Harry Potter:

A Multi-Billion Dollar Business

Group IX:

Li Shuguo

Tanda Song

Liu Yazhuo

Han Jie
Harry Potter is not only an incredible story about the magic world, but also an unbelievable
miracle of business. The series has recorded a stunning 325 million book sales worldwide
since its 1997 debut. Along the way, Harry Potter has spawned a multi-billion dollar industry
complete with the requisite movie and video games, plus merchandise ranging from
Hogwarts-crested iPods to earwax-flavored jelly beans. Doubtlessly, Harry Potter has gained
huge success especially when the Warner Brothers succeed in implementing its
well-controlled market strategy for the franchise.

Main reasons for the initial success of Harry Potter franchise

A perfect foundation of the branding

Although it is the Warner Bros. who mainly made the Harry Potter become one of the best
popular and profitable brands of the world, the amazing work of J.K Rowling and the
primarily work of Bloomsbury and Scholastic cannot be neglected at all. J.K Rowling’s
brilliantly written story did not talk down to the audience while kind of guide the readers to
discovery Harry Potter themselves, which intensify the feeling of participating in the process
and become a special experience of the readers at last. It is the special marketing strategy,
such “word of mouth” and “denial marketing policy” that enlarge the segmentation range
from only children to both children and adults and also makes Harry Potter not a book or a
character anymore, but a brand and a kind of culture symbol eventually. In a word, before
Warner Brothers’ success, a perfect foundation has been built for its further work, which
cannot be excluded for the success factor.

Outstanding insight for new market space

With the good reputation of excellent insight in the entertainment industry, W.B. of course
won’t miss the huge potential market of the Harry Potter. Actually, the franchise process
was not really creating a new market space but rather scrambling the unoccupied market
space and utilizing of mature business model used by W.B. for the successful literature
works. So it is just follow the rational line to encash the brand’s power through the movie
and the relative merchandising deals. Since these merchandising products are the
complementary value provided for consumers, so what kind of merchandise to produce
became a critical issue for the W.B. to consider? Finally, W.B. chose several kinds of
merchandising products mainly including family product, gift and collection, children and
family entertainment product, toy, bedding product and interactive electronic games.

What is something new is that the franchised companies are not exclusively for the physical
product, there is also kind of franchised company ,such as Coca Cola, just holding some
campaigns together with Harry Potter while is not allowed to use product placements. This is
a kind of interesting way to cooperation. Though the brand name and image of Harry Potter
were not used by Coca Cola products or commercials, related images and themes were
extensively used for promotions. The franchise range is enlarged without compromising with
the inconsistency of tow cooperated companies’ brand images.

Well-controlled marketing strategy

Realizing that it was important to maintain the brand’s carefully created image during the
course of releasing new books, merchandise and movies, J.K. Rowling decided to have a firm
say in what Harry Potter marketers could and could not do, which means that W.B. had to
be very careful in choosing the licenses. This marketing with the consideration of controlling
actually made the biggest contribution to the success of the Harry Potter. And the
controlling can be perceived from several aspects as follow:

Strict standard of choosing licenses

In order to maintain the fine and classic brand image, the W.B. set a high standard of
choosing licenses. Warner Brothers’ majority licensing agreements are signed with the
leading manufacturers of the US based relative industry.

Brand /Company Position of the industry

Mattel The world’s leading manufacturer and marketer of family products based in
the US
Enesco Group US-based world leader in the gifts and collectibles industry
Cap Candy US-based worldwide leader in Children’s and family entertainment products
Oddzon US-based leading children’s toy maker
Springs Industries US-based manufacturer of bedding
Lego Company US-based world leader in making construction toy
Electronic Arts US-based world leader in the interactive electronic games market

Accompany with the high standard is the high quality, so the well designed products would
doubtlessly generate a good memory and intensify the positive cue of the Harry Potter.

They not only signed up with world leaders, but also turned down sever potential licensees
those whose brand image might be related to idea of cheap. In order to protect the brand
image, some interesting agreement, such as signed with Coca Cola, also emerged. And all of
these done by W.B. illustrate that the worldwide retail strategy for Harry Potter
merchandising was carefully controlled and limited.

Certain rules for the merchandising product

Although the manufacturers are the top ones of the world, there are some certain rules set
to guarantee the quality of the products and benefit the brand image and growth. For
example, the book-based merchandise product is asked to follow the book by letter, while
some of the product is required not to base on character images but on objects from the
book so as to avoid a possible future conflict between characters’ face, which ensure the
consistency of the brand.

The “less is more” strategy

By launching ‘less’ products, W.B. was ensuring that consumers would want ’more’ by the
time of the release of the Harry Potter movie. So they launched the relative products six to
eight weeks before the release of the movie. And not only the limiting the rolling out by time,
W.B. also put in measures to launch the products in a limited quantity. This marketing
strategy would, to the largest extent, inspire fans’ curiosity about the movie so as to
promote the releasing movie. Commenting on the controlled worldwide strategy for Harry
Porter, Dan Rommanelli, president W.B. worldwide consumer products said, “The launch
of the Harry Porter products will be world wide effort. Our intent is to judiciously rollout the
product not to flood the market. We are looking to support the literary and film property as
long as term franchise. Strategies and timing will be determined on a market by market basis

In sum the initial success of Harry Potter’s success is mainly because that the entire
marketing plan for Harry potter was well thought out and structured in a controlled and
phased manner.

Strong value creation network

Just as what mentioned by Pracakar Kothandaraman and David T. Wilson in the future of the
competition, the companies cannot survival by themselves, but, to some extent, rely on the
relationship they owned in the industry. Although W.B. here played a kind of powerful and
controlling role of the whole process, it had to rely on the credibility and capability of the
franchised brands and companies. So the well cooperating relationship is also one of
necessary factors of the success. And reviewing the value creation process, W.B.’s position is
sort of at the center of the value creation constellation playing a controlling role in the value
creation network. It can be both the advantage and a huge challenge for W.B.

Strategy in the long run

After create the Harry Potter to be one of the most successful brands, this magic makes
billion dollars for the relevant industries. Furthermore, Warner Brothers and J.K. Rowling pay
more attention to the steady growth and long term performance.
How many years would Harry Potter popular?
Although Harry Potter’s magic story only have seven books totally according to J.K. Rowling’s
original plan. Booksellers all over the world are all optimistic to this series books sell in the
future 10 years. They consider it’s very easy to find these books in most book stores, at the
same time it would continuously appeal new readers.

The films made by Warner Brothers insure the popularity of the brand ‘Harry Potter’. Every
times the released of the films became the hottest one. So far, the movies already earned
1.8 billion dollars from the box office and merchandise revenues. This influence will promote
the whole products chain of this brand. The rest of the movies will be released until 2010 as
Warner Brothers’ plan. So there is no doubt that the trends would be last till that time.

If we consider the people’s memory and the culture influence, fifty years later we will also
remember ‘Harry Potter’. Because of the huge number of young readers, when they become
old, the name of ‘Harry Potter’ may still in their mind.

According the current business success and brand image, we believe Harry Potter would be
popular after quite a long time.

Improve the strategy

In this part we are more focus on the future strategy to make the brand more memorable.
We separate the strategies with different theoretical perspective.

Designing the Experience

According to B. Joseph Pine II and James H. Gilmore, we consider making an integrated and
clear theme experience, Harry Potter Theme Store. According to investigate the products
classification, we find that there are many relationship among the core books and movies
with the other license derivative productions. To draw on the experience of Japan cartoon
industry, we want to set up the theme stores which include the Harry Potter books and the
peripheral products as much as possible. For example, you can read Harry Potter books
while sitting on a comfortable chair which is also Harry Potter theme furniture, we provide
Coca-Cola which is our sponsor, we will play the Harry Potter movies, put some Playstation
or other game player only for play Harry Potter games, the customers can play the Lego’s
construction toys in the store etc. Our store staff members should have well educated
background, and all are passionate Harry Potter book lovers. All the effort we have done is
to express to the customer a comfortable and enjoyable experience. We think the store will
go into the people’s everyday life. It will continuously appeal new consumers both the fans
of Harry Potter and others for the useful products.

This theme store also creates a new market by the exits product and brand value. Warner
Brothers could authorize the name to the chain stores. We also support Harry Potter Theme
Park and Harry Potter Them Travel as an experience for customers to memory the brand for
a long term. We assume some advantages in the chart below:

5 Theme Store

4
Normal book shop
3
Normal peripheral product
2 shop
1 Theme Park

0
Theme Travel

Taking Harry Potter Theme Park for example, customers can participate in the theme and
the environment will give them a real feeling of being in the magic story. According to Pine&
Gilmore, there are five key experience-design principles.

1. Creat a well defined theme. Harry Potter theme will recur the scene of Hogwarts School of
Witchcraft and Wizardry.

2. Harmoize impression with positive cues and eliminates negative cues.

3. Mix in memorabilia, they can sell licensed merchandise of all sorts such as gifts ,toys and
LEGO construction toy.

4. Engage all five senses. It will be very cool to be a student of Hogwarts School of Witchcraft
and Wizardry.

Market space innovation

First, getting profit from the license fees by the brand value is quite an efficiency and low
risk way. We suggest to find some powerful sponsor to release some celebrate product or
limited product, such as cooperate with Apple to make a Harry Potter 10 years celebrate
iPod which include Harry Potter movies etc., or design with some cell phone companies to
release Harry Potter limited mobile phone with Harry Potter theme and ring tone etc. These
kinds of products are relevant to the changing from functional to emotional appeal to buyers
according to W. Chan Kim and Renee Mauborgne. During our discussions, we also think
these kinds of products should delivery to the customers separately in a suitable term. We
studied forgetting curve by Hermann Ebbinghaus, to maintain the long run interest we

should also follow the formula which can performance our strategy more

efficiency.

Second, design interactive strategy. We practice the theory in ‘From value chain to value
constellation: Design Interactive Strategy’ by Normann and Ramirez. However, J. K. Rowling
plan to write only seven books, we can use the stories and characters in the books to build a
platform for the fans or customers create and customize new stories. Our plan is to use
internet to set up website for the fans to share their stories, furthermore, we want to make
Harry Potter as an online game. Although the story in the book is short, J.K. Rowling builds
up a magic world. We want to use Harry Potter magic world as the blueprint, each player
play an individual role in the magic world. Our opinion is to set up a virtual world for the
players to interactive with others create their own story and adventure. ‘The goal is not to
create value for customers but to mobilize customers to create their own value from
company’s various offerings.’[Normann and Ramirez]

Third, we recommend Warner Brothers go into the cartoon industry with the original Harry
Potter brand. In media industry, cartoon is also an important part and also has the huge
market. This strategy won’t destroy the image of Harry Potter, at the same time it can keep
on creating the new magic stories. After studied the resources & capability in Warner
Brothers Company, we think take Harry Potter to the cartoon industry.

Culture
In this part, we use Porter’s five forces to analysis the future strategy.

We find out the substitutes products of Harry Potter books would be the main threat in the
future. We are not sure about when the substitute books come out. And we can’t restrict
the release of that kind of books as well. For the long term strategy, we want to make the
compete advantage from trends to culture. That might be more reliable by the buyers and
it’s a strong barrier to entry. Although Harry Potter already is a successful literature, we plan
to change the role to the educational field. For example, we plan to make Harry Potter
books go to school for teenager student study the literature and expand their imagination.
We also want to introduce these books to the language study courses in the some
non-English speaking country. It’s much easier to study a language with interesting books. It
suitable to be textbooks, because these books tell people appreciate friendship and courage,
criticize vanity, reiterated that ‘Love’ is the greatest magic. We use this way to educate the
young people, at the same time we maintain the image of Harry Potter in people’s mind.

Summer camp is another campaign in the educational field to attract the teenagers. We use
the format of the magic school, to teach them science knowledge, such as some chemistry
reactions and physical phenomenon. We can also develop a chain of license Harry Potter
science kits for young people. We think Harry Potter is quite a great way to hook children
into science.

The strategy of control

Warner Brothers and J.K. Rowling have already taken a well control action to restrict
cheapen the brand. Even in the future, they also try hard to maintain the brand loyalty.
While here we want to discuss more about product consistence. After J.K. Rowling finish all
the books and Warner Brothers release all the Harry Potter movies, the control to the
licence should be more carefully. It is easier to destroy the brand at that time. As the picture
below illustrate that we should cut some end products to make the tree grow healthy. And
how to measure the products, we should use forecast, vision and scenario process to
anylasis the future control strategy.

According to this picture again, we find the resources part is also need to control. J.K.
Rowling have to do lots of works to research deeply about the literate book itself, because
that’s the fundemantal of the whole product. All the other product depand on Harry Potter.

Robin Taigland, Jan. 2008

Analyze with the experience framework
The two dimension of experiences put forth by Pine & Gilmore is one of the effective way to
analyze the harry potter phenomenon.

There are two theories which correspond to the two spectrum of the first experience
dimension--participation. The audience theory raised by Joseph Klapper divided the passive
participation into three periods: selective Approach, selective comprehension and selective
memory. Different types of audience cause the different understanding of the feature, role
and function of itself in the process of mass communication. As some research shows, the
group background or the social background is the most important factors which decide their
attitude or action towards objects.

The Encoding and Decoding theory raised by Stuart Hall could be regarded as another
explanation of the other end of the spectrum--active participation. In the ten years
development of harry potter, the product was continuously decoded by the algorithm
whose name is dominant Ideology and then encode it into various influences that both
affect the audience and the author. In addition, many fans of the books have built
communities and websites to interactive and influence many of the successors.

The four realms of experience also reveal how the whole harry potter product line capture
and affect the inner need of different customers. It is believed that the richest experiences
encompass aspects of all four realms.

Entertainment
At the end of absorption and passive participation lies the entertainment. Hundreds of
thousands of creative thoughts are definitely the elite of human imagination. The entrance
on railway platform to magic world, the fireplace from where people can go across time and
space, owl the pet and the messenger, these idea look like bizarre but in fact reasonable. On
the other hand, appealing story also means a lot. Here are some of the features of it:

1. There are always surprises

2. There is always suspense that will be revealed in the end

3. Every role is useful

4. There are many cues

5. Harry is always lucky when facing Voldemort

These two main features, together with the joy when enjoying and sharing fashionable
topics within certain group bring great experience of entertainment
Educational
Many critics pointed out that the books provided only entertainment, and no learning values
to children. However, in our opinion, there are two main educational themes of the books:
growth and the understanding of evil.

Firstly, time of growth spent in school is always unforgettable for everyone. The flavor of the
ink of books, the story of new semester, the new teacher, friends and enemies, big success
and failures, these things are easy to reach the sympathetic response and assent of readers.
on the other hand, evil things that have spread to campus like complicated and dark
relationship, hoodlum and other influence, selfishness, prejudice, or discrimination have
not be reach by any other works before. J.K. Rowling teaches children how to deal with
these in the books.

Escapist
By combining the two actors--active participation and immersion, it is easy to generate
escapist feelings for the readers. After being tired of real world's explosive competition,
readers are likely to believe the perfect magical world where people fly with a mop and
exhortation bad guys with a snivel magic. Now it is easy to understand the word from a kid
who sat in front of me when seeing a harry potter movie: "how cool it would be if I can beat
the guy asking money from me like this!"

Esthetic
An escapist event becomes an experience of the forth kind-the esthetic. Generally, the
books elaborate the esthetic views in these following aspects: the construction of the ideal
magic world, the exemplification of heroism, the characterization of growth and the
penetration of truth.

Generally, the intelligent usage of experience influence and enable the books to reach such a
multi-million dollar business.

Critics and ethical market

Mainly on the aspects of culture spirit was the Harry Potter series of books criticized. Many
critics pointed out that children were attracted to the books because it made use of
adventurous elements like magic, witchcraft and wizardry. Critics pointed out that this
exerted a bad influence on the children, making them believe in a false world full of
unrealistic events. They pointed out the books provided only entertainment and no learning
values to the children. European legend stories always talk about justice fighting against evil
and finally justice beat evil. However, in J.K Rowling’s point of view, it is not easy to
distinguish between justice and evil and there is no absolute goodness in the world. Critics
worried this spirit will have bad effects on child growth.

Critics argued that children had ‘a good exercise in imagination’ when they read these books.
Every child who read the books formed his/her own unique image about Harry Potter and
how he looked like, how the Hogwarts School of Witchcraft and Wizardry looked like with all
the complex structures and moving stairways etc. Critics felt that by bringing all these to life
by creating movies and merchandise killed the imagination of thousands of children across
the world.

For movies part, J.K Rowling’s creation is a different sort of commercial property, one with
long-term potential that could be damaged by a typical Hollywood marketing blitz.

For merchandise criticized part, critics started worrying that the licenses stood to lose a lot
as there was always a possibility of the movie not doing well since a movie’s failure directly
hampers sale of the merchandise.

Ethical marketing is an honest and factual representation of a product, delivered in a

framework of cultural and social values for the consumer. It promotes qualitative benefits to
its customers, which other similar companies, products or services fail to recognize. The
philosophy of marketing is not lost with this newfound ethical slant, but rather hopes to win
customer loyalty by reinforcing the positive values of the brand, creating a strong citizen
brand.

We think profiting from 'controversial' themes like Harry Potter is an ethical marketing
practice. When measuring the value of this book, time answers. J.K Rowling also said the
life-force of the book relies on itself. If there are still many readers in 50 years, then it’s
really a great work.

Now the commercial packaging of this book covers up its real literature beauty and spirit
value. The depiction of book is great and the magic world is full of power. As a Child reading
books, it’s more or less a lesson book for child. It glorifies real friendships and lampoons on
peacockery. It emphasizes that love is the greatest magic and bravery is the most important
moral.

Moreover, it’s a book about growth. The main character Harry Potter grows from an
innocent child to a mature man who has the sense of responsibility. The adult world is
complex and suffering and no one can escape from it. So it is not only a book for
entertainment, but also has learning value for children even for adult.
Also in the world now, Harry Potter wins a customer loyalty following market rules. Overall,
the brand has positive values. All above support the profiting from Harry Potter is an ethical
marketing practice.

Reference
W. Chan Kim and Renee Mauborgne, 'Cteating new market space', 1999

Robin Taigland,'Basics of strategy', Jan. 2008

Athena Schindelheim,'Can the billion-dollar Harry Potter brand survive?’ 2007

Normann & Ramirez, 'Designing interactive strategy', 2000

Wu Haiyun, 'Harry Potter's magic time'

Pine & Gilmore, ‘Welcome to the experience economy’