Surprising Trends in Lego Pricing

Managing a Strong Brand for the Long Term

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A friend who is a major Lego fan suggested a while back that I dive into Lego pricing, and I’m glad that I finally took him up on it. After spending a while digging through research (and some fond childhood memories) I found it’s a fascinating example of how a successful brand manages pricing and brand value for the long term.

Those of us who grew up lusting after the classic big Lego sets of the 1980s were used to hearing from our parents that Legos were pretty expensive. And as we in turn have become parents and faced the choice between buying one of the latest iterations of the Millenium Falcon or the Hogwarts Castle for the ten-year-olds in our lives, the impression has only grown stronger.

So how have Lego prices really evolved over time?

It turns out that our parents were not kidding that Legos were expensive back in the 1980s.

For instance, the really premium Lego set I remember from my youth was the 1984 King’s Castle. I still remember building this on the apartment’s dining room table with my dad, and the cool little pullies that would allow you to raise the drawbridge, not to mention the way the whole thing hinged open.

Honestly, I think the set may have originally been as much a treat for Dad as it was for me. (Odd to think of the fact he was ten years younger than I am now.) But once it had been built properly a few times it eventually made it into the Lego bin and those pieces were used in everything from towers to spaceships for the rest of my childhood.

That 1984 Kings Castle set sold for $52.75 and contained 664 pieces. That seems pretty cheap compared to modern Lego castles. A search for a comparable castle on the current Lego website gave me the Hogwarts Castle and Grounds for $169.99.

However, before we get too nostalgic it’s important to recall that in 1984 the US minimum wage was $3.35 and the price of a Big Mac was $1.49. So that $52.75 is not comparable to modern day prices. If we adjust for inflation based on the consumer price index, that Kings Castle becomes $155 in modern-day dollars.

That would seem very comparable to the Hogwarts Castle now, unless you look at the piece count: the 1984 castle had 664 pieces while that current Hogwarts Castle has 2660. Lego fans sometimes benchmark Lego prices in terms of price-per-piece. By the metric, the 1984 castle was $0.23/piece while the modern Hogwarts is only $0.06/piece

That piece count difference, however, also points to another difference between many modern Lego sets and some of the classics from 40 years ago: modern sets have far more pieces even without necessarily being much bigger. That Hogwarts set appears to be physically similar in size, but it is designated as an age 18+ set and appears to be made of, on average, much smaller pieces. Here it is with a human for comparison:

Indeed, one of the things that stood out to me as I researched Lego prices is that virtually all of the well known sets I found from before 2000 were under 1000 pieces, while sets in the thousands become increasingly common in the 2000s and 2010s.

Even with these lower piece-counts, Lego had a significant price range back in the 1980s and 1990s.

The 1987 Space Monorail Transport System had 731 pieces (barely more than the castle) and yet sold for $155. Adjust that for inflation and it’s $416 or a per piece price of $0.57, a level that would be unheard-of today. A look at the set explains why. Many of those 731 pieces were not small. Indeed, the set included a whole train-style track and a powered monorail.

The 1989 Black Seas Barracuda pirate ship was more of a standard Lego set (no motorized parts) but still originally sold for $110 with 909 pieces, which in today’s dollars is $270 or $0.30/piece.

I collected data on the most frequently owned Lego sets from the 1980s to the present off the Lego fan site Brickset.com and did some analysis on overall set price and size trends, both in nominal dollars and adjusted for inflation.

In nominal terms, the price of Lego sets has increased over the years, though there continue to be popular sets in the $20 to $80 price range.

However, once you adjust set prices for inflation, a different trend emerges. There were actually very few Lego sets under $100 in today’s dollars back in the 1980s and 1990s.

There may be some selection bias here, in that the sets from that period which people collect most today may well be the larger sets. But comparable size sets in the 300-500 piece range are pretty affordable in the last ten years, but were more expensive before 2000.

This becomes very clear when you look at the long term trend in the price per piece. Once you adjust for inflation, this trend is clearly down over the last forty years.

Indeed, even in nominal terms, the price per piece has declined slightly over time. The long term average price per piece is $0.12, but in recent years a number of sets are priced below that.

Even within that overall recent trend, there is variation by the type of set. Licensed sets (Star Wars, Harry Potter, Marvel) since 2010 have an inflation adjusted price per piece of $0.13 while other sets have an inflation adjusted price per piece of $0.10.

Given that the 1980s and 1990s sets were primarily Lego originals, with licensed sets appearing to begin shortly before 2000, this makes the higher average price per piece in that era more dramatic compared to modern sets.

One factor here is probably that truly huge Lego sets have become more common during the last 20 years. Up until 2005, none of these popular sets exceeded 1500 pieces. Since then, however, a number of sets have more then 2000 pieces and some have more than 5000.

Very large Lego sets tend to have a lower price per piece. For instance, the lowest price per piece among the sample of popular sets I analyzed here was the Taj Mahal, which had 5922 pieces and an inflation adjusted price per piece of just $0.07

The 6020 piece Hogwarts Castle from 2018, which originally retailed for $399, had a price per piece almost as low at $0.08 once adjusted for inflation, despite the fact it was a licensed set.

What insights can we gain from this data into how Lego has managed its brand over the years?

The long term trend of decreasing real dollar price per piece shows that Lego has consistently decreased their production costs over the decades. No matter how strong a brand or how high the margins a company, a constant focus on reducing costs without giving up quality is essential to maintaining a profitable company.

This long term decrease in costs has allowed Lego to increase its prices more slowly than inflation. And yet, they have also consistently added larger sets which allow them to extract larger single purchase prices from their biggest fans.

Offering a range of different price levels seems like an important move here. Not everyone is going to want to spent $100+ on a Lego set. However, while the most spectacular sets are over $100, there are a number of sets for less than $50 which have 500 pieces or more.

Competition has probably been a major factor in keeping Lego’s pricing honest. Between increasing efficiency/automation and the offshoring of a lot of manufacturing to low cost regions, the price of toys in real teams has declined over the last forty years. Lego remains a premium player within the toy industry, but comparisons with cheaper toy brands doubtless help to keep it grounded.

Personally, I think that Lego has become somewhat over-licensed in recent years. I wish that there was still a cool Lego castle that was not based on a movie franchise. But at the same time, some of the newer lines of Lego products strike me as very creative, such as the Lego flowers bouquets — though like a lot of Lego’s more interesting recent products, those are aimed at adult fans rather than kids.

Still, Lego provides us with a great example of long term price management with a strong brand. They have maintained their premium position in the market while reducing costs and passing some of that value on to customers. At the same time, they’ve diversified their offerings and used that broader product range to monetize the full range of customers from price conscious buyers to those willing to splurge on the largest sets.