Economics
Mr. Rueter
9/29/14
Building Something New
Whenever there is a new product in the market there has been a huge risk taken by the producer who invested possibly thousands of dollars in which they could get nothing in return. The economy is set up for people to greatly succeed or fail in the products they sell with many products out there in the world many people have never heard of. However these products still exist because they do have a market no matter how small the clientele is they must be making some sort of money or else they would not exist. Thus the market could go really well for anybody or just completely screw them over.
There are thousands of small products out there that are pretty much invisible to us but still bring in millions of dollars a year because the product works well and is scarce to a certain number of people. Like the scrub daddy, shown below, which appeared on the TV show Shark Tank could have been a bad decision but instead he got an investor and made the product happen into a good thing, from making 100,000 dollars, to upwards of 4 million in annual revenue(He’s). Thats quite a bit of money and many people probably never have heard of this sponge that changes its hardness according to water temperature. There are many things that could have gone wrong with his product and he invested thousands of dollars and it happened to pay out for him. Even though the market for such a product is not good he made it work by advertising properly and got into the right place to sell his product.
Then there are the products that we do know about but are doing poorly such as segways. Pretty much everyone has heard about what a segway is, but does not know how poorly the company actually did in profits. According to http://blogs.wsj.com/, “The Wall Street Journal reports that the original funds raised by Segway are gone and Mr. Kamen had to raise a new $31 million and mortgage its factory because the company was losing money”(From). This shows how segway a company that many know can have a hard time when others can have a relatively easy time making money that is not well known. Recently the company has come under new management and is currently doing a better job in advertising thus sales have increases as you can see from the chart below.
Thus the market that the US uses praises good ideas and people who know how to advertise them to a right group of people. This can be very important in how the flow of money can go around from the businesses to the workers. If the company doesn’t make money then it has to let go of workers and there is less money flowing through the economy.
Bibliography
"From Hype to Disaster: Segway’s Timeline." Digits RSS. N.p., n.d. Web. 30 Sept. 2014.
<http://blogs.wsj.com/digits/2010/09/27/fromhypetodisastersegwaystimeline/>.
"He's the daddy of the Scrub Daddy."Philly.com. N.p., 16 Oct. 2011. Web. 30 Sept. 2014.
<http://articles.philly.com/20111016/business/30286442_1_aaronkrausebobblehea
ddollgrillcleaning>.
"Scrub Daddy." Zujava.com. N.p., n.d. Web. 30 Sept. 2014.
<http://www.zujava.com/scrubdaddy>.
"Super Segway." Rekvizitai.lt Lithuania. N.p., n.d. Web. 30 Sept. 2014.
<http://rekvizitai.vz.lt/en/company/super_segway/turnover/
I didn't even know what a scrub daddy was until I read this piece. It's crazy to think abut actually, that this guy was just trying to make some money on a sponge, but turned out to become a millionaire. The segway is a pretty popular thing back in the early 2000's, but I've really never seen one in Wisconsin before. I think they're there more for fun then to actually have as a transportation device. I would of never though that a sponge would be doing better in profits then a segway. I use stuff everyday that is common for average citizens to use, but now I know that the company that produces this product is actually making a lot more money for a object that I've basically forgot about cause I use it so much. I've learned a lot just from reading this piece and I think you did a good job with this one Casey!
ReplyDeleteLove, Conner XOXO
thought*
DeleteYou made some interesting points about the risk of introducing a new product to the market that I think many people overlook when thinking about entrepreneurship. So my question is, how does someone determine whether or not to pursue an idea? I feel like we all come up with some weird invention at some point in time, but we never really choose to actually run with that idea and invest in it. But then again, if people didn’t pursue their ideas, the market would suffer greatly and the entire system of capitalism would fold in on itself.
ReplyDeleteThis is a very interesting topic to talk about, because on a daily basis you don’t really think about these small, almost useless items to our daily life could be a huge business for someone else where they are making large amounts of money. But at the same time products that we know and may perceive to be doing well, actually are not and are losing money on their product. I think it is kind of interesting that this could not only be the case with specific products, but with larger companies as well. This is the case with Chrysler. A popular car company that we all know, but they actually went bankrupt this past year and are not doing well overall. It's interesting to see what we persevere of a company or a product may not be what is actually going on with them financially.
ReplyDeleteIt's weird seeing A company such as segway loose money even though the inventor, Dean Kamen, Is a very smart individual who has came up with multiple inventions and is the president and founder of First Robotics, a High school robotics organization. Seeing this sponge thing that I've never even heard of, and then see segway do worse than them is very strange.
ReplyDeleteYou bring up a good point on how the market of America and many other countries of the world is highly based on small time ideas that not many people know about, but still generate a high amount of revenue. As you pointed out, scrub daddy. Risky product, lots of personal investment on the front end, and probably some loss initially, but now he makes millions of dollars a year, even though the product has such a small clientele. I would as the same question that Ryan did, how does one determine that such a odd invention, i.e the scrub daddy, can do well in the marketplace? How do we know? I suppose that that is the beauty of America. Some fail, some succeed, and others keep on trying.
ReplyDeleteYou did a good job exemplifying how different products can succeed and fail in the market. I had no idea that the makers of segway were losing money. I also thought you did well explaining that the makers of these products are taking a huge risk when they put them on the market because there is a good chance that their products will fail. This reminds me a little of GNC when they went bankrupt because they made bad business decisions and a once great car company ended up needing a bailout.
ReplyDeleteBecoming an inventor and creating something that can make you millions and millions of dollars, is like a dream for many people. Coming up with a good idea is just the start, and then you have to invest thousands of dollars to come up with the prototype. You never know until you enter the product into the market to know if you are going to come out rich or go into debt. Being in the business of inventing products can be a very risking business, but people are willing do anything to make millions.
ReplyDeleteIt is intriguing to hear about stories such as these, as it opens a new light to consumers and producers. Obviously when one decides to create a product, he or she undergoes numerous obstacles, the primary one being the uncertainty of its profitability. While you pointed out that the smaller object’s greater revenue than the segway’s is surprising, it becomes understandable when one considers the elasticity of the two products. The scrub daddy is much more inelastic than the segway for several reasons. The scrub daddy has an extremely low price relative to a consumer’s income, whereas a segway maintains a relatively high price. Neither products are “necessary,” but the segway has more probable substitutes than does the scrub daddy. Bicycles and mopeds and motorcycles and scooters and feet can easily replace segways – which all would perform similar effects – but scrub daddies offer a unique feature that perhaps other scrubbing products cannot offer. Scrub daddies are likely used daily by purchasers, yet segways might be only occasional vehicles. Therefore, considering elasticity can definitely help explain the purchasing behaviors of consumers in a market and can help producers decide what products to produce.
ReplyDeleteI remember watching the Shark Tank show when the Scrub Daddy product was getting presented to the sharks. That was a good point there on how they are taking a huge risk on there own product. And how they turned 100,000 into 4 million dollars. This really shows that if you work hard towards your product you will get your return.
ReplyDeleteIts interesting to see how that small products can make so much money with the right marketing. Also that there are so many small products that produce so much revenue. It seems that a lot of companies or products are unnoticed. But if they are put in certain advertisements such as tv commercials. It’s amazing how much it can make a difference in the business world. Most of the small products that make millions of dollars in revenue are simply advertised better than their competitors. And it’s interesting to see how much of an impact it can make.
ReplyDeleteThis topic is incredibly interesting as the Market place is such a vast variety of opportunity. I agree with you when you say that an individual can either make or break the market. I also agree with Ryan in the sense that people essentially come up with great ideas but never actually act upon making something great out of it. With out people that have the courage to go in the Market to make these unheard of, but great products the Market would essentially fall flat.
ReplyDeleteThe perspective that you take on how much money must be invested into making new products is one that is forgotten a lot. I think that giving the numbers help to put things in perspective a lot. This also relates back to the fact that resources are scarce so when people want to put a product on the market, there has to be a lot of thought into a plan to pay off the resources that were necessary to take on in the beginning steps of manufacturing the product.
ReplyDeleteI think it is interesting to see just how much advertising really pays off. Everyone knows what a segway is, but advertisements don't seem to be aired for them, while the other product that was mentioned was shown on a popular TV show, increasing the demand for that product. Although the segway is probably a little more practical, sales are low because there is advertisements for them.
ReplyDelete*no advertisements for them.
DeleteThis blog definatly appeals to me due to the fact that I work in a toy store. Every week we have new products comming in. It's crazy to see how some of them we sell out of in a week, and others have been there since the day we've opened the store. We even sell blankets that have been on Shark tank and it was awesome to tlak to the lady and hear her experinces. I definatly agree that the individual makes the market. If you put enough determination and advertisements out there you will succeed.
ReplyDeleteI have actually never thought of this before. It's weird to think that small dinky little products can have such a big affect on the economy and in the market. To think that a small scrub that probably took four dollars of a piece of sponge and a pair of three dollar kid's scissors to cut out the smiley face made 100,000 dollars in the market. Whereas a Segway, modern technology that works as transportation that's apparently so fast you need a helmet... is doing worse than a smiley sponge. It's very interesting how this all works out based off the people's wants and needs for such devices. And it's even more interesting that some invest in such things, I still don't understand it actually. But overall, a good topic to bring up, good job!
ReplyDeleteI agree and think it's crazy how one small product can change the nature of the marketplace. I also think it's insane how we spend so much money on certain products that are generally cheap to make. For example we spend so much money on clothes when in fact the clothes are made in sweatshops in other countries and are produced for a cheap price. The marketplace is full of opportunity and anyone can make a huge profit off a product if they have a good idea.
ReplyDeleteI think that it's interesting to see how advertising a product can determine how well it sells. I thought it was crazy that companies will invest so much money into one product when they don’t no what the outcome will be. Also, that we will buy products for so much money when they are being made cheap.
ReplyDeleteI really like this topic. It shows that you can't play around in the economy as well as have some luck and chance if you invent something. But, it also shows great opportunity for any product. If you come up with a product, you have to come out with it at the right time, like a new kind of shovel during winter and not summer.
ReplyDeleteAnother thing to consider is the relative utility gained from both purchases. Obviously, a Segway has a greater potential to be of high utility than a sponge, but when put in terms of utility/dollar, sponges will probably come out on top. A sponge may give a consumer a utility of 4 utils and cost $2, whereas a Segway can cost $5000 and could give a consumer, say, 2000 utils. In terms of utils/dollar, the sponge is at 2 and the Segway is at .4. It’s easy to see, then, why people would buy more sponges than Segways. Even factoring in the idea of decreasing marginal utility, it would take a lot of sponge purchases to reach the low util/dollar ratio of the Segway.
ReplyDeleteIt's most interesting to me that a very iconic product could still suffer financially like that. Granted I haven't seen a segway cruising around Pewaukee in my lifetime, but more just the mental ideal that it is a big deal makes it staggering that it might not be profitable. Someone could get a lot of utils for buying a segway but with the cost associated with it you could very easily get a ton of other things with also high utils thatwould add up to a total utility higher than just from the purchase of a segway. Hence buying a segway could be a non rational decision based on levels of utility.
ReplyDeleteThis is an interesting point that you bring up in this essay. Although I do believe that some of this discrepancy between products is caused by advertising and marketing tools, I think there are some other factors that play largely into this as well. Think of the supply and demand for these two items. For a segway, the market for motorized vehicles that can transport you short distances is tremendous and there are much more efficient ways than a segway. While you would think with such a crazy idea, there would be a lot of demand for this product, the segway as a whole is inefficient. It can only fit one person, it doesn't go very fast or far, and is extremely expensive. On the other hand, substitute goods such as golf carts, ATVs, and other such products have much more accessibility, are more efficient, and therefore, have a greater demand. On the other hand, scrub daddy is probably more of a one-of-a-kind type of deal. There aren't may substitute goods on the market that can replace scrub daddy, it's useful for many people, and is probably relatively inexpensive. These factors could also cause this discrepancy we see between these two products and products alike.
ReplyDeleteI think this is really interesting because you never really hear about the successful but small companies, and I've never heard of the sponge thing they make. But they made a lot of money off of it, and the risk of shark tank seemed to pay off. I the opportunity cost of shark tank was probably really low, just go on tv and tell everyone about the product. they payout would probably be really high, because the least they could get out of it was publicity, which is never a bad thing.
ReplyDeleteThis topic is incredibly interesting as the Market place is such a vast variety of opportunity. I agree with you when you say that an individual can either make or break the market. I also agree with Ryan in the sense that people essentially come up with great ideas but never actually act upon making something great out of it. With out people that have the courage to go in the Market to make these unheard of, but great products the Market would essentially fall flat.
ReplyDelete