Maximizing Effectiveness: Nanoblocks

So what did Ohio Art do in the digital world? I’ll tell you one thing, the cameraman Kyle wants to really know this. Do you want to know this? I think you do. So let’s you, me and Kyle find out what they did. So the product they used in the digital world was nanoblock. This is this Lego-type product where with this very minute detail, you can create these kind of nice intricate things over here. And the one that they really tested was this Eiffel Tower block. So you would get these boxes that would look like - these are the set of pieces that you can use to make the Eiffel Tower and look like something like this, right?

They did the experiment on Amazon.com. So Amazon.com has these gold deals or gold box deals, right? So these are these deep discounts that are short-lived, right? I mean, they’re really - like really awesome deals if you haven’t seen them, right? I got some winter gloves that are like 50 percent off or something like that. It was crazy. But they’re the same products, but they’re - for a short time, you get a really good deal. So the same thing Ohio Art did for nanoblock. They launched a nanoblock with a gold box deal on Amazon.com during March 2012. So what happened? So let’s look at the numbers here. So we have data on sales of nanoblock during Jan and February.

This was the test period in March and we have sales post-test period in May. Right off the bat, what do we see here? We see that you have much more data, you have much more data pre-test, during test, post-test, right? So that’s good. Next, you see that the Eiffel Tower was sold for 19.99. In the two months - Jan and February - they sold a total of 274 units. When the gold box promotion was running just during March, they sold 686 units of nanoblock Eiffel Tower. And then in May, post-experiment, they were still selling about 219 units in May. So the test worked. The lift was about 501 percent that was sold during the promotion versus pre-promotion.

And even after you look at the economics and by looking at the margins and such, this was still by far a runaway success. And there were a lot of control products that you could easily compare with. So for example, nanoblock Taj Mahal was sold for 19.99. But two months prior, the total units was 308. During the test period, the sales was only the same, about 163. So for two months total, the sales was 308; so for a month it was about - say 154. And then during the test, it’s about 163. So it’s only like a 106 percent lift. Not really good.

And for Castle - I’m not even going to pronounce that, seems German - it’s a German Castle - lift was 151 percent. For classic Etch A Sketch, it was about 205 percent. So clearly, the gold box gives a much better lift than all the control products. But why do you think this lift carried on in May also? Why do you think? Think about this. This is something unique to the digital world. Why do you think that is happening? Think about this. Think about the process through which you shop in Amazon. Think about Amazon’s algorithms and then think about why in May the sales were still up. Now, did you find that? Absolutely.

So, what do you do when you go on Amazon when you’re looking for products? You go to the search box and type and boom, boom, boom. I want Lego-type or nanoblock toys or Lego toys or something like that. And then Amazon provides you results. Now, if you sold good number of products previously, Amazon is more likely to feature your products on the top of the sales results like this. So you can come up on the search results if you sold well in the past. Now what did Ohio Art do with nanoblock? They sold a lot of nanoblocks during the experiment period in March.

So whenever somebody comes in May and types in nanoblock or Lego toys or what not, these products come up on the search results. Now search results are - coming up on the search results is an important thing because people normally look at the top two or three results and then buy that and that’s just that’s empirically validated. So it’s really important to come up on search results. So the experiment pays dividends forward - post doing the experiment also. So there’s a long-term effect of these experiments. And here’s another thing; the experiment was short-lived; it was a variable cost experiment. If it was not working, Ohio Art could take the money out and stop the experiment in real time.

So there is this shift of marketing from a fixed cost in the Etch A Sketch/Betty Spaghetti world to a variable cost in the nanoblock Amazon world. So that really changes the dimensions in which we look at marketing, from a sunk cost to something like a variable cost that you can tweak and change in real time by feedback from the market. And it pays dividends long term. What’s not to like, right? So this is why experimentation has really taken off in the digital world. And Ohio Art was no different, right?

So they looked at all this and started to put a lot of effort in the digital world and started to put a lot of social media efforts and they come up with some really nice cutesy ads for nanoblock. So the one here, right, I like this. I mean you’ve worked through a lot of numbers. You’ve really worked hard, so here’s your dessert. I promised dessert, here it is. Let’s look at some pretty pictures. I like this. The smaller the blocks, the better the detail. The biggest little toy on the block - biggest little toy on the block. I like this one too. Interesting. And this is the best, look at Mr. King Kong.

So these were the things that Ohio Art did with these pictures and graphs and they really went hard on the digital world and they got a lot of dividends for doing that.