Mattel was founded in 1945 by two Californian dollhouse furniture makers, Harold Matson and Elliot Handler. The decision to sponsor Walt Disney’s “Mickey Mouse Club” television show in 1955, the first sponsorship by a toy manufacturer, proved very helpful in attracting young consumers. Mattel can trace its success to the introduction in 1959 of the now legendary Barbie doll. Named after Handler’s daughter, Barbie was an instant hit in the doll market despite her dramatic figure and slender proportions, which were not typical of American dolls at the time. Within ten years, over $500 million Barbie dolls had been sold. Barbie became the most successful branded toy in history, and Mattel became a toy and entertainment powerhouse.

Mattel’s genius is in keeping its Barbie doll both timeless and trendy. Since Barbie’s creation, the doll has filled a fundamental need that all girls share: to play a grown-up. Yet Barbie has changed as girls’ dreams have changed. Her themes have evolved from jobs like “stewardess,” “fashion model,” and “nurse,” to “astronaut,” “rock singer,” and “presidential candidate.” Barbie also reflects America’s diverse population. Mattel has produced African American Barbie Dolls since 1968 – the time of the civil rights movement – and has introduced Hispanic and Asian dolls as well. After sales flattened in the mid-1980s, Mattel rejuvenated the famed doll with introductions such as Crystal Barbie (a gorgeous glamour doll), Puerto Rican Barbie (part of its “dolls of the world” collection), Great Shape Barbie (to tap into the fitness craze), Flight Time Barbie (a pilot), and Troll and Baywatch Barbie (to tie in with kids’ fads and popular TV shows). Industry analysts estimate that two Barbie dolls are sold every second and that the average American girl owns eight versions of Barbie. Every year since 1993, sales of the plastic doll have exceeded $1 billion.

Much of the renewed success of the classic doll was credited to Jill Barad, who had worked as a marketing director for Barbie before being named president and chief operating officer before gaining the title of CEO in 1997. One of her first moves with Barbie was to make the doll’s image more consistent with the empowered woman of the 1980s with a campaign titled “We Girls Can Do Anything.” It was a stunning success, and boosted Barbie’s sales by more than $100 million within a year. Before Barad came to the company, Mattel had always followed a restrained segmentation strategy, with at most three new doll introductions annually. Barad quickly ramped up these introductions, and before long Mattel was introducing dozens of new Barbie dolls every year in order to keep up with the latest definitions of achievement, glamour, romance, adventure, and nurturing. Her aggressive reinvention of Barbie took the doll from $320 million in domestic sales to nearly $2 billion in global revenues by 1997.

After this peak in 1997, Barbie endured a two-year decline. Contributing to the drop in sales was the “age-compression” trend, marked by children exiting the toy market at increasingly earlier ages. As a result of age compression, one executive noted, Mattel found itself having “to reinvent 80 percent of [its] base volume on an annual basis.”(fn, David Finnigan, “A Knock-down, Drag Out Fight,” Brandweek, Feb 12, 2001). To keep kids interested in the brand for additional years, Mattel expanded into interactive games and software with a $3.5 billion acquisition in 1998 of educational software firm The Learning Company (makers of popular games “Carmen Sandiego” and “Myst”). The move proved disastrous. A shrinking market for CD-ROM games and software caused The Learning Company to suffer unexpected losses, which in turn cost Mattel $300 million in 1999 and depressed the toy company’s stock price by more than 60 percent. Barad was forced to leave the company in February 2000. Kraft Foods veteran Bob Eckert was named as her replacement. After finding a buyer for The Learning Company, he developed plans to revitalize the company by concentrating on its core strengths.

Since Mattel relies on Barbie for roughly 40 percent of its profits, the doll figured heavily in Eckert’s comeback strategy. First, Barbie was redesigned and given a slightly wider face that made her look less “waifish.” Second, Mattel stepped up its merchandising efforts in stores, adding, for example, 200 Barbie boutiques in Toys ‘R’ Us stores across the U.S. Third, the company segmented its markets further by marketing different styles of Barbie to different age groups.

Outside the Barbie franchise, Eckert pursued conservative growth opportunities that carried minimal risk. For example, rather than design software and games itself, Mattel contracted with experienced software providers to develop electronic entertainment for the company. The company also reduced its licensing commitments, renegotiating with Walt Disney Co. in 2000 to retain the rights to classic characters like Mickey Mouse while forgoing rights to characters from upcoming Disney films, which typically come at great cost and are no longer guaranteed hits. By focusing on the company’s core divisions, “Eckert is transforming Mattel from a volatile, hit-driven toy company to a slower-growing but more stable consumer-products company,” says one industry analyst. In 2000, sales bounced back, with total worldwide revenue up two percent to $4.67 billion worldwide. Eckert seemed to have Mattel back on track, no small thanks to Barbie, whose sales grew 10 percent domestically and five percent worldwide in 2000. After more than four decades on the shelves, Barbie remained the company’s blockbuster brand.