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Thomas Hustad
Kelley School of Business

George Vlahakis
IU Media Relations

Last modified: Monday, November 22, 2004

What's the "buzz" about hot holiday gifts? It's not manufactured, says Kelley professor

Editor's note: This story is one of several holiday-related features that will be published by IU Media Relations over the next few days. This note at the top signifies the story's inclusion in the holiday packet.

BLOOMINGTON, Ind. -- Every year around the holidays there's a buzz about the "hottest toys," often accompanied by a reported shortage and, in some cases, inflated prices for these desired gifts. Remember the Cabbage Patch Kids and Tickle-Me-Elmo?

Some may believe that these shortages are an intentional effort to build interest in a product, but Thomas P. Hustad, a marketing professor in Indiana University's Kelley School of Business, said that's not true.

"It is in a company's interest to produce enough product to avoid stock outs," Hustad said. "Toy sales are seasonal. While birthdays and certain occasions exist throughout the year, it is clear that much of the industry lives for Christmas season. If a hot toy goes out of stock, the chance that it is hot the next year is slim, due to competitors who are alert to current market trends.

"Some successful items are planned, while others may come as a surprise. Research and development don't guarantee success," he added. "But being alert to market trends can alert companies to emerging ways to use novel technology, new materials, to satisfy traditional needs for learning, emotional satisfaction, play value and creativity in new ways."

Hustad, also the interim director of the Johnson Center for Entrepreneurship and Innovation, said companies have to weigh the costs between not having enough toys to sell and having an inventory that isn't sold.

"At some point, a company is probably willing to forego 'over the top' sales because the risk of excess inventory is too high," he said. "The blow of lost sales can be softened if the sales for the out-of-stock item can be transferred to another product that remains available for sale. Sometimes product lines are merchandised for that reason."

Good examples of this are toys that are tied to movies. If one action figure is popular, others may be substituted as gifts.

What criteria do toy-makers follow to produce a popular product? Hustad, founder of the Journal of Product Innovation Management, said successful products usually have to meet a need, often an emotional one, and need to be distinctive from at least some of the competition.

"Parents want kids to excel and be happy. Those are fundamental connections to product value," he said. "Kids enjoy exploration, fun, learning and other forms of stimulation. That is another connection to value. If a toy can appeal to kids, a parent gains emotional satisfaction. But if the toy creates learning, that can strengthen a parent's willingness to buy."

The maturation of the electronic game market has affected the sales of certain kinds of toys, particularly among adolescents.

"One market that exists now, much more than 20 years ago, is the kids who return to an empty home after school. There are perhaps several hours of time available for activities, including homework. Video games have become a product that consumes time, and the changing challenges on the screen often create high involvement," Hustad said. "It is likely that a successful video game attracts attention for a far longer time than many, but not all, more conventional toys. In fact, with some games there is the risk that there is not sufficient variety to the play experiences."

Ultimately, Hustad said, the gift giver is the target market, and "the hot toy of this coming season will be easier to predict after Christmas than before Thanksgiving."