As I drive through my neighborhood I'm struck by the number and variety of frozen yogurt retail establishments. There are local establishments, chain stores, stores that offer a wide variety of flavors or mix-ins and more. The most stunning thing about the frozen yogurt stores in my neighborhood, however, is that most of them are closed, after a period of really rapid growth just a few years ago. The rapid rise and fall of frozen yogurt stores holds a lesson for innovators and entrepreneurs. We need to know whether we are chasing a fad, or a trend.
There's another burgeoning retail phenomenon which I enjoy even more than frozen yogurt, and that's good, local small batch beer. It seems now that every street corner must have either a bottle shop or a craft brewery. One wonders if all of these local watering holes with beer flavors ranging from coffee stout to watermelon lager will suffer the same fate as the frozen yogurt stores. To understand this more completely, we need to understand the differences between fads and trends, and why you can build a lasting business on one but not the other.
Fads are here today, gone tomorrow happenings. They are sudden changes in consumer markets or tastes that happen momentarily but don't create a lasting change on consumers or their habits. I usually point to fads like the "pet rock" of days gone by, or Cabbage Patch dolls. These were products that sparked momentary interest, peaked in a flurry of absolute insanity and then withered and died almost as rapidly as they emerged. Fads emerge quickly, suck up a lot of attention and consumer demand for a short time, and then die off just as quickly. Trends on the other hand emerge slowly but continue to evolve, and as they emerge and evolve they impact consumers and their thinking and buying decisions--shifting thinking, needs and product demands.
Trends are also changes in the marketplace, but they are changes that will have a lasting impact and will shift the way consumers buy, or the kinds of demands that they have for products and services. The simplest way to think about trends is using the acronym PEST (Political, Economic, Societal, Technological). We tend to pay the most attention to technological trends (software as a service, new protocols, hacking) but societal, political and economic trends create demands, needs and markets with as much impact but often with less notice. For example, we can see that several generations of families are moving in together, to save money, to live in community or for other purposes. This trend could have major implications about how new housing is constructed, the types of furniture and fixtures people choose for their homes, and how they refit or refurbish existing spaces. This is a trend that is likely to continue for quite some time, as boomers outlive their savings and move in with their children. A change like this that evolves over time and changes behavior is one you can build a business on.
Understanding the difference
If you are interested in building a business or growing one, separating fads from trends is a vital analysis. You can spend a lot of money gearing up to serve a fad, only to watch the interest and enthusiasm die, while ignoring longer term trends that form new business opportunities. When thinking about what emerging needs to serve, ask yourself:
- Is this emerging need likely to grow and to sustain over time?
- Is the emerging need based mostly on novelty?
- Is the need based on political, economic, societal or technological changes?
- Will what's happening shift behaviors, create new needs, new markets or new customer segments?
You can build a business on fads, but it is a business that must be exceptionally flexible and include the ability to quickly retool as one fad dies and another emerges. Better still to build businesses based on trends that create new market needs and new customer segments.