Beanie Boos and Ty’s Marketing Genius

If you are 10 or under or have kids of that age, chances are that you have seen these cute stuffed animals, especially if you are in the US. The probability that you even own some of these is higher if you know the Desineni family — the above is a “sample” from our kids’ collection. Suffices to say, our 2 children adore these collectibles. We have steadily added to this motley crew over the past 6 years, give or take. The stuffed creatures have arrived as birthday presents, as gifts of my away-from-home-trips, and the best of all — as surprises from Santa. We have over 70 of them. And counting, as the kiddos reminded me yesterday when I asked them to grab a few for the above photo-op for this article. The toys are called Beanie Boos — a creation of Ty Warner, a reclusive American billionaire toy manufacturer and businessman.

Besides being adorably cute and incredibly durable — a few of our toys have been used as soccer balls, punching bags, (American) football and have even seen the insides of our high-speed washer, and have survived—a big part of their allure hinges on Ty Warner’s product & marketing genius. With a dedicated name, a short couplet — Haiku-style poetry, really — and a dedicated Birthday published on a tiny, heart-shaped tag attached to the left ear of every animal, Ty ensures personalization of every toy. Silky smooth velvet exterior, soft bean-pellets on the inside, bright colors and trademark big eyes helped position these toys in a class of their own. For our kids, there are stuffed toys and then there are Beanie Boos. “The whole idea behind using the plastic pellets (beans) rather than conventional soft stuffing was to give Beanie Boos a flexible and real feel,” per Ty. That is called catering a product to your audience. Ty knew precisely what’s missing in the millions of stuffed animal toys in the market and he made a fortune (billions, literally) out of selling his version of stuffed animals.

Sample this.

Name: Coconut
Birthday: July 27
Poem:
Some say I’m a strange-looking monkey
My legs are short and my body is chunky !

We have 4 versions of this guy. The fact that his color matches the pattern of our living room sofa in the picture is pure serendipity; makes for a good background, nevertheless. But I digress. What used to be shocking for me was that our kids remembered the names of every one of those 70+ Beanie Boos and even their birthdays. I once checked with a neighbor who had an equally passionate Beanie Boo collector of a daughter if our kids were normal. I don’t know who felt more relieved — my neighbor or I — after our discussion because we concluded: The kids are alright (no reference to either the Hollywood movie or the TV series by the same name.) That’s the ‘product genius’ of Ty Warner.

Part 2 of Ty’s ingenuity is in his radically different approach to marketing. I will cite 4 marketing norms that Ty does NOT follow: (1) There is no print, Radio, TV, Facebook, or any other internet advertisement campaign for the toys, with word-of-mouth being the primary marketing mechanism; (2) The toys are not sold at big department stores like Walmart or Target but are instead found in small mom & pop shops, gas stations and specialty toy stores; (3) There is a very rudimentary but fully-functional, user-friendly and robust business-to-consumer website for online sales where the base price of toys has never changed — no flashy pages; and probably the most implausible one: (4) The company follows the strategy of deliberate scarcity, producing each new design in limited quantity, restricting individual store shipments to limited numbers of each design and regularly retiring designs, even for the toys that have attained incredible popularity.

I am not a marketing major but intuitively #4 sounds preposterous, especially for a “commodity product” like kids toys that costs no more than $4.99. Why would the company not want to cash in on the success of a product? It must, after all, take extra R&D to launch new characters and it’s a well-understood principle furthermore that profits (and product quality) are maximized with least number of changes/variables in the supply-chain. Why then would Ty champion the philosophy of deliberate scarcity? Why would he want to cannibalize his gross margins by pulling a successful product during high volume manufacturing?

After thinking about it a bit, I think it all comes down to 2 simple things: (1) Focus on ‘people’ not ‘product’, and (2) Confidence in the superiority of your product. There is one other company that comes to mind when talking about these 2 topics — Apple. Now, Apple plays in a completely different segment of the market and their scale is probably 2–3 orders of magnitude bigger than Ty’s toys, but my point is about the philosophy of launching new products. Apple is the only big brand name that is equally notorious for yanking their products off the market at their peak because a new product is ready to be launched. They are also known to follow the strategy of deliberate scarcity. Ty knows his customers intimately; he has figured it out that they are loyal to his concept of Beanie Boos — with their unique names, birthdays and poems — rather than any one character from that world. He knows that his customers are okay not showing off a popular character because they can always brandish the next coolest one coming down the pike. The result: A continuous cycle of product craze allowing Beanie Boos to ride unending crests of financial success and popularity.

It turns out that Beanie Boos is not a flash-in-the-plan for Ty Warner. Back in the 1990s, Ty created Beanie Babies using the exact same philosophies of product design & marketing described above. And he was wildly successful. Beanie Babies emerged as a major collectible in the 2nd half of 1990s and were even cited as being the world’s first internet sensation. They were collected not only as toys, but also as a financial investment, due to the high resale value of particular ones — an unintended direct result of retiring products during the peak of their popularity. Beanie Babies and Ty’s marketing philosophies became case studies taught at business schools because people would flip the toys at as much as ten-fold on eBay even as some collectors insured their purchases for thousands of dollars. So, he has been there before. What is remarkable is that he was able to work the same magic successfully, a second time!