A toymaker ponders product liability. Plus, how to bolster customer interaction online.
Q I'm developing a toy intended for older kids, but it has small parts that a young child could choke on. How should I weigh the risk of product liability and potential lawsuits?
On most occasions, finding an unexpected audience for your product is cause for jubilation. This is among the very few instances when it's not. Fortunately, the toy industry doesn't experience a particularly high level of product liability litigation, says Rick Locker, counsel for the Toy Industry Association. But before wiping your brow, consider this: Toy manufacturers pay higher than average insurance rates because the statute of limitations for children continues until they reach maturity. The laws vary by state, but typically if a child is harmed by a product today, he can sue until he turns 21 or older. (Injured adults are covered for only a couple of years on average.) And, not surprisingly, when a child is harmed by a product, juries rarely side with the manufacturer, notes Locker.
Having product liability insurance, which covers your costs in the event of a lawsuit, may help you sleep nights. Many trade associations, including the TIA, offer special insurance packages for members. Rates vary depending on the size of the company and what you're selling: Expect to pay more for a child's flotation device than for a rubber ducky. Big toymakers like Mattel (NYSE:MAT) and Hasbro (NYSE:HAS) pay $1 million or more annually in product liability insurance, while small toy companies pay an average of $7,500 a year, estimates Benjamin Thrush, vice president of business development for insurance broker Hub International Northeast (NYSE:HBG), which partners with the TIA.
Of course, the best way to mitigate your risk is to make darn sure your product is as safe as possible and will be used as intended. In addition to required labeling, consider including a warning to parents about the danger to younger siblings, suggests Kimberly Thompson, director of Kids Risk, a research project at Harvard's School of Public Health.
You may also be able to diminish your product's object-of-desire status through design and packaging. "If a toy is meant for an older kid, it should look like it's for an older kid," says Joan Lawrence, vice president of standards and regulatory affairs at the Toy Industry Association. "You don't want to use primary colors or a character familiar to toddlers." Unfortunately, even the least SpongeBob-esque approach imaginable can't guarantee little kids won't find your product compelling. So extensive product testing and design reviews are crucial. If, in a controlled environment, three-year-olds still grab for your toy, make alterations--or make something else.
Q How can we increase activity in our online communities and forums?
It's the fear of every high school student: You throw a party and no one shows. The business version of that humiliation is an inactive online forum. To stay healthy, online forums require two things: a critical mass of participants and intelligent, lively conversation. The first challenge is enticing people to drop by. We assume the forums are prominently featured on your home page (we can assume that, yes?). You can then aggressively advertise their presence with a mass e-mail to customers, perhaps highlighting a recent provocative exchange or posing a controversial issue for discussion. You could also try offering incentives--a 10 percent discount coupon, for example--to the first 100 new registrants.
To start the conversation you want participants who are knowledgeable about your products but not company spokespeople. Your best customers are ideal. Ask them to moderate, says Mike Tatum, a general manager at CNet (NASDAQ:CNET), the large Internet media company. Company representatives should chime in as well; everyone from the CEO to the designers of your latest product can add insight and prevent uncomfortable silences. "Some mornings, it might just be employees talking with themselves," says Bill Johnston, director for community and research at Forum One Communications, a technology consulting firm in Alexandria, Virginia. "But there's a conversation." And, of course, employees should never be coy about their affiliation. If participants catch one of your people pretending to be a customer, things can get ugly fast.
As fascinating as your product is, chances are it can't sustain a conversation indefinitely. So come up with other topics that might interest your customers. If you make a device that scans receipts, consider opening a debate about workplace efficiency or taxes. If the digital tumbleweeds still blow through your community, consider other forms of interaction, like a blog. Blog readers can add their comments to yours, and given the right topic, their interactions can be as freewheeling as those in forums. Sure, it means you'll have to supply most of the conversation, and if few respond you end up talking to yourself. But that's better than presiding over a ghost town whose emptiness tells the world that nobody cares.
For more on product safety laws and minimizing product liability, read Product Liability Prevention by Randall L. Goodden. To get more information about building online communities and forums, visit the Online Community Report, Bill Johnston's blog about virtual communities, at onlinecommunityreport.com.