Using terms like “play value” and “playability” to measure the success of its products, this buildable toy company increases profits by maximizing fun and value for its consumers. Despite the tough economic climate, buildable toy company K’Nex, based in Hatfield, Pa., admits that business is on the up and up, thanks to keen attention paid to price points, a strong web marketing presence, and the inherent creativity this company’s products possess.
“Toys tend to be recession-resistant,” said Michael Araten, president and CEO. “In particular, building toys continue to be on a tear because as people look more carefully where to spend their dollars, they are looking for things that can work with the things they already have. The cool thing about building toys is, if you have a few, you can add something new and have a whole new system.”
K’Nex has made a concerted effort to keep its products affordable to maintain its competitive edge. For the past two years, Araten and his team have taken a close look at the product line to ensure that 85% of the products on offer are at the $25 price point or below. “We’re taking a look at where the sweet spot is for consumers who are all challenged and make sure the bulk of our line is where they want to be with the discretionary dollars they have,” he said.
What’s more, Araten says K’Nex products pack a stronger value punch than its competitors and boast the highest “play value” in the industry. K’Nex products have between 30% and 50% more parts at the same price point than competitors such as Lego, or it offers the same features or a much larger build at lower price points.
Araten, who has been with K’Nex for five years, says the heart of the company’s marketing strategy is being where people are when they’re looking for things related to his company’s products. That is why, in recent years, K’Nex shifted 95% of its marketing dollars to the web. According to Araten, in the US and increasingly around the world, it’s where everyone goes first.
“We see it as a growing area from a convenience standpoint,” said Araten. “As more and more people shop from their iPads or computers, as people have either less time or don’t want to take the time to go out to the malls to go shopping, we want to be where people are.”
K’Nex has been selling on the web for the past five years, both directly to consumers and through drop-ship partners for 14 of the 15 largest Internet retailers, such as target.com and toysrus.com. “We’ve expanded our pick-and-pack abilities to make sure we can serve all of those retailers.” Clearly it’s a thriving relationship, since K’Nex makes it a priority to have no less than a 99% scorecard with retail partners.
In addition to being its central marketplace, K’Nex can administer its customer loyalty program on its site. “For kids, it’s all about adding value for them,” said Araten. “If you join our club, we’ll include Bonus Builds at no extra charge. Here are parts that you already have, and here are new things you can build with them. Rather than going out and buying another set, here are things you can do with the sets you already own.”
In addition, Araten admits that social media has been a focus for the company’s marketing efforts, especially over the past 18 months. “We’ve developed a network of mommy bloggers to review all of our products and make sure we’re getting their input,” he said. “We work on ways to improve communication with them and incorporate them into the product development process. We want to, as much as we can, build products that are meaningful to those audiences.”
With approximately 175 employees, the K’Nex company culture is centered on finding ways to foster learning and creativity. “With our entire brand promise of imagine, build, and play, our job at K’Nex is to find the world that kids want to live in, help them build those worlds in a physical way, and allow them to play with them afterward,” said Araten.
For instance, the company knows that boys love cars and trucks, so it plans to launch a broad line of Nascar and Monster Jam products this fall. The Nascar line not only includes the vehicles and the rigs the vehicles come in, just like on the track, but also little pit crews so kids can build an entire Nascar world of their own.
The Monster Jam product line has a clever twist: the entire product is sustainable. The package itself, which is shaped like a ramp, can be used as part of the game once opened. It even comes with a dirt graphic sticker to cover the legal information on the back.
It’s not hard to imagine why K’Nex products would be both fun and educational. But what may surprise you is the fact that K’Nex has had a school division since 1994, and around 250,000 schools use its products as part of their curriculum. For preschoolers, these buildable toys help to teach color matching, number counting, and coordination; for older students, they teach three-dimensional spatial thinking, creativity, math, science, and logic.
According to Araten, students are learning logic and math without knowing it because they are learning through play. “If I tried to explain centripetal force, all of our eyes would glaze over,” he said. “But if I say, look, here’s the roller coaster, and the reason the figure doesn’t fall out of the roller coaster is because of centripetal force, then they learn without knowing it.”
Outside of the classroom, K’Nex still has a large role to play in cultivating creativity for people of all ages. “We get videos e-mailed to us: 20, 40, 50 new videos on YouTube every day, with the stuff kids do that we would never have come up with,” said Araten. “That’s the fun part: seeing what the kids can really do.”
Overall, Araten takes great pride in knowing that because of his company’s efforts, children continue to learn both critical skills and creativity through play. “I have one of the best jobs that I could imagine. To know there are a few million kids right now, in 30 countries around the world, playing with our stuff and having fun is an incredible thing.”