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MARKETING

Child's Play

Start-up attempts to sell a positive-message-stuffed doll to kids.
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Carolyne Greene says her F.R.O.Y.D. doll is unique because it encourageschildren to achieve their dreams -- but is that a message a kid can understand?

It's a steamy August day in Manhattan, and business is slow at Bloomingdale's. On the second floor, near the tiny, nearly customerless toy department, Carolyne Greene is valiantly trying to break into the toy business. Her invention: a taxicab yellow, big-nosed doll named F.R.O.Y.D. To promote him, she has brought along a "live" six-foot version of F.R.O.Y.D., which now bobs and sways to a scratchy recording of his theme song.

Nattily dressed in yellow and black to match her creation, Greene offers F.R.O.Y.D. buttons to passing children. A curly-haired moppet catches sight of the giant doll. Spotting her, too, F.R.O.Y.D. bends down and beckons. Shyness battles attraction, and then the little girl succumbs, delightedly accepting a button. From that moment on, she doesn't take her eyes off F.R.O.Y.D.

This, you might think, is what being an entrepreneur in the toy business is all about. Fun. Kids. Toy love. But you'd be wrong. As Carolyne Greene, a 34-year-old with waist-length blond hair and Betty Boop eyes, is discovering, toys can be brutal. More than half of the Barbie wanna-bes, Nintendo would-bes, and other new toys that debut at the annual American International Toy Fair in New York City every February don't survive beyond their first year.

But Greene, who's prone to giggle and partial to the phrase "really cool," may have more insight into kids than your average toy executive does. This is a woman who named her cats Disney and Henson in honor of her role models. A woman who sees herself as the heroine of a legend in the making. Tears rolled down her cheeks, she will tell you, when she watched children in a focus group happily playing with an early version of F.R.O.Y.D.

She is also a woman who wants to be rich. "I like making money, and I hope to do a lot of it. I believe more than ever that F.R.O.Y.D. will be a megahit."

* * *

F.R.O.Y.D. was born in 1979, when Greene, then known as Carolyne Fischer, was working as a free-lance jewelry designer. From a series of sketches, she developed a forerunner of F.R.O.Y.D., a tiny doll with removable sunglasses, which was known then as Pocket Person.

Working on the doll was no idle pastime for Greene. Trained in design, she had created line extensions for Sasson Jeans Inc.: handbags, lingerie, and costume jewelry. Such licensing of famous names was well established in the fashion industry and was just becoming a popular marketing strategy in the toy industry. Previously, the licensing of a character had always followed long-established commercial success in at least one medium. Snoopy dolls, coffee mugs, and lunch boxes didn't materialize until after the beagle became a well-known comic-strip character.

But Greene's idea was to make it happen all at once. Knowing success depended on the invention of a character, not just a doll, she had developed a personality for her Kilroy look-alike, taking her cue from their own "relationship." She recalls, "I thought, F.R.O.Y.D. is my best friend." Kids, too, would like to have a friend who believed in them, she reflected. She had named her character F.R.O.Y.D., which stands for "for reality of your dreams." F.R.O.Y.D., Greene decided, would encourage children from ages 5 to 13 to achieve their dreams.

Greene believes the concept is unique in Toyland. It's not violent, a rarity among the G.I. Joes, Teenage Mutant Ninja Turtles, and other warrior playthings. Yet F.R.O.Y.D. isn't as saccharine as non-violent hits such as Care Bears or My Little Pony. And F.R.O.Y.D.'s message, Greene believes, is certain to please parents.

For Greene the marketing possibilities were tantalizing. As F.R.O.Y.D. Inc.'s 1989 business plan put it, she wants F.R.O.Y.D. to become "synonymous with 'dream fulfillment' much the way a rabbit's foot or four-leaf clover symbolizes good luck. . . . This concept creates a very large merchandising opportunity -- owning the commercial rights to F.R.O.Y.D. is owning the commercial rights to dreams."

In addition to further developing the doll, which grew to 13 inches and went through several kinds of "skin," Greene worked on F.R.O.Y.D.'s message. To encourage kids to focus on their goals, every doll comes with a postcard on which kids list their name, age, address, gender, and dream. Sending in the postcard to Dream Team Headquarters (D.T.H.) entitles them to receive a Dreams Come True Poster (D.C.T.P.) of F.R.O.Y.D. and some star-shaped Official Yellow Dream Stickers (O.Y.D.S.s). Kids are supposed to place a sticker on the poster each time they accomplish a goal.

Besides allowing Greene's affection for acronyms to run wild, the postcard ploy enables Greene to track her customers. Ultimately, F.R.O.Y.D. owners will become part of a fan club, which will likely be formed when the last element of Greene's concept -- an animated television show -- is put in place. Using a talk-show format with F.R.O.Y.D. as the host, "Friday Night F.R.O.Y.D. on Saturday Morning" would feature more of Greene's creations: The Princesses of Procrastination, Dr. I.M.I. (It's My Idea), H.O.G. (Hot on Girls), and Buzz Humming Nerd, among others. Unfortunately for Greene, however, toy sales have been sluggish for the past six years. Though the ubiquitous Turtles are an authentic megahit, the industry scraped together only $13.4 billion in sales in 1989, a bare 5% gain over the previous year. The unpredictable boom-and-bust sales cycles that plague toy companies have killed some -- such as Worlds of Wonder -- in recent years. The last thing toy makers want is a risky new product like F.R.O.Y.D.

F.R.O.Y.D.'s other critical constituency is retailers such as Toys "R" Us. The top 10 toy retailers now control 80% to 90% of all toy sales in this country. If your toy doesn't interest them, you don't have a lot of alternatives -- especially if you want it to be a megahit, as Greene does.

All of this would be fatally discouraging to a toy entrepreneur if it weren't for one simple truth: success in the toy business is capricious. You can have the most thorough research, the biggest advertising budget, and the most beautiful product, but none of them gives you a window on a 10-year-old's brain. The most vivid example: Cabbage Patch Kids, the mid-1980s superhot hits that rained millions of dollars upon Coleco, were rejected by every other major toy company. The Cabbage Patch Kids, in fact, were Greene's model for F.R.O.Y.D.

* * *

Between 1984 and 1989, Greene continued to work as a free-lance jewelry designer but began to try to sell F.R.O.Y.D. She took her ideas to Hasbro, Coleco Industries, Fisher-Price, Tyco Toys, and Kenner Products. Greene says they all thought the doll was terrific -- fresh and different. But not one was willing to take it on as a product.

By then Greene was ready to try to launch F.R.O.Y.D. herself. She believed she could do this, in part because she now had someone to help her -- Jeffrey Greene, a onetime venture capitalist and consultant. He had become her friend and unofficial adviser and had begun investing his own money in the F.R.O.Y.D. project in 1985. A few years later they got engaged, and Carolyne decided not to wait for the wedding day to change her name. For the sake of continuity, she wanted her name to be Greene from the very beginning of what she was sure would be F.R.O.Y.D.'s runaway success.

Bolstered by market research in which F.R.O.Y.D outscored Cabbage Patch Kids, the Greenes had put $725,000 of their own money into F.R.O.Y.D. Inc. by 1989. To fund the company's launch, they raised $600,000 through a private placement of equity with individual investors, giving up 26% of the company. This was their plan: The money would pay for a market test, which would be so successful that retailers would reorder immediately. The strength of those new orders would allow F.R.O.Y.D. Inc. to finance a national rollout of the doll, using manufacturers' representatives to reach toy retailers.

By agreeing to support sales with television advertising, the Greenes persuaded Toys "R" Us, Lionel Leisure's Kiddie City, and Cole National's Child World to sell the doll in three metropolitan regions: New York City, Philadelphia, and Boston. In addition to running four weeks of TV ads, the Greenes hired the New York public relations firm Howard J. Rubenstein Associates to generate heartwarming stories about F.R.O.Y.D.

Carolyne also sent some 250 dolls to celebrities such as comedienne and actress Whoopi Goldberg, actress Jean Smart (who said she'd try to get him on CBS's prime-time show "Designing Women"), the "Today" show's Deborah Norville, President Bush, and Soviet president Mikhail Gorbachev.

The Greenes contracted out the fabrication of test dolls, keeping costs entirely variable, just as they will for large-scale production. Matchbox Trading Ltd., a subsidiary of Hong Kong-based Universal Toy Ltd., made the 20,000 test dolls out of latex, cloth, and polyester stuffing in three months. Altogether, it cost F.R.O.Y.D. Inc. $9 to produce and deliver each doll to retailers' warehouses. It charged the retailers $16. The retailers, in turn, marked up F.R.O.Y.D. to $24.99 to $39.99, putting it in the Cabbage Patch Kid price range.

May 1990 was set as the test-market month. Carolyne and the Manhattan advertising agency Deutsch Inc. created ads that showed little kids, with F.R.O.Y.D.'s help, suddenly able to perform feats they'd previously been un-able to do. The commercials were produced in Canada for $100,000. Four weeks of ad time in the three cities cost another $190,000. The public relations firm spurred stories in the daily newspapers and on a few television stations.

As the test grew nearer, the Greenes' expectations were soaring. The couple anticipated a raging success -- sales of 1 million to 6 million dolls in their first year, with corresponding profits of $2.6 million to $34.5 million. By comparison, in the last half of 1989 Tyco sold 700,000 units of its Oopsie Daisy doll -- an extremely successful first season. Within three years, the Greenes optimistically projected in their business plan, F.R.O.Y.D. would be a "$100-million earner."

Instead, F.R.O.Y.D. flopped.

Out of 6,300 units shipped, the stores sold only 1,500. "We won't be reordering," says Angela Bourdon, the Toys "R" Us spokeswoman. Many would take that verdict from the industry's biggest retailer as a death knell. But Carolyne Greene argues that the market test wasn't really a bust, especially considering that the ads aired beginning the week of April 23 and many stores failed to get F.R.O.Y.D. on their shelves until late May. She explains, "Getting F.R.O.Y.D. from the storeroom to the shelf is the biggest hurdle we face."

* * *

Still, the test-market results have caused Carolyne Greene to revise her thinking. "We expected this would boom overnight. I now think that's a little unrealistic without a huge advertising budget," she admits. Now she calls 1990 "a year of experimentation" and has decided on a new course -- grass-roots marketing.

The idea is to build F.R.O.Y.D.'s image regionally through a spate of appearances with the giant F.R.O.Y.D. Exploiting his power-of-positive-thinking message, Greene has been lining up appearances at children's hospitals.

She hopes to "seed" the market with such high-visibility appearances. In particular, she's targeting opinion leaders and important specialty retailers. She's already won the loyalty of toy buyer David Niggli, at F.A.O. Schwarz, the famous Manhattan toy store. "Probably one of F.R.O.Y.D.'s biggest assets is that it has Carolyne behind it. When the people involved have that kind of intensity, retailers get excited," he says.

The payoff: in October, Schwarz ordered 700 F.R.O.Y.D. dolls and asked Carolyne Greene to go on a 12-city tour of its stores with the giant six-foot F.R.O.Y.D. The Christmas-season appearances should raise F.R.O.Y.D.'s distinctive profile considerably. F.R.O.Y.D. made a surprise appearance on television, too. Jean Smart of "Designing Women" was true to her word and put him in the crib of her TV baby during the show that aired on October 1.

F.R.O.Y.D. himself has undergone a bit of an image change. By simply glancing at the doll on a retailer's shelf, kids couldn't get his message, Greene decided. So now she's stuffing a one-inch-by-one-inch book in his pocket. Inside, it explains his purpose, but the point of the book is its title, You Can Make Your Dreams Come True, which is plainly visible.

Looking for new ways to get her dolls into children's hands, Greene ran print advertisements in Child magazine's November and December/January issues, at a total cost of $38,512. Aimed squarely at parents, the ad copy reads, "If you would like to encourage your child's dreams and you haven't seen F.R.O.Y.D.'s big yellow nose in your local store, please call or write. . . . " Mindful that many well-known characters are sold mainly through gift stores, she is pushing F.R.O.Y.D.'s nose into that market, too. As a test, she hired two giftware sales representatives last fall.

The rest of her current plan rests on her hopes of licensing F.R.O.Y.D. Those Characters from Cleveland and United Media, which licenses Garfield, have both turned down F.R.O.Y.D. But Greene says they were impressed with him and with her new product: F.R.O.Y.D.'s Really Cool Coloring Book. She won't disclose the details of the novel coloring-book concept, except to say that it involves "no rules and no lines."

The Greenes report that they have talked with people at MCA/Universal and that the studio is exploring the television-show idea as well as the licensing of the F.R.O.Y.D. name for other products. General Mills' snack business is also reviewing the F.R.O.Y.D. concept, says Carolyne Greene. She has already been able to sell one licensing arrangement. Gary Polan, president of Giftcraft, one of the largest wholesalers of giftware in Canada, bought the Canadian licensing rights in 1989. Though F.R.O.Y.D. hasn't been selling well for Giftcraft, Polan has hired a Toronto public relations firm to promote the character.

* * *

But isn't this piecemeal approach too slow to launch the kind of superstar that Carolyne Greene envisions? She insists that it's not, claiming that Xavier Roberts, inventor of Cabbage Patch Kids, sold his dolls in crafts fairs for years before signing a deal with anyone. Still, it's a long haul winning specialty retailers over, individual by individual, especially when you don't have enough money.

With the cash from the private placement running out, she planned to put together an unofficial second round of financing for $150,000 last fall. That would see her through year-end. If sales of retailers' remaining F.R.O.Y.D. stock didn't improve over Christmas and no licensing deal materialized, she would attempt to raise at least another $2 million, either through an additional private placement or by selling a piece of F.R.O.Y.D. Inc. to a larger toy company. The cash infusion would support a major advertising campaign.

Even if she can raise that much, however, F.R.O.Y.D. is no shoo-in. Several retailers wonder if the concept isn't too sophisticated. Bourdon of Toys "R" Us says, "I don't think F.R.O.Y.D. would even be for a kid -- it seems like something an adult might buy."

Meanwhile, Carolyne Greene's image-building strategy eats up a lot of her time in personal appearances. That's a problem when there's only a staff of two. With the initial money raised, Jeffrey Greene withdrew from playing an active role in the company at the beginning of 1990. That leaves Linda Richards, who acts as creative director, secretary, and chief button carrier at F.R.O.Y.D. appearances, as Carolyne Greene's only employee.

Still, sitting in her East 59th Street apartment with its wraparound views of the East River, Carolyne Greene puts her faith in F.R.O.Y.D. As Disney, her Siamese cat, executes a languorous stretch near her chair, she responds to a skeptic with wide-eyed sincerity. "The interesting thing with this business is that it's very much like becoming a movie star," she says. "It takes years, and then all of a sudden it happens. Isn't it amazing how long it takes to become an overnight success?"


EXECUTIVE SUMMARY

The company: F.R.O.Y.D. Inc., New York City

Concept: Sell F.R.O.Y.D. as a doll and licensable character based on its positive message to kids: You can make your dreams come true if you work at them

Projections: Pretax profit of $2.2 million on 1991 sales and licensing royalties of $15.6 million; pretax profit of $20.3 million on 1993 sales and licensing royalties of $62.4 million

Hurdles: Getting distribution through large toy retailers after an initial poor showing; marketing F.R.O.Y.D. effectively without a huge advertising budget; convincing licensing companies of the doll's appeal

THE FOUNDER

Carolyne Greene, president and CEO

Age: 34

Family: Single, no children

Source of idea: While working in fashion design, saw the potential of a licensing strategy applied to the toy business; also inspired by the success of Cabbage Patch Kids Personal funds invested: More than $800,000 with fiancé Jeffrey Greene

Equity held: 74%

Salary: $72,000

Education: Three years at Fashion Institute of Technology, a design school

Other companies started: None

Last job held: Free-lance designer of fine jewelry

FINANCIALS

F.R.O.Y.D. Inc. Operating Statement

($ in thousands) 1990 1991* 1993*
Sales

F.R.O.Y.D. units 60,000 750,000 3,000,000

F.R.O.Y.D. revenues $960 $12,000 $47,900

Accessories and licensing $0 $3,600 $14,500

* * *

Total revenues $960 $15,600 $62,400

* * *

Cost of goods sold $690 $9,400 $37,700

Gross profit $270 $6,200 $24,700

General and $600 $4,000 $4,400

administrative costs
Pretax profit (loss)
($330) $2,200 $20,300

*projected


WHAT THE EXPERTS SAY

OBSERVER

Larry Carlat

Editor, Toy & Hobby World Magazine

The best-friend concept is not, in my estimation, unique. Almost every toy company has a best-friend toy. So I don't think it is a good point of differentiation. The rest of the concept, the acronyms, and the dream fulfillment also are not points of differentiation. Lots of toys on the market do pretty much the same thing. I'm not sure that little kids really care about a message. So the question is, Is this message for a parent or a child? If Carolyne Greene is looking for mass-market exposure other than preschoolers, she has to draw the kids in. But I'm not sure this message will do the trick. Having F.A.O. Schwarz as a customer is all well and fine and can only be a plus, but F.A.O. Schwarz is not Toys "R" Us. It is a good endorsement but not exactly a sign that this is going to snowball. I do like the grass-roots strategy, but it sounds as if the company is still barking up the wrong tree. A large part of the toy-retailing community has made its decision. If Toys "R" Us and the others didn't want to reorder, I think she will have one tough row to hoe to persuade them to change their minds.

Now, she can go for the small retailers, but in the scheme of things we're not talking megahit status. She definitely does have a chance to get a new property out there. But she's going to have to scale back her expectations. On the licensing stuff, she's hitting the right people. This is what I would have done in the beginning. Or I would have hired a licensing consultant and let that person do the job for me.

INDUSTRY ANALYST

Sean McGowan

Analyst at Gerard Klauer Mattison & Co., a securities brokerage firm in New York City

I think it was Sigmund Freud who was once asked if his cigar was a phallic symbol. He said, "Sometimes a cigar is just a cigar." When toy companies repeatedly turn you down, it's not because your toy is a hit. Sometimes it's because the product won't be a hit.

I think the whole idea that this lovable character can be created in someone's mind and be made successful is false. The correct approach is to say, We don't know what's going to be successful, but we'll come to the market with many new toys, and if one goes, then we'll go with it. If it's not going to work, you can't make it work. I think that the grass-roots approach is the most expensive way to launch a product. You're just not making that many impressions when you make appearances or demonstrations. It's the last resort. What you're saying is that you haven't created mass appeal and you're just trying something else.

On the positive side, the Greenes haven't gone crazy building a company. But the projections don't make any sense when so much of toy sales is going to video games and you have 50 large dolls out there competing. I think the Greenes have come up with a marketing concept that sounds good but doesn't translate well in execution.

COMPETITOR

Sheldon Morick

Former senior vice-president of sales and distribution for Mattel Inc.; cofounder of General Consumer Electronics Inc., a manufacturer of video games

I think Greene was incorrect to try to sell F.R.O.Y.D. to children and through the mass market. There's a basic positioning problem. I don't think children can relate to dreams. That's too abstract a concept. It's more young-adult oriented.

She's on the right track now, going after the giftware and department-store markets, but she should have gone that way first and then possibly crossed over into the toy business. Gift shops and department stores tend to deal with an older market than toy stores do, and tend to sell on a low-volume, high-margin basis without requiring a lot of advertising backup.

I also think Greene will have a difficult time licensing F.R.O.Y.D. It's a single product with no real line extensions. And generally speaking, products become licensable only after the product becomes somewhat in demand. The product has to have value in the marketplace before it's a licensable commodity. She did well to get distribution with Toys "R" Us and the others; the fact that she didn't do well there is a bad sign.

FINANCIER

Tony Miadich

Managing general partner, Orien Venture Capital, Portland, Ore., an investor in Intelligy, an educational-toy series

In venture capital, there's an old truism that you don't want to be in the position of pioneering a market. But that's exactly the position Carolyne Greene is now in. All the response that's come from the marketplace has been negative. The tests she had with Toys "R" Us and other retailers have failed. Her marketing through gift stores has also not done too well. That is very important to investors. It really hurts the chances of F.R.O.Y.D. Inc.'s getting institutional investment.

Now Greene has to go out and educate the market about her concept, and I think that's tough to do in any business. Especially with the toy marketplace, which is more of a crapshoot than it is a process of educating the market.

LICENSER

Betts Fitzgerald

Director of licensing for Jim Henson Productions, in New York City

Greene has an interesting concept. The one thing I certainly learned about licensing over the years is that one never knows what's going to capture the fancy of the retailers. Many a company turned down Teenage Mutant Ninja Turtles and Cabbage Patch Kids, and we know what happened with those.

Going the gift-market route makes a lot of sense because F.R.O.Y.D. is such a specialized product. I think the mass market is made up of people going into Toys "R" Us knowing what they're going to buy for a child. Whereas in a gift situation, you don't really know what you're going to walk out of the store with.

I have to say, I really admire her for sticking with it. I think in this industry that's what you have to do.




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