This Woman’s Company Should Have Been Named After Her, Not Her Husband

A version of this article previously appeared Forbes.

In 1936, Ruth Handler and her husband Elliott were $200 in debt and unable to pay their rent. Elliott was a shy carpenter, while Ruth’s friends described her as, “beguiling and determined.”

On her lunch break, at the age of 20, Ruth entered a local furniture store with samples of her husband’s plastic chairs. Initially rebuffed, she refused to leave until she could speak with the store’s manager. She walked out of the store with a $500 purchase order. Four years later, she sold $2 million of Elliott’s dollhouse furniture through retailers nationwide.

Though she was the de facto leader of the company, America of the last century was not ready to accept a female led company. Thus, she agreed to name the startup after her husband and his friend Harold “Matt” Matson, resulting in the name Mattel.

Matson resigned and sold his shares to Ruth and Elliott less than two years after the company’s founding, due to health issues. Ruth had previously headed the company’s sales efforts, but she formally moved up to the CEO role upon Matson’s departure.

Ruth’s Big Innovation

Under Ruth’s guidance, Mattel grew steadily through the 1940’s. In 1944, at a single trade show, Ruth sold $100,000 of the company’s doll furniture, which translates into $1.4 million 2018 dollars.

In 1952, banks refused to loan Ruth the money needed to invest in a windup, music-box piano that she was convinced would be a hit. Rather than back down, she borrowed money from friends and family and eventually sold 20 million pianos. This is an especially remarkable feat, considering that America’s entire population at that time was 157 million, representing a sale to 1 out of every 1.7 Americans.

In 1955, the company’s net work was $500,000 ($4.6 million, inflation adjusted). Ruth decided to bet the company on an unproven show offered on the new medium of television: Disney’s Mickey Mouse Club. At the time, toys were advertised to adults, under the premise that adults were the decision makers.

However, Ruth took a contrarian view. She bought 15-minutes of commercial time on each of the first season’s episodes for $500,000. Sensing a more inclusive, gentler approach to parenting following World War II, Ruth marketed Mattel’s revolutionary commercials directly to children.

The first toy Ruth advertised on Disney’s show, the Tommy Burp gun, had been previously launched, but sales had been lackluster. Today’s gun violence sensitivities were virtually non-existent. Less than ten years after the conclusion of World War II, toy weaponry was a popular product segment.

The Tommy Gun’s chief selling feature was the rata-tat-tat sound it made when fired. The medium of television highlighted the gun’s sonic qualities and sales tripled overnight. Though Ruth’s innovation of marketing directly to children is not without its critiques, it continues to drive billions of dollars of consumer purchases annually.

The Doll And The Razorblade

In 1957, while traveling with her daughter Barbara in Europe, Ruth attempted to purchase some clothing for a Lillie doll that her daughter had bought a few days earlier. The clerk told Ruth that if she wanted more clothes, she had to buy additional dolls, as the clothes were not sold separately.

Seeing an opportunity, Ruth designed and sold a similar doll, which she differentiated by creating a huge wardrobe of clothing and accessories.

In short order, Mattel sold three million Barbies, each of which generated additional revenue, due to the sale of after-market clothing and accoutrements. This “razor and razorblade” business model allowed Mattel to sell the dolls relatively cheaply, which in turn spurred additional sales. For decades, the modestly priced Barbie became the ideal birthday gift for girls between the ages of 5 and 12, ensuring that each new generation of children would demand Barbie houses, cars, clothes, as well as Barbie’s friend.

Ruth’s other innovation was changing the doll world’s traditional child/baby dynamic. Before the introduction of Barbie, children’s dolls were typically anatomically correct babies, which appealed to young girls’ maternal instincts. Ruth’s launch of mature, sexualized doll turned this convention on its head. Rather than nurturing their dolls, young girls created vibrant work-oriented fantasies which included a number professional careers, including Doctor Barbie, Paleontologist Barbie, Astronaut Barbie and President Barbie.

Though the evolution of children from nurturing a baby to role playing as autonomous and independent adults was largely positive, critics have rightly pointed out that Barbie’s unrealistic anatomical design also had/has negatively impacted young women’s body image issues.

Ruth’s Second Act

Mattel went public in 1960 and continued to grow until the early-1970’s, when cultural changes began to impact Barbie’s sales. Ruth was forced out of an operating role in 1970 and she left the company’s Board of Directors in 1975. However, her entrepreneurial career wasn’t over.

After surviving breast cancer in 1971, Ruth created a prosthetic company called Nearly Me. Twenty years later, she sold the business to Spenco Medical. As of 2018, NearlyMe continues to offer women post-surgery prosthetics.

Ruth died in 2002, but the empire she created lives on. Mattel’s 2017 sales were $1.6 billion, the majority of which driven by Ruth’s two big innovations, direct-to-children marketing and the adult doll, Barbie franchise.

Follow Greathouse’s startup-oriented Twitter feed here: @JohnGreathouse

Image credit: Reuters

 

 

John Greathouse

John Greathouse is a Partner at Rincon Venture Partners, a venture capital firm investing in early stage, web-based businesses. Previously, John co-founded RevUpNet, a performance-based online marketing agency sold to Coull. During the prior twenty years, he held senior executive positions with several successful startups, spearheading transactions that generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara’s Faculty where he teaches several entrepreneurial courses.

Note: All of my advice in this blog is that of a layman. I am not a lawyer and I never played one on TV. You should always assess the veracity of any third-party advice that might have far-reaching implications (be it legal, accounting, personnel, tax or otherwise) with your trusted professional of choice.

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