Marketing to Kids: Toy Sellers’ Bonanza or Parental Danger Zone?

Gone are the days when kids raced to the toy sections of old-fashioned department stores to find items for their holiday wish lists, or parked themselves in front of Saturday morning cartoons, captivated by a barrage of television commercials for GI Joe action figures, Chatty Cathy dolls and Easy Bake Ovens.

The Digital Age has changed those rituals. Glossy toy catalogs, TV commercials and eye-level in-store displays for the four-feet-and-under crowd still exist, of course, but toy companies these days increasingly use the Internet to connect with young consumers. Through kid-friendly online quizzes and multimedia games for touch-screen phones and tablets, marketers are blurring the boundaries between traditional advertising and children’s entertainment.

Some industry watchers say these marketing strategies represent added value for both the consumer and the marketer: Kids exercise creativity and have fun, while companies reap the benefit of an extremely effective tool for capturing the attention of the youth customer segment. But stealth advertising aimed at kids is also a source of mounting concern for parents and children’s advocates, who say that children are not mature enough to know the difference between advertising and editorial content. There are also worries that exposure to these ads — which often appear on a child’s personal electronic device — are much harder for parents to monitor and control.

“It’s obviously a huge concern,” says Barbara Kahn, director of the Jay H. Baker Retailing Center at Wharton. “Kids can’t differentiate between what’s propaganda and what’s not. And on the Internet, the regulations haven’t caught up.”

Perhaps the biggest difference between the Internet and television commercials is that the level of involvement is much more intense and interactive, notes Kahn. “TV is a passive medium,” she says. “Kids get mesmerized by TV shows, but they’re not engaged. When they are on the Internet playing a game, it’s much more involving. So the effect of the ads is probably greater. Another difference between the Internet and television is the platform: Kids watch television on a bigger screen in an open room. The Internet involves a smaller, personal screen so it’s more of a private experience.”

While the Federal Communications Commission (FCC) regulates television advertising targeted at children, there are no federal rules governing how advertising is offered to kids on the web. For now, it is unchartered territory. “The Internet is a new medium,” notes Kahn. “[It's not entirely clear] how kids parse what they see and experience online.”

‘Attuned to Technology’

The typical American between the ages of 8 and 18 lives in a home equipped with no fewer than three television sets, three radios, three video players, three portable digital media players — such as iPods or other MP3 devices — two video game consoles and at least one personal computer, according to a report published by The Future of Children, a research group run out of the Woodrow Wilson School of Public and International Affairs at Princeton University and the Brookings Institution. Those children spend more than seven and a half hours a day using a smart phone, computer, television or other electronic device, reported a separate study from two years ago by the Kaiser Family Foundation.

Cell phone ownership among young children is increasingly prevalent, too. Nearly six out of 10 parents of so-called “tweeners” — children aged 8 to 12 — have purchased cell phones for their kids, according to a survey by the National Consumers League. Only 4% of those tweeners have basic phones with no Internet or texting access. About half have mobile phones with texting capabilities, another 20% have non-smartphones with texting and web access and 27% have smartphones.

“This is a generation that is attuned to technology,” says Ronald Hill, professor of marketing and business law at Villanova University. “This is a generation that believes technology should be accessible at all times. They seek out marketing. They seek out apps and Twitter feeds that are related to products and companies that interest them. They are energetically connected to companies that are relevant to their lives.”

Companies, for their part, are taking their cue by spending more money on Internet advertising and designing ads that go beyond simply pushing products.A study released by Nielsen in October found that Internet ad spending grew more than any other media in the first half of this year. (Advertising on the Internet rose 7.2%, radio rose 6.6% and TV increased 3.1% to offset the 1.3% decline in magazine spending.)

Advertising on the web requires a different strategy from other media, however. “Instead of advertising, the most innovative brands are taking content marketing strategies and applying them to kids,” according to Mark Bonchek, founder of Orbit + Co, a social media strategy company based outside of Boston. “In content marketing, the focus isn’t on promotional deals and offers. Instead, there’s some kind of intrinsic value, and the advertising message is embedded within the content or experience.”

There are, for instance, immersive “advergames” — video games made specifically to advertise a product. There are also in-game ads and quizzes where product placements are embedded within a game narrative. Many of these online marketing strategies revolve around a popular character or group of characters, which enable toy companies to continually cross-reference and promote TV shows, branded dolls, T-shirts, action figures and other products.

The Club is an online virtual world run by kid-centric television network Nickelodeon, where users are invited to create avatars and play Super Spongy Square Games (overseen by Sponge Bob), browse the Power Rangers Samurai store or join in Dora (the Explorer’s) Great Big World Game. Disney offers an array of free apps for kids featuring The Muppets and Mickey Mouse. Barbie.com offers video games that enable users to design virtual dresses for Barbie and her “besties,” watch cartoon episodes of “Barbie: Life in the Dreamhouse” or play an assortment of “princess charm school games,” which are, according to the perky disembodied electronic voice of the website, “super glam and royally fun!”

Bonchek says that the most effective advertising approaches are those that establish “a partnership between brands and parents.” They create virtual worlds that inspire kids’ imaginations and help them get more enjoyment out of the products, but also help parents make better gift-buying decisions. “It’s much better than when brands try to turn my children into a new mobile marketing channel,” he notes.

Food companies are especially skilled at content marketing. Kraft has many free kid-friendly apps, including one that lets users watch a cube of Jell-O dance in time to their favorite songs, and another in which kids create digital macaroni art — a subtle promotion of its Kraft Macaroni and Cheese. “Kraft has long been a leader in content marketing with recipes for grown-ups, so it’s not surprising that they have done well in finding innovative approaches to engage kids,” says Bonchek.

Innovative, certainly, but do these advertising practice also prey on the innocence of kids? “I don’t think any more than they prey on grown-ups,” notes Bonchek. “Does the 25-year-old guy really think if he drinks a particular brand of beer that he is going to get that girl?” The good news regarding children, he adds, is that “there are gatekeepers in the form of parents. They control the credit card.”

‘Not Just Adults in Teeny Tiny Bodies’

Parents may have ultimate control over what their children spend money on, but there is no doubt that kids have a large say in those decisions. According to a consumer tracking study conducted by The NPD Group in 2010, nearly half of the total dollars parents spent on kids went to items specifically requested by them. A 2005 estimate by James McNeal, professor emeritus of marketing at Texas A&M University, found that children under 14 influenced as much as 47% of American household spending, amounting to more than $700 billion that year.

As for 2012, it appears that the holiday shopping season is already off to a rollicking start. Despite the shaky economy, Americans spent $11.2 billion at stores across the U.S. and a record $1.04 billion online on Black Friday, according to ShopperTrak and ComScore, both retail and technology research companies. The National Retail Federation’s holiday consumer spending survey projects that the average holiday shopper will spend $749.51 on gifts, décor, greeting cards and other items, a slight increase from what they spent last year. The largest share of shoppers’ budgets this year will go toward gifts for family members — with much of that money going to presents for kids.

During the holiday season, children’s desires for new toys and games reaches a frantic, whiney pitch familiar to all parents. “It’s obvious that kids bug their parents so much because it works really well,” says Stephen Hoch, professor of marketing at Wharton. “Especially at Christmastime, parents want to buy something that their kids would like to get.”

Desperate children plus eager-to-please parents are a potent combination for toy marketers at Christmas. There is a reason, after all, that this time of year sees a significant uptick in holiday-themed advertisements meant to build up expectations around what packages might be arriving from the North Pole. These ads have an especially powerful effect on kids who have difficulty differentiating between editorial content and marketing, according to Hoch, a former Walt Disney executive who used to run the company’s children’s music division in the late 1970s. “Kids are not as savvy to the methods and motives of advertisers,” he notes. “Young kids are more gullible.”

Online, even fully-fledged adults can’t always tell the difference between marketing and editorial. “We have all accidentally clicked on a display ad that didn’t look like a display ad,” says Hoch. “But as adults, we set up defenses when we see the intention to persuade. That’s why it’s more difficult to persuade an adult of something than it is a little kid. As kids get older, they wise up to this. But when we’re talking about kids playing an online game or [being immersed in a] continuous stream of content on a computer screen, it’s not clear how vigilant they are.”

Research suggests it is unlikely that kids fully grasp the marketing processes at work behind many of these online advertising strategies. Indeed, evidence points to the fact that until the age of eight, most children are unable to understand persuasive intent — the fundamental basis of marketing, which makes kids especially vulnerable to an ad’s techniques.

Children deserve special consideration, according to Susan Linn, director of the Campaign for a Commercial Free Childhood, a Boston-based advocacy group, and a psychiatry instructor at Harvard Medical School. “Children are not just adults in teeny tiny bodies,” she says. “They don’t have the same impulse control as adults, and they have a harder time separating reality from hype. Very young children can’t differentiate between a commercial and a program. And even older children are more susceptible to persuasion.”

While the Internet remains a largely unregulated domain, the U.S. regulates marketing for children less than most other industrialized nations. Canada has very stringent regulations stating that companies can’t market to children on television who are under the age of 12. In Sweden and Norway, companies can’t market to children under the age of 13. In Greece, there are no television advertisements allowed on until after 10 p.m., and no war-related toys, such as toy guns, are advertised at all.

The Internet and other new technologies have made marketing to children more pervasive and even more effective, Linn notes. She says that laws against false and deceptive marketing could be enforced better and that marketing to kids on the web that is based on television and movie characters should be limited. “Advertising on the web is so much more insidious. For one, kids spend more time with the ad. For another, with handheld devices, it’s so much harder for parents to control [what their child sees and does] once that child has access to the Internet. It’s really hard to have parental control.”

Privacy is another area of concern. Online research applications allow marketers to piece together richly detailed consumer profiles based on the aggregate data gathered from children — a demographic that is otherwise extraordinarily hard to access, according to a study by Sara Grimes, an assistant professor of children’s literature and new media at the University of Toronto. Her study appeared in the International Journal of Communications and Law Policy.

Still, it’s not certain whether regulations that govern Internet advertising aimed at kids are the answer. Regulators are still finding their way, notes Jonah Berger, professor of marketing at Wharton. “Regulations often chase new technologies, but they often come with a substantial delay [as] people figure out what the issues are and how best to protect children. Regulators have yet to get used to this new environment.”

At a time when nearly one in three children is overweight, makers of salty snacks and sugary drinks are already under scrutiny for their advertising practices. Many food and beverage companies have signed on to the Children’s Food and Beverage Advertising Initiative, part of the Better Business Bureau, which encourages voluntary commitments to advertising healthier dietary choices and healthy lifestyles. The Federal Trade Commission soon plans to publish a report describing the ways in which food companies market their products to children.

For now, it is up to parents to monitor what their child sees and does online. “We live in an age where advertising is pervasive,” says Bonchek, the social media strategist. “Parents have a responsibility to educate their children about marketing and advertising. We need to lean into it. You can’t protect them from everything.”

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