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Leapfrog and Powertouch
Marketing Analysis

Children were taught fundamental subjects such as Spelling and Math with the aid of books and even building blocks. Children of this century are fortunate to have electronic interactive-learning toys to aid them as they begin to learn how to read and write, as well as introduce them to math or geography. Last season, LeapFrog Enterprises Inc. of Emeryville, California had one of best selling toys in their LeapPad product line. Unfortunately, heavyweight toy manufacturer Mattel Inc. attempted to wrestle some market share with the latest learning systems by launching its version PowerTouch System, giving LeapFrog major competition during last year’s holiday season.

Marketing Concepts

The USA economic system is categorized as mixed capitalism, “An economic system characterized by largely private ownership of the factors of production, market allocation of resources, and decentralized decision making”. Most economic activities take place in the private sector in this system, but government plays a substantial economic and regulatory role” (Arnold 46). One quality that thrives in a mixed capitalism system is competition, and marketers need to be aware of this characteristic. The article, LeapFrogging LeapFrog Mattel Aims to Knock the Popular Learning Toy off its Lily Pad, explains how the USA way of doing business is treating LeapFrog Enterprise Inc. revenues. LeapFrog Enterprise Inc. started as a small company in 1995, and for several years it dominated the interactive toy market, its revenues provided proof of the company’s success. In 2003 a giant toy company, Mattel, realized the economic potential of the interactive toy market and decided to compete against LeapFrog Enterprise Inc. The competition created by Mattel might have not been the best news for LeapFrog Enterprise Inc., but it might not have been a bad deal for the USA economy and its consumers. After all, in many instances competition might work to lower prices while increasing the quality of the products. As Mattel entered the interactive toy market, it introduced the PowerTouch, which is similar to LeapFrog. It is important that marketers be aware that competition is just a reality of doing business in the United States, and if the companies are serious about staying in business they better be prepared to compete.

Nowadays, mass marketing is seldom a strategy for most companies. Instead, most marketers realize that they do not want to connect with just any customers (Armstrong and Kotler 27). LeapFrog’s marketing focuses on the concept of “connecting with more carefully selected customers.” They have made enormous profits with LeapPad by targeting children between ages 4 and 7 where kids are first developing. Similarly, Mattel marketed its own educational interactive system PowerTouch in order to gain control of LeapFrog’s market power. Mattel has already built up its reputation as one of the predominant toy manufacturers in the world. With the invention of PowerTouch, Mattel is trying to maintain their customers in hopes of gaining long-term profits. On the other hand, marketers now spend less time increasing market share but rather “customer share” (Armstrong and Kotler 30). Mattel

has always offered products and services to their young customers by marketing more toys but with changing times, toys are becoming more technological.

Technology has taken over every facet of our lives, including education. Entering a new century, kids are now interacting with electronic educational devices to reinforce their learning development. LeapFrog seized the opportunity of Generational Marketing and came out on to the market with LeapPad. Baby Boomers, Generation X, and the early portion of Generation Y did not have the advantage of developing math, reading, or speech skills via electronic devices while growing up.

Mattel Co. saw the growth, in just three years; go from $328 million to $725 million in the educational toy industry. LeapFrog was making all of the proceeds. Mattel saw a market that had yet peaked and decided to compete with the LeapPad toy. Mattel considered the facts that there is a society that stresses human welfare and education. There are consumers in demand, i.e. parents, and there are plenty of profits to be made. It sounded like a great market to enter for Matel.

Mattel’s selling concept was to produce a toy that would outsell the LeapPad. They applied more technology into a unit similar to the LeapPad and called it the PowerTouch Learning System. The PowerTouch was unique because kids would not need a stylus pen, but could use their fingers instead. After making the product they promoted it by running their most expensive marketing push for a preschool toy. Instead of running their national television ads in late October for the holiday season they advertised in mid-September. Their strategy was to get the early holiday shoppers consuming their products. And it worked.

LeapFrog Co. saw their stock plunge after the release of the PowerTouch. They then decided to release three new products and sued Mattel for patent infringement. Their new products came out just before the holiday season and targeted kids as young as 18 months. Their objective was to compete with Mattel’s PowerTouch with their old LeapPad and also tap into the market of even younger children’s learning toys with the newer LeapPad. They felt that parents are demanding more from their children at younger and younger ages. They marketed and distributed their new products while battling in the courts with a lengthy lawsuit against Mattel, but both the PowerTouch and the LeapPad sold well during the holidays, according to the vice-president of Toys “R” Us (Business Week).

Marketing Environment and Responses

If LeapFrog loses the competition to the giant Mattel in the electronic learning aid segment of the industry other companies that are trying to enter that particular segment of the toy industry will face many barriers, but if they succeed to hold on to the market share, they will lose their momentum from Mattel, who has more capital resources to spend to produce more product and newer products and sell it at much lower price.

The technological dimension of the environment is the major factor here that why LeapFrog is losing its momentum when Mattel entered the segment of the toy industry. Mattel has more money to pour into its research and development to produce newer products with newer technology. When LeapFrog saw the product that Mattel produced they responded to it buy suing Mattel with patent infringement.

On the other hand, if the small LeapFrog stays afloat with the competition, other small toy manufacturing companies will enter the market. As competition grows, the price of the toys will go down and the winner will be the consumer.


LeapFrog’s LeapPad is a tremendous investment for children between ages 4 to 7. It is simple and fun to use. LeapPad is extremely educational as it includes all aspects of child development. The interactive-learning system allows kids to use the stylus to interact with interactive games, which promote better learning of the alphabet, vocabulary, and other areas. LeapPad also includes activities that help children with phonics. This is a great feature for younger children who are 2 or 3 because it allows them to practice pronouncing their first words. In addition, children are introduced to shapes, symbols, and colors. Another positive characteristic of LeapPad is that children will find it easy to carry around, as its laptop-like design is lightweight and portable.

Another recommendation would be for LeapFrog Co. to merge with Mattel. With LeapFrog stock down over 30% there might not be a light at the end of the tunnel without drastic change (Business Week). A merge would mean the two companies could combine technologies and produce a unit that would own the market. Since the educational toy industry is still growing, it won’t be long until another competitor steps on the scene. By merging they might be able to work together on marketing an educational toy that nobody could compete with.


LeapFrog found its niche market in electronic educational systems and has become a success. With the latest craze of LeapPad children are able to reinforce subjects such as math, reading, and spelling with its electronic learning system. Mattel Inc. quickly introduced a comparable product called PowerTouch. Both products tutor its users by using an electronic learning system. It will be a tight race between LeapFrog’s LeapPad and Mattel’s PowerTouch and only time will tell which one comes out ahead.


Armstrong, Gary, and Philip Kotler. Marketing: An Introduction. 6th ed. New Jersey: Prentice Hall, 2003.

Arnold, Roger. Economics. Ohio: South-Western College Publishing, 2001.

Palmeri, Christopher. "LeapFrogging LeapFrog." Business Week. 1 December 2003: 100.

LeapFrog Enterprises, Inc. Fisher-Price® PowerTouch™


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