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curious about legos sales tactics

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curious about legos sales tactics

Postby lostone » Fri Sep 09, 2011 2:30 pm

hi
I was curious about how lego's buisness operates and had a couple questions.

So far this year i seemed to have noticed alot more sales and deals on lego then in the past, im wondering if anyone has noticed the same thing or is it just my impression.
This has got me wondering, if the cost price of lego has stayed roughtly the same to the retailer such as amazon, but lego has recommened higher rrp on the sets.
Is this allowing sites such as amazon, to have more sales and offers ie 20% of the rrp without biting into thier profit margins while giving the consumer a sense of having got a bargin.
If this is a sales tactic of lego, it seems a tad underhanded, as it implies that sets can be sold generaly at a lower price then present.
It also lead me to another question, namely why is the price of sets from lego S&H alwasy higher then from other sources, surley it should be the other way round, as you are in effect buying direct from the company

As i said, i dont know a lot about retail, im just curious
lostone
 
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Re: curious about legos sales tactics

Postby turtle » Sun Sep 11, 2011 4:06 am

TLG sales practices are actually pretty standard for just about any retail product. Although for many products it's a lot less visible. TLG's short product cycle from the introduction of new products to their retirement within each line, makes all of the stages more easily observable.


rule #1 Prices are deteremined by "what people will pay" , that is what the product is worth. How much the product costs to make is irrevelevant beyond the decision of whether or not to make the product in the first place. Consumers decide what is a "fair" price by voting with their wallets.

rule #2 Always offer a product at every price point, it's all about hitting the right combination of product and price to create the perception of value in the mind of the customer. Buyers only purchase when they feel that they are recieving a good value.

rule #3 It's hard to raise prices once you've taken a product to market, it tends to make protential customers literally angry with the company. It's anti-marketing. It is best to raise prices when new products are released, then it can be unnoticable if done correctly. If customers will not buy the quantity you want to sell at the price you've set - lower prices slowly & incrementally.

rule #4 You can't undercut the price of your major distributors. You want them to be successful selling your product, so they continue to work for you. You can focus on creating the product (what you're best at), and they can focus on selling it (what they're best at). You also don't want them to mark your product up excessively and make more money without purchaing more product from you. (Shop @ Home & the Lego Stores are how TLG controls this.)

rule #5 get the old product off the shelves, whenever new product becomes available. (so you can raise prices on that new product and take advantage of "the new thing" excitement) Even at clearance prices of %50 off MSRP, most retailers are probably breaking even. TLG still made their money.
turtle
 
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