01 January 2016

Is It a Fad or a Trend?

"Trends that can't continue won't."

--Dr. Herbert Stein, Nobel Laureate

Are you old enough to remember when the marketplace went crazy with people buying lava lamps? 

That was more than 50 years ago when in 1963, a British accountant, Edward Craven-Walker, invented the lamp. He was watching a homemade egg-timer crafted from a cocktail shaker filled with "alien-looking liquids" bubbling on a hot stove.    

Why did so many people go out and buy the counter-cultural lava lamps? (Or CB radios, bellbottom pants?)

Today, they're selling more lamps than pants.

According to Smithsonian.com, U.S.-based Lava-Lite supplies millions yearly to retailers such as Wal-Mart and Target.

Recent fad lists might include the Atkins low-carb diet and PDAs (personal digital assistants). 

Is the current political climate and direction of the presidential race in the Republican party a fad or a trend?  

A theory of fads

Since economists tend to look at purchases through an analytical lens, it's confounding to those with more structured minds as to why consumers make such irrational choices.  

One theory of fads suggests that we often imitate others' actions when making choices with limited information about what's best. That type of behavior leads to chain reactions--cascades--of imitation. (Welch/Bikhchandani, UCLA and Hirshleifer, Michigan)

Go ahead and criticize conformity, but the study concludes it's almost a law of nature.

Does that help explain fad-chasing in business (best practices--overestimated) and misinterpreting specific trends (social media--underestimated)? 

For all the attention given to innovation, top managements are still creatures of habit looking for a sure thing. Take the motion picture industry's practice of producing sequels to box office hits such as Star Wars. That's one example of looking for new profits inside old ideas.

Differences between fads and trends

How can we tell if fresh food is a fad or trend? Is cable cord-cutting a fad or trend? Walt Disney Co. recently stated that ESPN lost seven million households in the past two years, though 92 million subscribers remain tethered to the highly profitable cable channel. 

Here are the results from an EPM Fad Study by Karen Raugust. The characteristic is underlined, followed by a description of a fad or trend:

The underlying reason for the rise

Fad:  None discernible

Trend:  Identifiable and explainable

Life Space

Fad:  Short; typically less than two years

Trend:  Indefinite

Period of build-up

Fad:  Fast rise; typically 6-12 months

Trend:  Slow rise; difficult to pinpoint beginning and end due to evolutionary nature


Fad:  Usually, one product, property, or theme

Trend:  Several across society


Fad:  Usually disappears or declines steeply, typically after two years

Trend:  May fall to a level below the peak, but still meaningfully present.


Fad:  Disconnected from historical precedents

Trend:  Evolves from historical precedents


Fad:  Has little impact on developments that follow

Trend:  Affects developments that follow


What's on your company's shelves? Do the offerings include fads, trends, and mature or declining products?  

Whatever's available for public consumption, decision-makers can only hope for at least one lava lamp-like product. The 60s icon began as a fad and has sustained itself through irrational consumer behavior for over a half-century.    

Apple reported earlier this year that it has sold 700 million iPhones since launching the Steve Job's-created product in 2007.   Notwithstanding that fact, what are the chances the iPhone will last as long as escalators, tea bags, and instant coffee, all of which are more than 100 years old?


(C) Bredholt & Co.