Problems
The Toobers&Zots concept was a product that employed a new type of product component that was unknown to any existing manufacturing techniques. The Zots component of the product are foam shapes stamped out of square colored material into circles, waves and crowns which have holes for the Toobers, the long foam tubes, to slide into. This is a standard manufacturing dye and punch process. The Toobers however, are a soft foam extruded tube that have an aluminum wire embedded in the center of the tube to allow the product to be bent and to maintain its shape. The company saught contract manufacturing agreements to source the Toobers product from, and after 10 months of searching concluded they could not find the appropriate facilities able to make this new Toobers product. Therefore the founding group looked to their engineering expertise in Arthur Ganson to create a manufacturing process to make the Toobers. This was a complete shift from what the company had intended to become involved with, “We didn’t start out wanting to be a manufacturer, but we ended up being a manufacturer,” said Mr. Farrar. This shifted their business model fundamentally and their capital plans fundamentally, but it was what was necessary to get the product out on the market in 1994.
This new manufacturing technology proved to not be the only glitch in the Toobers&Zots development and manufacture. Other problems included an adhesives problem in the Toobers manufacture that took almost three months to solve, and many others involved with starting up a machinery line. “We’re not factory guys,” said Mr. Farrar, “We were not afraid of the challenge but when you’re doing something you don’t know how to in a short period of time, that’s a lot of pressure.” Their perseverance and enthusiasm for their new business allowed them to meet their aggressive schedule and conduct their initial product runs and shipments in August of 1994. All in time for the Christmas season of 1994 which was their primary goal for getting the product on the market to test its salability, which will be described in next section.
When asked if the efforts that were undertaken for the Toobers&Zots product development would represent the norm for future products Mr. Farrar replied, “Toobers&Zots required a new technology to make the toy, not true for the other toys we have invented. Others will go through a more standard development process and can go to existing factories to get them made.
Importance of New Products
Andrew Farrar described the importance of new product development to the ongoing success of HandsOnToys as “critical”. “You can’t rely on the success of one product. Anything could happen…so you’ve got to be ready to move onto something else.” Understandably a young company growing rapidly based on the success of its first product is focusing all its efforts on maintaining the success of that product and ensuring it is positioned and developed to its fullest potential. But unlike a larger more established company that must rely on a continual stream of new product development ideas to maintain its market share and to keep up with changing customer needs, HandsOnToys is in a stage where their Toobers&Zots product concept is the foundation of the company’s growth. Their one unique product idea is generating the strength in their company so they do not have the luxury to actively pursue new product concepts as aggressively as they have with the Toobers&Zots. “We quit our jobs to launch this product. We feel it has the potential to be a $100 MM dollar product so we are going to pursue that as best we can.” When asked about contingencies based on speculated drop-off of Toobers&Zots sales Mr. Farrar replied, “We are not doing anything now to bring out other products but we are actively looking at others products. The other two concepts we have taken up to full prototype development are on hold right now. If Toobers&Zots were to drop off right now I wouldn’t have something to go into right away, but I wouldn’t be starting from ground zero.” Despite this being a risky position to be relying on only one product for the sales and growth of a company, the fact that HandsOnToys is a start-up company makes sense that they are portioning their limited resources to best exploit the one successful product concept they have. As time progresses and the company grows, they can learn from their experiences with the first product launch to more effectively repeat the process when they are ready to launch a new product.
Marketing and Success
Product Launch
“The product was brought from concept to market in 12 months. The typical time period for the toy industry is 18 to 24 months,” said Mr. Farrar. There are many reasons behind this aggressive schedule, and the strongest appears to be based on capitalizing on a window of opportunity. “We had market sources that told us that someone else might be moving in on an idea like this,” said Mr. Farrar, “We filed patents to protect ourselves but the only real protection was to get to the market first.” On this same note, another reason for the aggressive product release was to have the product on the market for the Christmas season of 1994 as a proving ground for the products salability. This as a first step in the marketing strategy for Toobers&Zots to establish it as a product with demand so marketing and sales efforts could be augmented the following year to grow the product’s sales. Mr. Farrar commented, “The retail market is very conservative. They don’t want to take the risks because they have been stuck with bad product in the past. By proving the product during the 1994 Christmas season, we can now go to the retailer and use the 1994 Christmas sale performance to show new retailers the proven track record of the product. If we missed Christmas we would have missed a year.”
To facilitate the Christmas season availability, HandsOnToys main product launch effort was to display at a gift show in New York in August of 1994 to hopefully generate the interest and sales to launch the product, primarily to retailers. “We were not in the distribution channels yet, so we had to first convince retailers to buy it. We hired a sales force and brought the product to the gift show and put it on display. That is where we got the bulk of the initial orders. The follow up orders largely consisted of re-orders from those initial customers.” For HandsOnToys their strategy was a successful one based on sales of 18,000 units for the Christmas season of 1994. Now they are confident with that established performance that they can grow their product as aggressively as they planned.