After I'd divided the students into three groups and had given them the plastic bag with the letters of the alphabet, I'd give each group an assignment to use the letters to spell words.
Quickly this game turned into a competitive sport, with each group trying to spell their word faster than the other groups. All grade levels really enjoyed this use of manipulative .... I would just make the exercise more challenging for the higher level grades, so that they, for example would have to spell a word, just based on their hearing it. In the lower grades, I would write the words on the white board.