Lesson #1: Tease Your Customers into Wanting More

Warner did not spend any money on advertising for any of his product lines, not even the ever popular Beanie Babies; he did not have to. Instead, he pursued a novel and cost-effective strategy of teasing and taunting his customers into wanting more. The first step in Warner's mystique marketing plan was to refuse to sell his toys to any of the large toy chains, including Wallmart, Wallgreens, and even Toys R Us. While his competitors might have considered this commercial suicide, Warner decided instead to sell only to Hallmarks and the smaller "ma and pop shops" that he grew up with in Chicago. Selling at niche stores nurtured the customers' perception that the toys were elite offerings.

The second step was to limit the number of toys that each store could order. Warner decided that the maximum order a store could place was thirty six per style of toy per month. Again, this fed into customers' perceptions that these toys were only for sale on a limited basis. It also made it difficult for customers to collect the entire set from one store alone.

Finally, the third step in Warner's marketing strategy was to ‘retire' select styles of toys on a sporadic basis while also introducing new styles. In 1996, Warner announced his first retirements, stunning Beanie Baby fans across the country. This was Warner's attempt to keep his line of collectibles always fresh, and to keep buyers baited for more.

Instead of spending valuable money on advertising, Warner decided to selectively curb supplies and limit sales to niche retailers in order to encourage collectors and create scarcity. His strategy of creating scarcity was so successful one year that Warner actually had to lease three 737 airplanes to fly emergency shipments of Beanie Babies from the factory in Korea to stores throughout the U.S because demand had become so unexpectedly high.

As a result of these three steps, Warner had created a product that was too irresistible to young collectors who would eagerly await and buy up the new toys the moment they hit store shelves. In fact, demand for certain toys became so high that a secondary market began to emerge. While the original Beanie Babies would sell in stores for anywhere between $5 and $20, collectors were able to then resell them to other avid collectors for as much as $5000 each. There were even several books published and hundreds of websites put up online all about Beanie Babies for collectors.

Thanks to his previous experience in the toy industry, Warner had become a master marketer, perfecting his strategy of bait and switch. In doing so, he not only ensured that his products never became passé, but that customers would be eagerly awaiting his new toys as fast as he could spin them out. He also made retailers believe that they were the lucky few who were allowed to sell his products.

It was Warner's shameless promotion of the ‘now or never' phenomenon that allowed Beanie Babies to become hot commodity items. "As long as kids keep fighting over the products and retailers are angry at us because they cannot get enough, I think those are good signs," he says.

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