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The Long Tail
 

The Long Tail

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    The Long Tail The Long Tail Presentation Transcript

    •  
    • The Long Tail Why the Future of Business is Selling Less of More AUTHOR: Chris Anderson PUBLISHER: Hyperion Books DATE OF PUBLICATION: 2006 NUMBER OF PAGES: 226 pages
      • It has been an accepted fact for decades now that 'hits rule'. Popular culture today is consumed by hits-- people can't help but talk about them, select them, and in general try to understand them.
      • Yet at the rate things are going, hits are beginning to rule less . Number one may still be number one, but the number ones don't sell as much as they used to. Hits are not the economic force they used to be; markets have fragmented into millions of niches.
      • The main difference between then and now is that consumers of today have far more choices than ever before. This incredible amount of choice is resonating in a very big way with modern-day consumers; they increasingly favor markets that provide the most choice.
      • This book is about that market. It takes a look at niches, which are emerging as the new big market alongside the hits.
      THE BIG IDEA
    • What’s a 'Long Tail'?
      • Anderson realized that this statistic contained a truth about the economics of entertainment these days. Thanks to the Internet, the concept of limited supply has begun to become obsolete.
      • When the hard data was graphed, it started out resembling any other demand curve, with a few hits being downloaded a relatively huge number of times at the head of the curve, and with the curve falling off steeply with less popular tracks. But the fascinating thing was that the curve itself never fell to zero.
      • Scarcity vs. abundance
        • most of us want more than just what is popular; everyone's taste is non-mainstream at some point. The problem is-- or used to be --finding the products to satisfy one's non-mainstream demands.
        • New technologies have made it ever more possible for retailers on the net to stock a variety of goods that is far, far wider than the amount any traditional retailer could ever hope to stock (and remain competitive in terms of pricing).
    • A Brief History of the Long Tail: Expansions in Variety
      • The true roots of the Tail are in the giant centralized warehouses in the American Midwest of the late 19th century – and with two entrepreneurs named Richard Sears and Alvah Roebuck. These two men came up with many innovations that are noteworthy even today.
        • They took advantage of the enormous capacity of these warehouses by coming up with a revolutionary system of catalog distribution, which they distributed to customers from all over.
        • The catalog itself, or ‘Wish Book’, in company parlance, astonishes even now, both in terms of the variety of goods available (mind-blowing for the rural families Sears and Roebuck targeted) and the price savings (often 50 percent or more compared to the stores of the time, even after shipping).
        • Another innovation was viral marketing
        • They also had a group of suppliers ship goods straight from their factories.
        • Sears managers set up a system in which each order was allotted a specific time to be shipped, and which made use of a series of pulleys and levers to make sure the orders were moved precisely.
        • With the advent of affordable cars and better roads, Sears was forced to invent the superstore, which offered huge selection and low prices – far lower than those of traditional merchants.
    • Six Themes of the Long Tail Age
      • In just about all markets, there are far more niche goods than hits.
      • The cost of reaching these niches is falling dramatically, such that it’s possible to offer a massively expanded variety of products.
      • Potential customers, however, have to be helped to find these niches; a range of tools and techniques – ‘filters’ – can help.
      • When the variety has been expanded and the filters are in place, the demand curve flattens – the hits are less popular and the niches more so.
      • All the niches add up; there are so many niche products that as a group they can rival the hits.
      • As a result, the natural shape of demand is revealed, without the scarcity of information and shelf space and the distribution bottlenecks of the past.
      • The tools of production have to become democratized. The personal computer is of course the best possible example. Millions of people can now do what only professional filmmakers or writers, for example, could do just a few years ago. The result is that the available variety of content is growing faster than ever before.
      • The costs of consumption have to be cut by democratizing distribution. The first force is only really meaningful if others can enjoy it – if they can reach it or find it. The Internet, for instance, makes it easy to reach more people – democratized distribution par excellance.
      • Supply and demand have to be connected. Consumers must find out about these newly available goods in order for the whole system to work. Demand must be driven down the tail.
      Three Forces of the Long Tail
      • Move inventory way in… Or way out. Either use digital inventory, or store your goods in partners’ warehouses – this will lower costs and simplify operations immensely.
      • Let customers do the work. Let them take care of coming up with reviews for your goods (this is termed as ‘crowdsourcing’). Customers can usually do a better job; reviews submitted by users are often well-informed, articulate and, very importantly, trusted by other users.
      • One distribution method doesn’t fit all. Some people prefer to shop online, others from the privacy and comfort of their own homes. Some want their goods immediately, others prefer to wait. If retailers focus on just one group they risk losing the others. Multiple distribution channels are the only way to reach the biggest potential markets.
      Long Tail Rules
      • One product doesn’t fit all, either. The winning strategy now is to separate content into its separate parts – to ‘microchunk’ it – so that people can consume it however they want to, as well as remix it to create something new. Newspapers, for instance, are microchunked into individual articles, which are used by other sites to concoct more focused product out of this content.
      • One price doesn’t fit all. In markets with room for abundant variety, variable pricing can be a powerful technique to maximize a product’s value and the market’s size. iTunes, for instance, which sells songs for $0.99, will sell music at a lower price if an entire album is purchased.
      • Share information. The availability of information is what can make or break an entire operation. Of course it needs to be presented in a way that helps order choice, not confuse customers.
      Long Tail Rules
      • Think ‘and,’ not ‘or.’ One of the symptoms of scarcity thinking is assuming that markets are zero-sum – that everything is an either/or choice. In markets with infinite capacity, however, the strategy is to offer it all.
      • Trust the market to do your job. In abundant markets you can simply throw everything out there and let the market sort it all out. Measure and respond – don’t predict.
      • Understand the power of free. One of the most powerful features of digital markets is that they put ‘free’ within reach – their costs are near zero, and their prices can be this way too.
      Long Tail Rules
    • BusinessSummaries.com is a business book Summaries service. Every week, it sends out to subscribers a 9- to 12-page summary of a best-selling business book chosen from among the hundreds of books printed out in the United States. For more information, please go to http://www.bizsum.com. ABOUT BUSINESSSUMMARIES