : BHK0031-1314

Subject Name : International Marketing

Student Name : LAM, Hing Yiu

Student ID : u1374222011

Lecturer name : Glynis Jones

Contents

Introduction.........................................................3

Global Market Segmentation...........................................4Global Kids Segment..................................................5

Challenges of Targeting Kids Market..................................7Conclusion..........................................................10

Appendix............................................................11Bibliography........................................................15

Introduction

International Convention defines a child who is anyone below the ageof 18 years. Some industries further divided the different age groupswhich are 1-3 years of age as Toddlers, 3 – 5 years of age aspreschoolers and 6 – 11 years of age as middle childhood. All thosecould be considered as KIDS.

According to United Nations Department of Economic and Social Affairs– Population Division, the population of group of child reached nearto 2,000 million, see figure 1. The distribution of CHILD by majorarea shown on figure 2 is 1,100 million in Asia, 450 million inAfrica, 100 million in Northern America (Heilig, 2012).

Figure 1 : Total Population by Age Groups, 1950-2100 Figure 2 : Population Age 0-14 by Major Area, 1950-2100

In some of countries, their government made a research of expenditureon children per family. For instance, in US, the annual expenditure ona child varies in the different age groups with different familyincome range, which is approx. US$ 10,000 to US$ 25,000 per child(Lino, 2012). In Japan, it is approx. US$ 22,586 to US$ 40,408 (Hori,2011).

Today, there are many businesses related to kids in the marketplace,such as Kid think, Inc. and Kid connection in advertising andpromotion industry, GapKid and Levis Kids in clothes industry, Toys RUS and LEGO in Toy industry and so on. Of different industries’expenditure related to kids is enormous. Those firms spent over 10billion every year in different marketing mix, such as promotion,media advertising, packaging and so on (McNeal, 1999).

Evidently, Kids market is existence and stupendous. This essaycontains 5 sessions including this introduction session to furtherexamine the existence of global kids segment. Next session is toattempt create a framework of global market segmentation and exploringthe characteristic and behavior will be in the 1st half of session 3.2nd half session will be proof the existence of global kids segment bythe case studies. Session 4 will examine the challenges to the kidsmarket. Final is the conclusion.

Global Market Segmentation

Globalization is able to facilitate the economic growth, improving thetechnology and communication that increasing the speed of informationexchange, increasing the mobility across national boundaries thatleading to interconnect peoples around the world, also acceleratingthe convergence of culture, therefore growing the similarity ofconsumer behaviors. Peoples around the world are drinking Coca-Colaand Blue Ribbon Beer, wearing CK jeans, seeing Hollywood movies andchildren is playing Wii, Playstation3 (Mitry & Smith, 2009). Owing toglobalization, the market becomes vast, increasing the businessopportunities. However, this large market is heterogamous. It leads tofirms might feel getting lost in this broader market, wastingresources. Therefore, the effectiveness of market segmentation is asticking point to aid firms dividing different market segments, andthen selecting the suitable one through in-depth analysis (Dibb &Simkin, 2013).

Market segmentation is the process of getting similar targetedconsumers together. The main purpose is to divide large and

heterogeneous markets into small segments that aid the firms easy toreach the market. In general, the segmentation is majorly based onGeographic, Demographic, Psychographic and Behavioral these fourvariables for consideration. Table 1 on the appendix session outlinesthe details of each element (Kotler & Armstrong, 2007).

Geographic Segmentation – it is mainly dividing the market intodifferent geographical location. For example: nations, regions,states, countries, cities or even neighborhoods.

Demographic Segmentation – the market is divided into the groupsbased on targeted consumers’ age, gender, family size, income,occupation, generation and nationality.

Psychographic Segmentation – it is to differentiate the consumersinto different groups based on social class, lifestyle, orpersonality characteristics.

Behavioral Segmentation – behavior such as knowledge, attitudes,usage pattern, loyalty status & so on are not same betweenconsumers. Thus, dividing the groups based on such criteria isone of methodology of market segmentation.

Market is dynamic and consumer behaviors evolve over time. Peoples maypresent over 1 segmentation scenario at the same time. For instance,banks always identify their customers mixing age & income leveltogether with their buying pattern and brand loyalty status forproducts promotion. Hence, multi-segmentation is necessarily appliedon the marketing strategy.

Despite globalization is spreading throughout the world, variationsstill exist among countries in consumer behaviors, language barriers,legal/regulation and so on. If firms can segment most similar needsamong countries such as English speaking countries like USA, Britainand Australia, its products could be standardized selling to suchsimilar countries. That may able to reduce the extra cost caused byhigh level of adaptation. Because of this reason, global segmentationemerged.

Global Kids Segment

This session is to identify the characteristic and behaviors of kids and attempt to examine the existence of global kids segment by case studies.

Characteristics and behaviors of Kids

The age of kids is in between 1 – 11 years. Children enjoy many firsttime which should be memorable, they 1st time crawling, 1st time sayingdaddy and mommy, 1st time tasting ice-cream, 1st time leaving home toschool, 1st time playing toys, travelling, shopping with parent and soon.

Essentially, children do not have greatly different among countries.Their behaviors and characteristics are about the same. They aremobile, what they do in today, but may not be exactly doing in fewmonths, or even weeks. They love playing and exploring. They are acopyist, imitating what they see adult do. Their parents, teachers andclassmates accompany their growth as well as influence their lives.Until they are middle childhood, they are creative and possessinfinite imagination. They would imagine what their career in futuresuch as policeman, nurse, or even astronaut. In 21st century, childrenare also increasingly interested on technology such as smartphones,tablets, PlayStation, X-Box and so on.

KidzGlobal is a market research and consulting firm for children-oriented consumer market. Its analysts possess 22 years of experiencein the entertainment industry. The surveys it conducted in year 2013is about kid daily routine, what toy brands kids like to play with,what TV channel they like to watch and what foods they love to taste.It surveyed 1000 interviewee in 10 countries. The result is summarizedas below.

Kid daily routine – Kids spend the most of time to watching TV at8.4% except sleeping and going to school. Next is indulging on computer and mobile at 6.1% (Table 2 on Appendix).

Toy Brands – The survey discovered that Lego and Disney is the most popular brand throughout all age group of kids. Different video game consoles are emerged on the group of 9 – 11 years (Table 3 on Appendix).

TV Channel – Disney Channel and Cartoon Network possess worldwidefans. The extent of famous is not only limited to western developed countries, but developing countries BRIC (Table 4 on Appendix).

Foods – It is not surprisingly that McDonalds and KFC is the mostfamous restaurant in the eyes of a child. Over 80% of intervieweeoften visits McDonalds and KFC is the most popular fast food restaurant in China (Table 5 on Appendix).

Kids Segmentation

From KidzGlobal analysis, LEGO is one of the famous toys brand in themind of children. It could penetrate all the range age groups ofchildren. Therefore, LEGO successfully exhibits the strategy of globalkid segmentation.

LEGO is a construction toys that one of the famous products in TheLego Group, based in Billund, Denmark. LEGO formed from the Danishwords “Leg Godt”, means “play well” in English. The LEGO Group wasstarting the business in 1932 and first product was the LEGO woodenduck in 1935. Subsequently, the well-known automatic binding plasticbrick with four and eight studs was emerged and sold in Denmarkexclusively in 1949.

The LEGO group internationalized its business starting in 1956. Itestablished the first foreign sales company in Hohenwestedt, Germanyin 1956, Switzerland in 1957, France, British, Belgium and Sweden in1959. Today, LEGO’s footprint scattered in 29 countries and itsproducts are sold in more than 130 countries.

“To inspire and develop children to think creatively, reasonsystematically and release their potential to shape their own future -experiencing the endless human possibility.” And “Inventing the futureof play - we want to pioneer new ways of playing, play materials andthe business models of play - leveraging globalization anddigitalization...it is not just about products, it is about realizingthe human possibility.” are LEGO’s vision and mission. Hence, the LEGOgroup is truly global brand and worldwide recognized. (The LEGO Group)

LEGO’s products are diversified to different age groups of children.For instance, LEGO JUNIORS is designed to give children age 4 – 7 forenjoying the moment of creatively. It is easy to kids to build withouthelp from their mum or dad. Another product line of LEGO X DisneyPrincess is obviously targeting to girl in 5 – 12 age range.

Kids are creative and possess infinite imagination that mentioned inthe session of kids characteristic. Therefore, LEGO Friends onlinegame provides the platform to children to fill up the colors based ontheir preference.

Based on KidzGlobal analysis, children loves and spend much time towatch TV and play video game. With this reason, LEGO created its themechannels. LEGO STARS WARS and CHIMA is famous channel.

Beside of those, LEGO established LEGO CLUB that is for children inthe 6 – 12 age range. There allow members to show each other thepictures of their favorite building work and the members could receivea member-only magazine every 2-3 months. In addition, LEGO also offersthe opportunity to children and adult to build their own models on thecompany, and then come to the physical LEGO model.

Moreover, regarding to LEGO internal, the bricks design, productionand most of marketing mix could be standardized as the kids marketcould be really homogenous. For instance, LEGO STAR WARS can be soldacross the countries with the same toys, packing and even promotion.With this reason, LEGO can get the benefit from the economies of scalein R&D and production, thereby minimizing the production cost, so thatit make most of families are affordable its good quality toys.

In summary, Global Kids Segment is truly existence through the case ofLEGO. LEGO is a famous toy in the mind of worldwide children. Itsproduct is sold to worldwide and some of products specific forchildren. LEGO also take children health seriously. Simultaneously,LEGO is able to maximize the economic efficiency by product andproduction standardization.

Challenges of Targeting Kids Market

Practically, kids market is a battlefield of fierce competition. Thereare many factors to impact the kids market that related to externalenvironment such as number of competitors in the field, differentlegal/regulation across countries or region, and the advancement oftechnology and internal strategy such as products range, promotion andother marketing mix. This session attempts to look over those factors.

Legal/Regulations

The first striking challenge in Kids products industry is theregulation of safely, especially to toys. Many countries legislate toprotect children’s health. The purpose is to ensure toys safely forconsumers – children. Most of countries follow EU’s directive2009/48/EC as standard. It covers general risk which is the protectionagainst health hazards or physical injury and particular risks whichrefer to physical and mechanical, flammability, chemical properties,electrical properties, hygiene and radioactivity. All toys entered inthese countries must comply with EU standard and carry a CE conformitymarking. Despite high level of children products standard in EUregion, the accidence rate caused by children products is still highin some of members of EU countries like Italy where over 10,000 caseshappened in 2010 (Table 6 in Appendix). Therefore, the product safelyis essential and principal subject in the kids segment.

LEGO undertakes the responsibility of manufacturing and selling thesafety products. The statement has been officially made in LEGO’swebsite that LEGO had verified that more than 2,000 raw materials usedin LEGO® products all compliance with EU toy safety directive.

Another legal/regulation has to be explored is the population controlpolicy. In some countries, especially in emerging countries likeChina, over fertility gave the various problems and pressure tosocieties and government. With that reason, the purpose of thepopulation control policy is to alleviate social, economic, andenvironmental problems. Their citizens are restricted to perform the“ONE CHILD” policy. In this social atmosphere, the child would bedoted by their parents and grandparents. The parents would willinglyspend a lot of money on their children that may drive the salesgrowing of child products. However, this kind of policy derive sideeffect after 10 to 20 years – aging population. The low birth ratecaused resource excessive. For instance, there are not enough childrento fill up all kindergarten schools in societies. Therefore, some ofkindergarten schools have to be closed and even lead to increase theunemployment rate in the worst case.

In the view of this, like China has to increasingly relax its policy.The citizens will be allowed to have two children if one parent is anonly child.

Behaviors

One of the characteristics of kids has been discussed on last session.Children are fickle, easy to influence or be influenced. Therefore, itwould impact to the marketers on the strategy of targeting andpositioning.

Preschoolers (3-5years) most likely are heavily influenced bytheir parents. One typical example is that some of kids wear t-shirt with the pattern of Snoopy or Hello Kitty. It is mostlikely their mothers’ favors.

5-7 years children will influence each other. They would chattereach other about something listening on yesterday night at home.They would desire to possess the same things those popularlyshowing on the TV recently and influence their parents to buy forthem. For instance, the comic character like Batman.

Competitions

The competition of Kids market is multitudinous. From clothes to foodindustry, from toy to education industry are aggressive. Taking LEGOas an example, the toy market size was US$ 84.1 billion in 2011 andkeeps growing, see figure 3. Its competitors are also a famous andworld class toy manufacturers which are Mattel, Bandai-Namco, Hasbro,Tomy-Takara and LEGO, see figure 4.

Although LEGO is well-known popular toys over the all age groups ofchildren, the game consoles such as PlayStation, Wii, XBox are erodingLEGO’s market share beside of traditional toy markets such as Mattel.Wii was released to the market targeting not only adult and teenage,but also young children.

Figure 3 : World Toy Makret, source from the NPD Group, Inc. Figure 4 : Main Market players

The influence of Technology

Holding the smartphone and tablets such mobile device is not only thecharacteristic of adult, even children who also possess this kind ofelectronic device. They use it for learning and playing. Nowadays, theelectronic games building in ISO and Android platform are verypopular, e.g. angry bird. Owing to this trend, LEGO also create theISO and Android games which named LEGO CITY MY CITY and LEGO JUNIORSCREATE & CRUISE. Till now, more than 5 million peoples have downloadedit.

However, the advancement of technology derives other side effect. Forinstance, Apple is going to pay back US$ 32.5 million to parent ofkids for App-buying made by children without their parents’ consent.The parents also have to worry their kids what the website they havevisited, what the video they watched, whether their kids browse therestricted website and so on.

Products Piracy

Fake products not only impact to the brand equity. It would even impact to the children health. The producers of fake products may use hazardous materials to produce the products.

Internal factors

Internal factors consist of pricing strategy, promotion strategy anddistribution channel. Of which is a critical the decision making ofdistribution channel. To maximize the footprints of product in theworld, firms have to consider using intensive distribution channel.Using LEGO as an example again, LEGO partnered with the largerinternational retailer like Toy R US, while simultaneously allow localtoy shop to distribute its product, e.g. Brickstime in Hong Kong.

Conclusion

Global kids segment has been explored and confirm it is existence.LEGO is one of the examples to examine the existence of global kidssegment. In fact, global kids segment is present in different sectors,such as clothing, food and so on. Kids are about the same across thecountries. Therefore, it benefits to the firm toward productstandardization, enjoy the economies of scale in R&D, production andmarketing activities. However, variations still exist betweencountries. The most external factor has to pay close attention is thesafely regulation. Although most of countries follows EU directive,some may be tighter than EU standard. Another external issue has to beaddressed is the control of mobile application. The case of Apple is acaution to the international markers.

Appendix

Table 1 : Major Segmentation Variables for Consumer Markets

Table 2 : Kids Daily Routine

Table 3 : Toy Brands Kids play with

Table 4 : Top 5 TV Channel

Table 5 : Favor Restaurant

Table 6 : Accident Rate caused by child products in 2010, source from EID in European Commission Website

Bibliography

Dibb, S., & Simkin, L. (2013). Market Segmentation Success : Making ItHappen! Taylor and Francis.

Hassan, S., Craft, S., & Kortam, W. (2003). Understanding the New Bases for Global Market Segmentation. Journal of Consumer Marketing, 446-462.

Heilig, G. (2012). Strategic Implications of Demographic Change in Asia. United Nations, Department of Economic and Social Affairs - Population Division.

Hori, M. (2011). The expenditure on children in Japan. Tokyo, Japan: Economic and Social Research Institute.

Kotler, P., & Armstrong, G. (2007). Principles of Marketing. In P. Kotler, & G. Armstrong, Customer-Driven Marketing Strategy: Creating Value forTarget Customers (pp. 185-194). Pearson Eduction.

Lino, M. (2012). Expenditures on Children by Families, 2012. USA: U.S. Departmentof Agriculture.

McNeal, J. (1999). The Kids Market: Myths and Realities. Paramount Market Publishing.

Mitry, D., & Smith, D. (2009). Convergence in global markets and consumer behaviour. International Journal of Consumer Studies, p316-321.

The LEGO Group. (n.d.). Retrieved from http://www.lego.com