Putting the icing on the cupcake

IBDP Teacher Blogs, Business Management | January 12, 2012
Putting the icing on the cupcake

Older readers of this blog will remember a raft of fad products over the years such as the Rubik Cube, Clackers, Cabbage Patch Dolls, Tamagotchi and Thunderbird toys, and global monster games from Pokemon to Moshi Monsters. Some fads fade into oblivion, while others morph into new variations or product extensions, often fuelled by new technologies.  Whatever, their longevity, fads can generate massive revenues and huge profits even in a short period. For example, more than 350 million Rubik cubes have been sold worldwide; making it the world’s top-selling puzzle game and Pokemon has generated billions of dollars since its inception in the 1990s.

So what is it that turns a run-of-the-mill product in to this year’s must have? If this formula was easy to predict or to drive, every product would be successful. Like a viral video, fads appear to meet a perceived need at a particular time and social behaviour and group dynamics create the environment for rapid growth.

In The Tipping Point: How Little Things Can Make a Big Difference, Malcolm Gladwell explains and analyses the ‘tipping point’, that magic moment when ideas, trends and social behaviours cross a threshold, tip and spread like wildfire. The Tipping Point attempts to identify and interpret the factors that contribute to a certain epidemic or trend. “The best way to understand the dramatic transformation of unknown books into bestsellers, or the rise of teenage smoking, or the phenomena of word of mouth or any number of the other mysterious changes that mark everyday life,” writes Malcolm Gladwell, “is to think of them as epidemics. Ideas and products and messages and behaviours spread just like viruses do.” The huge growth of the social media, such as Twitter and YouTube, has provided the vehicle for the rapid transformation of local ideas and products into global phenomena and the actions of celebrities or other role models, in this growth can be very significant.

One recent example of a fad product is the humble cupcake, which has been the reigning dessert of pop culture for some years now, inspiring not only recipes galore but fashion, artwork, and collectibles. In the U.S., between 2006 and 2010, cupcake sales increased between 9% and 13% per annum, according to the Perishables Group, a Chicago-based fresh food consulting firm.

“Cupcakes are thriving because they meet many current consumer hot buttons – indulgence, single-serve and convenience,” said Perishables Group spokeswoman Kelli Beckel. “They make cake an everyday eating occasion and allow shoppers to try new flavours.” The emergence of cupcakes began in 2008, around the time the economy started to struggle, said Darren Tristano, executive vice president of Technomic, a food-industry consulting and research firm.

Sweet desserts are similar to alcohol in that sales tend to increase with difficult financial times, Tristano said; “It’s still an affordable luxury,”

No place on the planet is thicker with cupcakes than New York City. There are nearly 40 bakeries devoted to them, including Magnolia Bakery, which kicked off the whole craze after appearing on Sex and the City in 2000, and Crumbs Bake Shop, a 35-unit cupcake corporation on the verge of mass franchising.  Magnolia Bakery is using franchising methods to expand into overseas markets as diverse as Sao Paulo, Tokyo and Doha, Qatar. Cupcake lovers in Dubai can now get Magnolia’s buttercream-frosted cupcakes, red velvet cake, banana pudding and a variety of brownies, bars and cookies without flying to New York. The new franchises will only be sold abroad, according to the store’s co-owner, Steve Abrams. He says the bakery’s vintage cakes and desserts are already popular outside the U.S., thanks in no small part to Carrie Bradshaw, the sex columnist portrayed by Sarah Jessica Parker on the widely syndicated HBO series. Magnolia is hoping that its new international customer base is just as sweet on cupcakes as New Yorkers. Indeed, one of the main drivers of economic growth in New York city over the last few years has been the growth in the restaurant and bar industry and the segment of that industry that seems to be adding the most outlets, is cupcake cafes.

Another example of a product back in fashion are Clark’s shoes and boots. Sex And The City actress Sarah Jessica Parker was again a catalyst for this trend, when she was spotted searching for the famous suede boots in a New York shoe store, and bought two pairs – one in brown, one in black – because she couldn’t decide which she liked best. Model Alexa Chung and singer Florence Welch have been stalking about in the wedge-heeled Yarra Desert Boots, while Liam Gallagher, the Arctic Monkeys, Dizzee Rascal, Nick Cave and Robbie Williams have all been spotted in Clarks’ designs. That Clarks shoes are ‘cool’, may be traced to dancehall artist Vybz Kartel and Jesse Serwer charting a 30-year love affair between Jamaican rudeboys and Britain’s premium sensible footwear. Clark’s shoes are now chic, sought after, and even have waiting lists – just like Louboutin but without the eye-watering price tags. So popular are Clark’s shoes, that copies of their designs have started appearing and multiplying.

IB-style questions

1. Define the following terms:

  • market segment
  • product extension

2. Explain the concept of a ‘tipping point’ in business.

3. Analyse the advantages and disadvantages of franchising as a growth strategy for Magnolia Bakeries.

4. Evaluate the effectiveness of using social media, such as Twitter and Facebook, as a marketing tool.

Sources

 

Recent Posts