Physical altercations in big-box stores. Suburbanites racing through crowded aisles. Desperate parents pursuing delivery trucks on foot. The winter of 1996 saw the frenzy surrounding Tickle Me Elmo—the hot holiday toy of the year—reach a fever pitch.

Released with an initial run of 400,000 units, Tickle Me Elmo sold out by Thanksgiving. Another 600,000 units were quickly delivered to stores. But a surprise uptick in demand—fueled in part by a clever promotional campaign—resulted in a seemingly nationwide fervor. The race for the “must-have” toy of the holidays was on. Eager to appease children clamoring for a toy that retailed for $30, parents responded to newspaper ads soliciting “$1,000 or best offer.” The New York Times even reported that crime boss John Gotti Jr. traveled to his local Toys ‘R’ US to secure an entire case of the talking dolls. The toy had become its own brand.

 

Tickle Me Elmo sold over 1 million units in 1996.

 

Since the days of Elmo-mania, other holiday toy sensations have found their way into the national zeitgeist. Furby, Hatchimals, Robosapien, and Zhu Zhu Pets were all household names among children and parents during the holiday seasons of their respective release. What’s their secrets?

Before dissecting what turns a cute toy into a holiday hit and brand sensation, let’s take a quick look at the impact of toys on the economy. In recent years, the trajectory of nationwide toy sales has gone up. In 2013, toy sales for the entire year equaled $17.6 billion in the United States. Since then, U.S. toy sales grew at a compounded annual rate of roughly 5% to reach $20.4 billion in 2016 (compare this with an annual average inflation rate of less than 1% during the same time period).[1]

All totaled, U.S. toy sales comprise about 30% of the global market.[2] As of 2015, $482 per child is spent on toys each year in the United States. And it is estimated that $6,500 is spent on toys for a child before he or she turns 18.[3]

A slice of a big holiday pie

What’s at stake for the industry during the holiday season? “Around 60% of toy sales occur in the fourth quarter,” according to Adrienne Appell, director of strategic communications at the Toy Association. “This means that more than half of toy sales take place around the holiday season.” Based on these numbers, it’s safe to estimate that more than $12 billion in toys were sold during the holiday season of 2016—so you can see why millions upon millions of dollars are invested in the development, manufacturing, and advertising of toys intended to be the next holiday hit and brand sensation.

What are the secrets of hot holiday toys? Glad you asked. At Vertical, we believe there are three aspects that go into making a toy both a holiday hit and a brand sensation.

1. Does it create a unique experience?

 The first aspect to creating a top holiday toy is to design a product that stands out by creating a unique experience—at the end of the day, successful toys are about the experience of play. This does not mean a hit holiday toy needs to be revolutionary, but rather that it needs to offer a new experience compared to what is currently available.

One of the best examples of a product that offered a unique experience was the GI Joe action figure. During the holiday season of 1964, these figurines exploded onto the market. The reason was in part that GI Joe toys allowed kids to articulate the arms and legs in different directions at the various joints, which was a first for any kind of doll. Similarly, prior to the release of the Super Soaker, water guns were considered throwaway, low-quality products. In contrast, the Super Soaker was a high-quality product that allowed you to shoot a water stream up to 50 feet.

A toy can also offer an experience that is exceptionally engaging or that inspires the imagination. For example, the Rubik’s Cube offered a near infinite number of both puzzle variations and ways to solve them. Hatchimals—the hot holiday toy that became a brand sensation in 2016—required you to care for the toy before it “hatched” (who knows what might come out!). The company behind Hatchimals emphasized this air of secrecy through a months-long countdown, during which it did not reveal what exactly a “Hatchimal” was until October.

In the case of Tickle Me Elmo, he was certainly not the first talking doll. This honor goes to Thomas Edison’s Phonograph Doll (created in 1890). Instead, what Tickle Me Elmo offered was an interactive experience that involved the entire doll responding to touch. When his belly was squeezed, he would giggle and say “That tickles!” Three squeezes in a row would send him into a laughing, shaking frenzy.

The takeaway from all this is that a customer needs to be able to look at a toy and quickly say “I want that!”

 2. What’s the toy’s backstory?

While a toy needs to be unique, that is not the whole story. Another way to bolster a toy’s chance of success is to base it on a compelling, well-known story. In fact, licensed toys account for roughly 30% of all toy sales.

To prove the importance of compelling content, you don’t need to look any further than the smashing success of Frozen toys. During the holiday season of 2013, Frozen toys were on most children’s top holiday toy lists. At the time, you might have asked yourself, “What are the chances that a plastic moose or snowman would become runaway hit toys?” The answer: Probably not high.

 

The movie Frozen made over $400 million at the North American box office.

Doll Photo Credit: Walt Disney Press Release, February 2014

 

But the movie Frozen made nearly $1.3 billion at the box office, making the talking snowman “Olaf” and loyal reindeer “Sven,” along with a myriad of other characters, recognizable to millions of children throughout the United States. This widespread recognition led to the toys being snatched up at retailers nationwide.

Frozen toys continue to be popular, and they still appear on best-selling holiday toy lists four years after the release of the movie. Other recent examples of compelling backstories include the LEGO Harry Potter Hogwarts Castle, which rode to popularity on the success of the film Harry Potter and the Sorcerer’s Stone in 2001.

A classic example of the importance of a compelling backstory is the case of He-Man toys from 1982. These wildly popular actions figured were originally pitched to retailers by a Mattell executive who claimed there was an accompanying television cartoon set to be released. The only problem? There were no plans for a television show. As a result, Mattell had to fast-track the production of a cartoon—and the toys, bolstered by the success of the show, ultimately ended up becoming brand icons.

The success of licensed toys around the holiday season is explained in part by impulse purchases. According to Lutz Muller, a business intelligence expert who specializes in the toy industry, a consumer is 50% more likely to make an impulse purchase of a toy if it is a licensed product.

3. What is the toy’s popularity quotient?

On top of offering a product that provides a unique experience and has a compelling backstory, a hot holiday toy must also be perceived as popular. The concept behind this is simple: The more we perceive something as sought after, the more we want it. Appell puts it this way: “When parents hear that a toy is hard to get, they will often make it their mission to get the toy. Buzz around a toy makes people think they can’t get their hands on it, and that makes parents want it even more.”

The trick is that it actually doesn’t matter if a product is initially popular or not. All that matters is that a toy is perceived as popular. This advertising tactic is seen in other industries—including book publishing. There have been numerous reported cases in which a publisher (or marketing firm) will purchase copies of its own book to propel the work onto various best-seller lists. The importance of perceived popularity is also made evident by the fact that major retailers like Wal-Mart and Amazon produce their own lists of the top toys of the holiday season. These lists are often released in October, well before any toy can claim to be a “must-have” holiday product.

In order to increase the perception of popularity, many toy companies employ a strategic “scarcity” plan. This means that some holiday toys are strategically under produced in order to create a heightened sense of demand. For example, the hot toy of the 2016 holiday season was unquestionably Hatchimals. After its release in October, the product was said to be moving out of stores quickly. Spin Master, the parent company of Hatchimals, quickly announced new inventory would not reach stores until 2017. According to the New York Times, desperate parents soon began “waiting in long lines at retailers, putting their names on waiting lists, and even buying lottery tickets for the toy.”

The case of Tickle Me Elmo is a classic illustration of the importance of perceived popularity. In November of 1996, retailers sacrificed profit margins by dramatically decreasing the price of Tickle Me Elmo. This helped spur sales, and the product quickly sold out. According to the Orlando Sentinel, “Retailers alerted the news media, prompting some breathless prose.” For example, it was reported that ”Tickle Me Elmo suddenly seemed vital to one’s existence, even if one didn’t actually know what he is, or what he does.”

Holiday duds

As we have seen, toys that become both holiday hits and brands in their own right share several common traits. But not all toys can be successful around the holidays. Take the Security Check Point Play Set, for example. It was priced at over $50, and promised all the fun of trudging through the security line at an airport, a “playful” experience few children have had to endure. Sales, like morale in an airport security line, were low—and it was quickly discontinued.

Takeaway: Pretending you are in an airport security line is not a fun experience.

 

The Check Point Play set did not make many top holiday toy lists.

 

We also have the Baby’s First Beer Doll. The designer viewed the toy, which came with a cardboard six-pack, as another way for children to act like adults. The advertising campaign included a TV commercial where a mother finds her son sleeping face down, and she then removes a beer bottle from his hand. As any good parent would, she looks at the camera and says “Looks like this little animal needs to sleep one off.”

Takeaway: An alcoholic baby is certainly not a heart-warming backstory.

Another notable failure was Flubber from 1963. This Silly Putty rival was reported to cause rashes. It was quickly recalled, but it seemed impossible to get rid of. Flubber would not burn, and would not sink into Rhode Island’s Narragansett Bay. Hasbro CEO Merrill Hassenfeld ended up burying it all in his backyard.

Takeaway: A toy cannot be perceived as popular if it is considered a hazard to public health.

 

Parting thoughts

When you think about it, successful toys—even ones that become their own brands—are like all other products that are marketed and sold. There is no guaranteed way to secure the next Tickle Me Elmo. Luck is always involved. But a good start is looking at how it relates to consumers. Does it provide a new and fun experience for young and old alike? Does it have a compelling and relevant backstory? Will its popularity create demand? Or will its scarcity create popularity?

Regardless of whether you are giving or receiving toys this time of year, here is to a safe, merry and fun holiday season for you and your family.

 

[1]https://www.npd.com/wps/portal/npd/us/news/press-releases/2017/us-toy-industry-grows-5-percent-in-2016-exceeding–20-billion-the-npd-group-reports/
[2]The 2016 NPD/ICTI Global Toy Market Report

[3]https://www.aol.com/article/finance/2016/11/22/shocking-amount-parents-spend-on-toys-revealed/21612020/