2. The Long Tail Sales volume (Popularity) Number of Products Head Tail Head: Refers to the products that are popular (standard). In general and specially in the entertainment industry, these have been the products available in the “traditional Market Place” (Brick and Mortar stores) and are widely used by a great amount of people. Tail: Refers to customized products for a specific niche. They are products that traditional stores refuse to carry because of it’s lack of massive attractiveness and thus the risk they represent: The cost of having this products in inventory and not selling them outweighs the cost of not having them and selling “popular products” instead. What does it mean? Traditional stores are only addressing the higher population of consumers based on the “supposed popularity of products” or standard products. By going down the “tail”, stores can satisfy other customers’ needs they were missing before, which causes to the enlargement of market size. Why now? Isn’t it to expensive? Long tail theory proposes “mass customization”: offer a higher variety of products depending on the number of market segments there are. Under traditional channels, this would mean increase in costs at an unsustainable rate. It will also signify in a considerable risk, since market information was quite limited. However, thanks to the Internet and technological advances, it has become easier for firms to address the “tail” without incurring in an enormous increase in extra costs, and allowing them to have much more accurate market research that will reveal customer preferences allowing them to benefit from both types of products (the standard ones and the customized ones ). Rule # 1 “ Make Everything Available” Rule # 2 “ Cut the price in Half. Now lower it” Rule # 3 “ Help me (the customer) find it” By: mgcabral.wordpress.com
3. Examples Examples that are widely known http://www.grandshoes.co.uk This Web site specializes in shoes and accessories for men with big feet. Grand shoes is taking advantage of the long tail by providing products that will not be easily attainable in normal shoe stores (even online shops) because these types of products are not so “popular”. www.alibaba.com This Web site facilitates business to business connections between manufacturers, and buyers all around the world. Although Alibaba.com covers the “popular” side of the curve, they specialize in suppliers, distributors and in general business partners that are further down the curve because of the types of products they offer, their geographic locations and other factors. Orange County Choppers is just an example of how a business (without the need of being on the internet) can specialize in a niche market (custom made motorcycles in this case) and take advantage of the long tail. In this specific case, they will manufacture any “Chopper Motorcycle” according to customer specifications. By: mgcabral.wordpress.com
4. Potential Controversy Even though the “Long Tail” theory has been accepted by many, there are still some people who agree that the long tail strategy is not sustainable if a company decides to go for a specific niche and forgets about the “head”. If we look at the most known examples of the “Long Tail” theory, we can see that even though they are making use of the long tail, they are also incorporating the head into the sales strategy. Anita Elberse an associate professor of Business Administration at Harvard Business School states: “My findings suggest that it would be imprudent for companies to upend traditional practice and focus on the demand for obscured products… The data show how difficult it is to profit from the tail”. Note: For more information please refer to The long tail ... and other business myths Rich Karpinski. Telephony; Dec 2008; 249, 16; ABI/INFORM Global pg. 4 Conclusion The theory of the “Long Tail” proves to be an efficient way to capture and attract new consumers which consequently would make the size of the market larger. However, if a company decides to pursue a “tail only” strategy they should asses the risks of doing so in terms of the expected volume of sales and the expected revenue. If on the other hand a company is pursuing a strategy that incorporates both the “head” and the “tail” they should make sure that the costs generated by the “tail” are kept under control. This is easier in industries such as the entertainment business but can definitely be done in other industries. By: mgcabral.wordpress.com
5.
6. Bibliography The long Tail. Chris Anderson. Wired Magazine. http://www.wired.com/wired/archive/12.10/tail_pr.html (Consulted in 01/23/2010) . Profiting from the Long Tail. Mike O'Malley. Telephony; Jan 2009; 250, 1; ABI/INFORM. Global. pg. S20. The long tail ... and other business myths Rich Karpinski. Telephony; Dec 2008; 249, 16; ABI/INFORM Global pg. 4
