Fads in Business

July 24, 2017




Sponsored

Why Trying to Build a Business on a Fad is Foolish

 

Will your product or service have intrinsic, practical, or long-term value in the market place–or will it merely be faddish?

Are you selling a product that merely capitalizes off someone’s impulse to buy? Or are you selling a product that people literally can’t live without?

I’ll tell you right now that given the choice I’d choose to sell a product that fits the latter category. That product will be around far longer than the one that fits in the first category.

Products that are faddish–meaning they come and go as popular opinion changes–never stick around. Think about a product that was over hyped at one time, but you can’t find any more.

How about slap bracelets? Or hyper-color t-shirts? (Do you even remember what those are?) Do you see any Pet Rocks being sold any more? Or Tickle-Me-Elmo dolls?

Don’t misunderstand the point I’m trying to make. You can make money selling novelties like those I’ve mentioned above.

For instance, take Xavier Roberts, the creator of Cabbage Patch Kids. The one-time major toy manufacturer, Coleco, began releasing Xavier’s dolls in toy stores around the nation in 1983. The dolls grossed $540 million in sales in 1984 and led Coleco to their best year ever (1985) when they grossed over $700 million in sales.

But the toy market experienced a severe slump in 1987 that ultimately brought about Coleco’s demise. The craze for Cabbage Patch Kids ended in 1987 and Coleco filed Chapter 11 bankruptcy in 1988.

Depending on the licensing agreement Xavier had with Coleco, I can only assume that this one idea–Cabbage Patch Kids–made him fabulously wealthy.

Novelties and fads do generate money–sometimes even millions of dollars–but I see two potential problems with selling faddish products.

Your chances of hitting the market with the right product at the right time so as to create a buying frenzy is highly unlikely.

When you sell faddish products you must continually be at the forefront of the next fad or craze… and that’s difficult to do.

Creating or selling faddish products is like gambling. You might hit the market just right, but the odds of that happening are largely against you. And if you do hit, what are the chances that you could duplicate your success with your next idea?

Rather than banking on fads or crazes, I’d far prefer selling a product that offers value that’s so powerful, people can’t say no to it. I want to sell a product that benefits people so much they’d be foolish not to buy it. I want to sell a product that literally changes peoples’ lives.

I don’t want to sell a product that gives my customers a 15-minute high that ends with buyer’s remorse. Buyer’s remorse often leads to returns, which ultimately means higher transaction costs. (You’d have to refund money, restock the product, and resell it. In addition, you’d probably have a vocal ex-customer or two who would warn others not to buy your product… and that would not be good for business.)

If you offer intrinsic, practical, long-term value to your customers, they’ll come back. If you offer them the latest fad, devoid of any durable value, they’ll probably never come back. Which kind of product or service would you prefer to sell…?

Next up: How to Grow Your Business in Any Market Environment




Sponsored

Previous post:

Next post: