MKTG/266

IBS Center for Management Research

Identifying the Factors Affecting Sales

This case was written by Sai Manohar, under the direction of R Muthukumar, IBS Center for Management Research. It was
compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate either
effective or ineffective handling of a management situation.

 2011, IBS Center for Management Research. All rights reserved.

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 MKTG/266

Identifying the Factors Affecting Sales

Pramod Kumar (Pramod), CEO of the Tiny Toddlers Group was going through certain figures
related to the sale of educational toys in the southern Indian state of Andhra Pradesh. Since its
inception in 2001, the Tiny Toddlers Group had emerged as a strong regional player in the Toys
segment in South India. The company faced competitive pressure from other major players such as
Mattel1, Lego2, Leo3, and Funskool4 that had a large market share and also produced and
promoted educational toys that improved the learning of the children. Pramod decided to take a
relook at his marketing strategies in order to improve his sales in relation to that of the other
players. He had asked his staff to tabulate certain data pertaining to the sales of the company’s
educational toys in Andhra Pradesh. He wanted to know what factors would help increase the sales
of the toys. But he was now faced with a dilemma on how to go about analyzing the data.
ABOUT TINY TODDLERS GROUP
The Tiny Toddlers Group was established by Pramod just after he completed his MBA. Pramod,
who lived in a joint family in Hyderabad and had a liking for children, began by manufacturing
small toys with the help of the disposable plastic and wood material lying around in his house.
There were many families in the neighborhood which had kids and the children used to visit
Pramod’s house nearly every day to buy the toys he made. Pramod not only sold his toys but also
got to spend time with the kids, something he really enjoyed doing.
After completing his post-graduate degree in Business Management, Pramod thought of starting a
small business manufacturing toys which would be both creative as well as educative. This was
how the Tiny Toddlers Group, a private shop designing toys for young children, came into being in
Hyderabad in the year 2001. The toys manufactured by his company also included educational
toys. Within a short period, the company was able to produce toys that caught the children’s
imagination. Within a span of 3 years, the Tiny Toddlers Group saw an increase in its sales and
was able to increase sales and compete with major players.
The company was well known for its high quality and immaculately designed toys for children of
different age groups. Over the years, the Tiny Toddlers Group attracted a large number of
customers who were satisfied with its products. It also established an online store in 2006 from
where customers could purchase toys by linking to the company’s webpage. The company offered
a discount on delivery and service charges to those customers who purchased toys in bulk.
Participating in the toy exhibition in 2007, the Tiny Toddlers Group attracted the urban population
as its products had many special features. The Tiny Toddlers Toys had heterogeneous features – in
terms of sound effects, elements of fairy tales, fables, and sports that attracted the kids. The Tiny
Toddlers Group ranked in the top 20 in terms of its sales and revenue compared with other toy
companies that participated in the exhibition. Sales in Andhra Pradesh increased from Rs.5 70,000
in 2001 to Rs.3.75 million in 2005.

1
U.S.-based Mattel Inc. is the world's largest toy company. Its products include Fisher Price, Barbie dolls,
Hot Wheels and Matchbox cars, Masters of the Universe, American Girl dolls, and board games.
2
The Denmark-based Lego group is one of the leading toys manufacturing companies in the world. Its
products include sets with a variety of themes, including town and city, space, robots, pirates, trains,
Vikings, castle, dinosaurs, undersea exploration, and the wild west
3
Leo Toys is India's largest toy manufacturer.
4
Funskool India is a Chennai-based toy and game manufacturer.
5
Rs. = Indian rupees or INR. As of January 4, 2006, US$1 was approximately equal to Rs. 44.73

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 Identifying the Factors Affecting Sales

The Tiny Toddlers Group promoted its products using various strategies such as advertising on
regional television channels, especially when cartoon shows were on; in magazines; and in
different story books that attracted children. By the beginning of 2010, the Group was thinking of
implementing strategies similar to those adopted by the global players in India – in which toys
were considered as the child’s development aid – equivalent to that of books.
ABOUT THE INDUSTRY
The toy industry in India, which is as old as the nation itself, had been fostered and enriched by a
rich and intellectual technology background. The toy industry was valued at Rs. 40 billion in 2010
and was expected to maintain the growth rate of 10%-15% for the next 10 years.6 In India, the
plastic toys captured around 80% of the toy industry and earned a profit of 10% to 20% every year.
The remaining 20% included fabric toys, paper toys, and wooden toys that were manufactured by
the cottage industry.7
The toy industry in India included both organized and unorganized players with 90% of the toy
market comprising unorganized players and the remaining 10% organized players.8 The organized
players in the Indian toy market consisted of multinational companies Lego, Leo, Funskool, and
Mattel which had established their presence in India. Lego Toys dominated the toy sector,
controlling over 20% of the domestic market. Funskool was the third largest producer in India.9 As
toy industry in India is unorganized, the toy companies have faced challenges in distribution and
marketing. The field survey conducted by the National Productivity Council (NPC)10 for the period
1942-2007 showed that the majority of the toy manufacturing units were in Delhi (44%) while the
remaining 56% were scattered across other states. (Refer to Table I).
Table I
State wise Distribution of Toy Manufacturing Units
Sl. No. States No. of Units Percent
1 Andhra Pradesh 13 7.07
2 Delhi 81 44.02
3 Gujarat 7 3.80
4 Karnataka 8 4.35
5 Maharashtra 32 17.39
6 Punjab 6 3.26
7 Tamil Nadu 11 5.98
8 Uttar Pradesh 10 5.43
9 West Bengal 9 4.89
10 Haryana 7 3.80
Total 184 100.00
Data courtesy NPC Field Survey, 2009
Source: “Productivity and Competitiveness of Indian Toy Manufacturing Sector,”
http://www.productivity.in/knowledgebase/DIPP%20Sponosored%20Studies/2.%20Indian%20Toy%20Man
ufacturing%20Sector/1.%20Main%20Report.pdf

6
“Funskool Upbeat about Toy Industry Prospects,” www.thehindubusinessline.com, July 10, 2010
7
“Toy Not A Child’s Play Anymore,” www.giftsnaccessories.com
8
Rituparna Chatterjee, “The Battle in India’s Toy Market,” www.rediff.com, January 2006
9
“Toy Not A Child's Play Anymore,” www.giftsnaccessories.com
10
Established as an autonomous body under the Societies Registration Act, 1958, National Productivity
Council (NPC) of India provides training, consultancy, research, and information in the areas of
productivity, industrial engineering, pollution prevention and control, human resource development, and
various other related fields.

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 Identifying the Factors Affecting Sales

According to eminent educationists, toys and games helped in the all-round development of
children. In the modern era, toys were used to educate the children right from the stage of infancy.
A change in the style of how the children were brought up over a period of time saw the
companies alter their business activities to meet the needs of children in the new era. In 2005,
Mattel11 targeted the audience at maternity homes – “Cradle Catching”. At the first visit of the
mothers to the doctor, the parents were given a book along with the medical reports. This book
was considered as a guide on the growth of the child at each phase and was a major instrument to
attract the customers. The book was filled with slots to store photographs and many other different
features. Mattel, as a result, educated the parents on the type of educational toys necessary for
children at different ages. This attracted Indian parents and they were usually persuaded to buy
educational toys and games for their children – considering their future.

PROBLEMS FACED BY TINY TODDLERS GROUP

Considering toys as an educational tool for the children, the Tiny Toddlers Group emphasized
designing educational toys and these were more in demand among parents from 2005. Around that
time, an old friend and classmate of Pramod, Ram Kumar (Ram), who was a teacher at the Comic
Garden School and taught Lower Kindergarten kids, visited him. While they were talking, Pramod
asked Ram what teaching style he followed to get the children to understand concepts easily. Ram
replied that it was not just through lectures that children should be taught. They also needed to be
given examples using objects and toys that would not only attract them but would also help them
understand the subject.
This prompted Pramod to lay even more emphasis on producing toys which were creative and
provided educational information to children. To advertise his products, he redesigned his
pamphlets and circulated them among different Lower Kindergarten schools. The advertisements
resulted in several Lower Kindergarten schools entering into tie-ups with the Tiny Toddlers Group
for the purchase of creative toys and products to be used by the children in the classes. The sale of
these types of toys again depended on the number of children enrolled for the year in a particular
school.

LOOKING AHEAD

At the outset, many of the toys attracted the children and sales were brisk. The Tiny Toddlers
Group thus managed to break even within a short span of 2 years. However, Pramod observed that
the sales of the toys were not stable and wanted to find out the reasons for this. With the
competition intensifying in the market, Pramod wanted to get the marketing strategies for his
company right. He wanted to identify the factors that would increase the sales of the toys. So, he
got the past sales data tabulated from old records (Refer to Exhibit I for the sales data). With the
data in front of him, Pramod tried to make sense of it.

11
In 1945, Ruth and Elliot Handler and Harold “Matt” Matson formed a partnership called Mattel
Creations, making and selling first picture frames and later dollhouse furniture.

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 Identifying the Factors Affecting Sales

Exhibit I
Tabulated Sales Details of Tiny Toddlers Group
Number of School
Year Sales Advertising Cost
Employees Enrollment
(Quarterly) (Rs. in million) (Rs. in million)
(in hundreds) (in hundreds)
1 0.15 0.06 0.04 0.10
2 0.25 0.07 0.06 0.15
2001
3 0.10 0.04 0.05 0.15
4 0.25 0.08 0.10 0.35
1 0.43 0.10 0.26 0.20
2 0.44 0.15 0.24 0.26
2002
3 0.48 0.10 0.15 0.44
4 0.40 0.15 0.35 0.30
1 0.60 0.55 0.25 0.60
2 0.70 0.55 0.35 0.70
2003
3 0.85 0.65 0.35 0.65
4 0.85 0.75 1.55 1.05
1 0.24 0.20 0.20 0.35
2 0.26 0.45 0.37 0.60
2004
3 0.20 0.20 0.43 0.65
4 0.30 0.15 0.20 0.40
1 1.20 0.70 0.25 1.25
2 0.65 0.85 0.35 0.65
2005
3 0.85 0.75 0.35 0.85
4 1.05 0.70 1.05 1.75
1 0.10 0.30 0.15 0.25
2 0.47 0.10 0.20 0.35
2006
3 0.43 0.10 0.15 0.55
4 0.20 0.25 0.25 1.05
1 1.10 0.80 0.60 1.15
2 0.40 0.55 0.55 0.95
2007
3 0.65 0.65 0.45 0.83
4 1.05 0.75 0.65 0.82
1 0.60 0.20 0.40 0.33
2 0.40 0.26 0.36 0.44
2008
3 0.55 0.24 0.14 0.58
4 0.45 0.30 0.30 0.40
1 0.60 0.40 0.83 0.60
2 0.80 0.26 0.62 0.95
2009
3 0.75 0.24 0.82 0.83
4 0.85 0.30 0.73 0.82

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 Identifying the Factors Affecting Sales

References and Suggested Readings

1. “Funskool Upbeat about Toy Industry Prospects,” www.thehindubusinessline.com,

July 10, 2010
2. Naresh K.Malhotra, Marketing Research, (Prentice-Hall of India Private Limited, 5th
Edition, 2007).
3. Rituparna Chatterjee, “The Battle in India’s Toy Market,” www.rediff.com, January
2006
4. “Productivity and Competitiveness of Indian Toy Manufacturing Sector,”
www.productivity.in
5. “Toy Not A Child’s Play Anymore,” www.giftsnaccessories.com

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