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How to Make A Hot Holiday Toy

NEW YORK ( TheStreet) -- Take that $50 Barbie doll with a digital camera and place it alongside a $9 16-pack of cute creature-shaped pencil toppers and you'll get a quick lesson in the anatomy of a hot holiday toy.

With Toys R Us opening 600 pop-up shops this season, Target (TGT - Get Report) and Wal-Mart (WMT - Get Report) engaging in price warfare and the NPD Group finding that 34% of holiday shoppers will buy toys this year -- up from 32% last year, but still conservative compared to the 42% the National Retail Federation believes will be trolling for toys this season -- there's a lot riding on this holiday's hottest toys. But with the biggest toys as disparate as Mattel's (MAT) Barbie Video Girl and Blip Toys' bubble-encased penciltop Squinkies, how do retailers and parents even determine what's a hot toy and what's going to end up on the post-holiday bargain heap?

"If there were a magic formula, everyone would be using it," says Reyne Rice, toy trends expert for the Toy Industry Association. "There are a variety of different factors that can make your product more or less successful, but there's never a guarantee on any product."

There are, however, two ways to narrow the odds. The first, and perhaps most difficult, is to build kid cred. The thing that fundamentally separates a hot toy from every other toy in the box are the schoolyard chatter, excited text messages and subtly sent links in parents' inboxes leading up to the holiday season. To make all of that possible, Rice says a toy needs to be visible enough that kids know what it is and easily explainable enough to friends and classmates to whip up a frenzy. From those whispers and wishes spring orders for millions of Silly Bandz, Zhu Zhu Pets and other small-time holiday must-haves.

"These are toys that are powerful because they started on the playground -- the oldest social network of all," says toy industry expert Richard Gottlieb, chief executive of USA Toy Experts, publisher of Global Toy News. "Ultimately, I don't think people like to feel manipulated, which is why they love the bottom-up fads."

The other way to go about it is to pound the kids into submission with a time-tested regimen of advertising, cross-marketing and other assorted pandering. Rice says she considered this year's Toy Story 3-related merchandise a lock for kids holiday wish lists largely because of Disney's (DIS - Get Report) promotion of the film, toymakers' promotion of the merchandise and retailers' push with accompanying DVD and Blu-ray releases. Gottlieb notes that Justin Bieber dolls also don't require much playground support, since Universal Music Group, Toys R Us and Bieber's pre-built consumer base have created all the market space that doll will ever need.

That says, there are plenty of examples of that sure holiday thing completely striking out with kids.

"When Star Wars came out in 1999 with the first prequel, they made just as much kid product as collector product, and the kid product didn't sell because kids didn't know what a prequel was," Rice says. "The product failed miserably at retail, there were a lot of closeouts and it was a major black eye for the industry and, at that time, made a shift in the industry toward looking into their archives at past successes and seeing what they could reissue or reinvent with less liability of licensing hanging over their heads."

That's exactly why tried-and-true Barbie hits this holiday season with a camera embedded in her upper chest and why Disney's most promising offering, Princess & Me dolls, stand on the foundation of one of its strongest franchises. Of course, if retailers and toymakers want a bit more certainty, they could price all of their hottest toys between $25 and $40. That price range is the one common thread Rice says has run through the most popular toys of the past 30 years -- from Cabbage Patch Dolls to TMX Elmo. With a 96-pack of Silly Bandz available for as little as $10, setting the price bar a little lower may not hurt, either.

"If it's affordable enough that kids can save up their allowance money to get it and actually do so, that's also a key," Rice says. "The kids want it so much that they're even saving their own money to get it, they're not just pestering mom and dad for it."

Just as a reminder of what's made a hot holiday toy during the past three decades or so, TheStreet included seven examples of the most popular toys to hit the shelves in seasons past:
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