How to build a tech toy brand in a mature market.

Hello and welcome to this episode of The Unnoticed Entrepreneur with me, your host, Jim James. And today we're going to talk about tech toys. We're going to talk about a new company called Tonies that is taking the world by storm. We're going to talk to Drew Vernon, who's the marketing director, to explain how he's getting 40% growth per year in a multimillion-dollar category. Drew, welcome to the show.

Hi, Jim. Thanks for having me.

Well, look, thanks for coming on the show because Tonys, the company that you represent in America, has been in America just for a couple of years and you're getting 40% growth in a very competitive category, which is in the, you know, toys for the young people, the 2 to 5 up to 8 years old category. So Drew, you're like number one personnel in Tonys in America. How are you building the brand? How are you getting it to take such stellar growth?

Yeah, well, right now it's a weird time with COVID everything shut down and then we had hypergrowth in the economy for a while and now we're starting to see a lot of softness. And so these are the circumstances that we're in. We're still building awareness. So first and foremost, we're trying to tell people who we are, what we have to offer. And we're trying to do that through a variety of different channels.

Well, Drew, before you tell us all about how you do it, tell us about how this company from Germany with 2 founders has built it now, I think a €250 million business listed on the stock exchange. Just tell us and show us the product. I believe we can even hear it. Explain Tonies to us.

Sure thing. As you mentioned, this started in Germany, launched in 2016. Our flagship product is called the Toniebox. It's a 5-inch or 12 centimeters, I think, speaker system for kids. And it's got a layer of foam around it. So it's really soft to the touch and you can squeeze it. It's really durable for kids and it's a figure-based system. So it uses little figures called Tonies. That play different songs and stories and types of content. And the inspiration from these 2 dads was they actually met on the board of their preschool, their children's preschool together. And they saw their children's teacher using a CD player to play songs and stories. And they thought to themselves, CDs have been around since the '80s or the '90s. They scratch and they break. And most importantly, kids can't use them independently. They need a teacher or a parent to help them. So They created this system where you put a Tony on the box and it begins to play. So this is one of our Sesame Street characters. We license all sorts of different content from different partners. We also do our own original content. And as I mentioned, it's an independent play device. So a child can listen to the songs, listen to the stories in a screen-free way with or without adult supervision.

Drew, it's beautiful. And those that can't see it, of course we do a video version of this as well. So you might want to see this on YouTube, but it's a beautiful square box. And I've watched the videos and kids holding them, they're dropping them down the stairs, they're able to slap them on the side to get the track to move on. And they can collect these figurines, which are in the shape of favorite characters like Paddington Bear, and you had Elmo there. But you also said that people can download the audio from those figurines, but also people can record their own messages onto the figurines and then have that play out on the workstation. Is that right, Drew?

That's correct. So I showed you Elmo. He's one of our content Tonies. He comes preloaded, so all you have to do is put him on the box and he'll begin to play. We also have a series of what we call Creative Tonies, and these, for your viewers, can see they have little pointy ears. These come blank and these can be recorded with up to 90 minutes of your own custom content, which is awesome because kids can now write their own songs and poems and stories and record it. And we also have a lot of grandparents who love to read bedtime stories. Or to send special messages from their phone. You can use our app to actually send your recorded message to the figure from anywhere in the world.

Drew, that's amazing. And presumably there's a whole area for entrepreneurs, maybe those people that have got podcasts that are bedtime story, for example, they could be buying and putting their content onto your figurines, I assume as well, Drew, right?

Yes. Any audio content, whether it's your own or your purchased audio content can be put onto a Creative Tony.

It's amazing, Tony. I love it. And because it really rescues children from the screen time. And at the moment we see children, mine are now 13 and 15. And I remember the struggle as they were the first generation to grow up with iPads, not giving them an iPad when so many children had it. So screen-free entertainment for children. That's a great contribution, isn't it?

Yeah. And we don't need to get into it, but it's an epidemic right now. And kids are on screens earlier and for longer periods than ever before. Yeah.

So the Tonys are a wonderful device. So that's why I was really delighted to come on the show and explain, because it's interesting in a number of different ways from the technology application. And, but also from a marketing point of view, you're kind of going against the main current, which is, you know, people having devices with screens and being sold avatars and games and Apple Arcade. So Drew, how are you managing to market Tonys in America at a time when It's kind of a screen free-for-all.

Sure. Yeah. It's kind of counterintuitive because we're sitting here as a screen-free device. We want to get your kids off of screens, but largely we have to show you what it is on a screen and we have to visually demonstrate what this is and what it does. And so we're going to find parents, basically we're marketing to parents, moms of young kids. We're going to where they spend their time on their devices through entertainment channels. And we're showing what the TonieBox is and the benefits they can provide for your household.

Can you just take us through that? Because obviously the product's made in Germany or it's designed in Germany. I'm not sure where it's made, but to get into America, especially as it's got RFID chips inside the figurines, from a compliance point of view, just at the top of the supply chain, what did you have to do and what do you have to display, for example, in advertising and on the boxes? To show that it's FCC compliant?

Yeah, so we have a couple of manufacturing sites. As you mentioned, it is designed in Germany. Our main warehouse is in China, so it's coming over from there. The figures are actually hand-painted in Tunisia, so that's a different part of the supply chain, but we're fully compliant with all the safety regulations and measures. There's the warning statement of it being an electronic toy and a small parts disclaimer for the products that have small parts, and that's all clearly represented on the packaging.

Yeah, that's wonderful. So making it all safe. And then in terms of what you've been doing to get the product in front of consumers and the media, because as you mentioned earlier on, you've got to show people, they've got to see it and feel it. You've got great videos on your website, but can you tell us what's been, for example, the strategy with regards to media relations, Drew?

I think really showing the uniqueness of the product, and that's always a challenge, but also a blessing. If you go to Toy Fair, as I do, you can walk the rows. We shut down for a couple of years, but getting back to Toy Fair, you can walk the floor for 3 or 4 hours and you'll see hundreds or thousands of manufacturers that are, I shouldn't say this, but they're selling a lot of the same things. And so the TonyBox is genuinely a unique new product category. And so our approach is to show not just the breakthrough innovation that the TonyBox provides, but the educational ramifications of being able to give a young child for the first time ever screen-free, on-demand library access to the world around them. And that's a very powerful opportunity in my opinion.

Drew, when you say there's education and sort of research, do you have any research that you've commissioned or are you working with any organizations to help validate that? Because it's an easy claim to make, but not necessarily an easy one to Yeah, I have commissioned a research study.

It's basically set out to validate what I already know from talking to thousands of teachers for the last 2 years as part of our education initiative. I've been going to conferences. I've been putting these in classrooms. We're in over 10,000 classrooms in the United States. And it's great for centers. It's great for circle time. It's great for independent listening. The teachers have been telling me this. I'm now setting out to prove it. What is this doing to exposing children to vocabulary at younger ages? What is it doing as being the first step towards literacy, which is learning, which is listening to reading. And we even have sleep products that are helping kids fall asleep. So I'm also studying how to quantify those types of things.

Now, if you're putting thousands into schools, for example, can you just tell us as well, what have you been doing? I mean, you mentioned about the research, but what have you been doing with media trials? Have you been working with a few magazines or TV stations, Drew? Any guidance you can give us on your learnings from doing that?

Most of our media approach is just getting a box into the hands of the publishers and the editors. We've seen some success there in terms of winning awards. So we won, you know, Fast Company Most Innovative Education Company, Good Housekeeping Best Toys. The Toy Association nominated us as a finalist for Preschool Toy of the Year. So we are working and I'm happy to continue working and anybody who's interested in getting a Tony Box, I'd love to put them in touch with one.

Okay, that's wonderful. I mean, and I can really see how getting it in front of people is the key, isn't it, in terms of the market sort of development? I found that when I was doing work with BlackBerry and introducing some of the message-based mobile phones, it was the trials that really got the market to move. Drew, can you give us any guidance on the investment that it takes? Because you're building a market from scratch in America for this German company. I don't expect you to give me the dollars and cents figure, but it's always useful to know either percentage or some kind of strategy when it comes to how much money people should invest in growing a business like this.

Yeah. Well, first I should say that here in the United States, we're lucky to have the history of the last 4 or 5 years in Germany behind our back because, you know, 5 years they've gone from 0 to 50% household penetration. One out of every 2 preschool kids in Germany has a TonieBox. And so that's the evidence and track record that gives us confidence to go into a market like the United States and to put the investment required in order to make this successful. And the other really nice thing about the business is that it's what we call a blades and razors model. So if we place a TonieBox into the household, we know that's not the end purchase, that's the starting point. So that's why we The toy category is a hockey stick seasonality. Most companies are doing the vast amount of their sales November, December. Well, we're doing that as well, but then we're having hundreds of thousands of families opening up Tonieboxes on Christmas morning and beginning their Tonies journey and coming back for the figures. So to come back to your question, the investment is in getting Tonieboxes into the hands of kids because we know that's going to be just the beginning for that family.

Right. That's really nice. Although maybe we need a different parallel from razors and blades for children's toys. Maybe we'd have to think about printers and toners or something like that. I don't think we're doing sharp print.

Just the, yeah, the replenishment model of buying additional products to supplement your initial purchase.

Drew, tell us about social media because we've talked a little bit about work you're doing in schools. You're doing some work in research. You've been very successful with the awards and a little bit about the media. You haven't mentioned social media yet. And plainly the users, the consumers are, as you say, 2 to 5, maybe up to 8 years old, but the buyers are not. So how are you managing social media?

Yeah, it's interesting to be a toy marketer of a preschool toy because children don't often or can't really step into asking for what they want until they're a little bit older ages, you know, age 3 or 4. And so our marketing is to the parents. And so we are doing a lot of video online demonstration through Instagram, Facebook, TikTok. But I think it's important to keep in mind, and it took me a few years to learn this, is that when your consumer and your customer are different people, you need to give a consumer benefit to the customer, which is to say, mom, this is not just going to be a great device for your child. But it's actually going to be good for you because it's going to give you some time back in your day. It's going to make managing your child a little less stressful. It's going to prevent them from being a zombie, you know, watching that 3rd or 4th or 5th Netflix show. So there's actually a consumer in your customer, the mom, which is peace of mind and an easier parenting experience.

Drew, I love that. So the idea of getting the customer To see benefit so that when they buy it for the consumer, it's a win-win for everybody. You articulated that really fantastically well. Where do you see the market going, Drew, for tech toys? Because there's all the talk about the metaverse. Do you think that a product like Tony's is a little bit of a fad that people, that our age group, my age group will be buying these screenless toys because we're We remember what life was like without screens. Do you think the next generation will come along and say screens are not a bad thing and ignore screenless toys? What's your view? Because from a marketing point of view, this is working now selling to the older generation. What about next generation come through?

Yeah, I may make a bit of a bold prediction, but this is based on literally hundreds of conversations with parents and teachers. But screen time is an epidemic right now, and we're starting to see the detriment happening to our kids in the form of attention deficit, inability to focus, social anxiety. And I'm not saying that screens are going anywhere anytime soon. I think they'll continue to run rampant, but I think there increasingly will be a backlash and a counter movement to restore a sense of being, sense of mindfulness and being present, which is hard to do when you're staring at something virtual happening somewhere else or happening digitally.

We've mentioned digitally, let's just talk about your distribution strategy because you've talked about the consumer and the customer, but Drew, just take us through the sales strategy for Tony's. Is it all online or are you also needing to reach out to the main retailers like Walmart and Target or Macy's? Tell us how you're doing that because that's also a key part of the marketing, isn't it?

Yeah, we launched in 2020 in the middle of shutdown. That forced us to build primarily an online direct-to-consumer model. We got Amazon up pretty quickly as well, since that is direct-to-consumer fulfillment. As the world kind of softened and people started shopping in retail again, we started to increase our efforts. So we're in about 700 independent specialty retailers. We're also now in Target as of 3 months ago, we have been doing really well in Target. We have, I don't want to say announced plans, but we have, we're well on our way for other major big box retailers that will be coming very shortly.

Okay. So that's great. So there is an omnichannel strategy to get Tonys into the markets, into the little hands of little people.

Exactly. Yeah. I was thinking the other day, I'm a student of marketing and I remember reading about some campaign in the 1950s, I think, which was called like a chicken in every oven or like something to just show the universality of a particular product. Well, I see that as being a Tony Box in every home. I really think it's a universally applicable device for a preschool child and a young child, and I don't see any reason why There shouldn't be a Tony box in every home.

Drew, as we close out, you're a marketing director. You've worked for Lego, for P&G, and now you've had your own business. And now you're driving the marketing and sales for Tonys in America. What would be, if you like, your number one piece of advice? What really works? What really moves the needle in terms of helping a brand in the child category or any other that you've worked in to get noticed?

I think for me, apart from having a unique product, is it has to really solve a need. And that's like business 101. Are you solving a need? But there's so many businesses and products that don't really solve a need. The reason I left beauty marketing is because I was selling lotion. I launched a product called Jergens Wet Skin Moisturizer, and it was designed to go on your skin while your skin is still wet, like straight out of the shower. And the, the need that we were solving was that your lotion was going to absorb twice as fast. Well, if your lotion takes 10 seconds to absorb, this brand new lotion is going to absorb in 5 seconds. So the need that I was selling people on was that we were gonna save them 5 seconds of rubbing lotion into their body. And that wasn't the kind of space that I wanted to spend my career in. That's why I needed something like the Tony Box that has the opportunity to actually change a child's life. That's what you need to make it succeed. So you need to find what that thing is for your business. What's the significant need that it solves or find a new business.

Drew Vernon joining me as the marketing director of Tony's over there in Salt Lake City for this German company that's really transforming and taking us back to the day when we used to play with things that we couldn't always see and listen to things that played on our imagination. More than in our screens. Drew, thank you so much for joining me today on The Unnoticed Entrepreneur.

It's been my pleasure. Thank you so much. I really appreciate the time.

So you've been listening to Drew Vernon. Of course, I'll put all the details in the show notes and me, Jim James. If you've enjoyed this, do please share it with a fellow entrepreneur. And if you've got the time, rate the show because it also really helps. And until we meet again, I do encourage you to keep on communicating.