Long Tail is a retailing concept characterizing the niche strategy of selling a large number of unique items in relatively small quantities – usually in addition to selling fewer popular items in large quantities. The concept was popularised by Chris Anderson in an October 2004 Wired magazine article, in which he mentioned Amazon.com and Netfixas examples of businesses applying this strategy. He then profoundly elaborated the Long Tail concept in his book The Long Tail: Why the Future of Business Is Selling Less of More. The concept of the Long Tail has transformed modern retail. Traditional businesses converges on getting as much value as possible from a small number of products, thereby constricting consumer choice. They focus on what’s called the ‘top’ products. They may be getting more sales from a small number of products, but they are losing a lot of money because they’re not carrying a large variety of products consumers can choose from. It has essentially one big idea—that the nature of demand has changed fundamentally in the modern world. Presently, you can see a considerable proportion of the total demand in majority of product categories comes from items that individually sell in very small numbers, rather than mostly from the hit products which sell in huge numbers.
The market in the future will be much less homogeneous than today’s markets. Instead, they will have countless small and dynamic niches. Chris Anderson’s “Long Tail” is an engaging observation of the market’s current state, distribution media and modern technology. These factors have led to a niche market and drifting away from mass consumption products. Chris Anderson convincingly points out that profits are to be found in niche products. That entrepreneurs must exploit the power of modern technology in reaping the fruits this newly found rich market has to offer. Conventionally, markets were driven by products which were consumed densely and this translated into fewer products that drive sales and profits. The 80:20 formula, where eighty percent of profits were made by twenty percent of goods, compelled marketers to push fewer items. In an interesting phrase called the ‘tyranny of locality’, the author submits that traditional goods which are sold in supermarkets are restricted in their reach because of the physical constraint. Democratization process has made the long tail phenomenon viable. People can now compete with larger institutions in spheres like writing, film making, animation and other creative pursuits with the use of digital tools. Reaching out to niche markets has been very feasible as prices of digital products and distribution cost has severely decreased pushing the demand down the tail.
The book discusses the nine rules of the long tail:
- Move inventory way in… Or way out: This refers to the use of digital goods or to use warehouses of partners in order to save cost of carrying inventory.
- Let customers do the work: Customer review and rating have become a rage on the internet. Amazon and eBay have mastered the art of using the sales channel, both consumers and producers, to provide product reviews.
- One distribution method doesn’t fit all: The assumption that all customers prefer the same sales channel has to be ammended. Traditional retail outlets, online resources and other niche markets have to be distributed simultaneously to cater to different customer profiles.
- One product doesn’t fit all, either: ‘Microchunk’ is a phrase coined to denote products which can be used in parts, as a whole or by mixing and matching them. For example, news content can be fed via RSS to individual consumers in countless ways.
- One price doesn’t fit all: Markets are ever price sensitive. Converting potential customers into buyers can be possible by giving a flexible pricing schemes.
- Share information: Today’s consumer is spoilt for choice. Helpful information required to make an intelligent purchase should be made available, in order to ensure that consumer makes the right and informed choice.
- Think ‘and,’ not ‘or’: This refers to a psychology of abundance as against that of scarcity. Mobilizing consumers to buy many products instead of making a choice between them.
- Trust the market to do your job: In a market of abundance, one should not predict the outcome. Let the market force take their own course. Learning from experience is a better way of altering marketing strategies as a response.
- Understand the power of free: Though things change, yet they remain the same. The power of freebies should not be undervalued. This book is a detailed analysis of how niche markets are on the rise courtesy of better distribution. A wonderful book!
Buy this book on Amazon: The Longer Long Tail: How Endless Choice is Creating Unlimited Demand
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