Long tail- Democratize Production

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  • BENEFITS OF DEMOCRATIZING PRODUCTIONTransferring the production to customers may achieve a reduction on the cost of training, security, operating system and database<number>
  • <number>
  • iTunes vs. Virgin MegastoreThe lack of shelf space in iTunes allows for the offer of thousands more titles and also more obscure ones.<number>
  • Carmax (online) vs. physical Carmax stores and other physical car dealers: With Carmax online the consumer can view the stats, photos of cars, and availability of different cars in a particular store. If you see a car in a store in another state and want it, you can request it to be delivered to your nearest store, where you can test drive it and see it in person. Carmax online allows for their entire U.S. inventory to be available to anyone in any state. Therefore, the consumer is not limited to the cars in the physical lot…<number>
  • eBay vs. Bazaar:On eBay for the same reasons as iTunes, the availability of products is much larger than a physical bazaar or street fair that also holds varied products. Just like carmax.com it combines all available inventories from different location points. There are no physical limitations. <number>
  • Atrapalo.com vs. regular travel agencies:Atrapalo automatically searches for the cheapest tickets according to your requirements (dates, location, etc…). It gathers info from all airlines and gives you all results for comparative purposes. In a physical travel agency, the results are for some reason always less, this might have to do with the programs used by the agent or purely the agent‘s willingness to help. Since there is no human element in getting the results in atrapalo, these are unbiased, immediate, and in greater quantity.<number>
  • Amazon.com vs. Barnes & Noble: Amazon is the eBay of books and because of the reasons cited in eBay’s case, it is also able to offer more titles than a physical book store such as Barnes & Noble. <number>
  • Why did these businesses not exist 10 years ago?Simply because the technology was not available, the platforms were not there. As we continued to move towards a more globalized society in terms of trade, aided by the evolution of the internet, it was only natural that we began to trade online. With the end of physical storage limitations and the increased usage of credit cards, trade could be conducted across any place on the globe. As we became accustomed to this new way of purchasing, it has become and still continues to become each time more main stream. Time is each time more scarce, which leads to consumers wanting fast and easy processes. However, at the same time the increase in leisure interests has led retailers to take advantage of the online potential in offering a greater quantity of products to satisfy ever changing and multiple consumer wants. <number>
  • Capable with online distribution and retail.Ease of access to the Long Tail sheer size: Higher amount of options for customers which generates satisfying demand. Offering of mass customization.Opportunity to discover new markets and expanded in existing onesPossibility of lowering the pricesMultiple taxonomies= classified within genre by genre (recent music/pop music) or offered in different forms (track by track or the whole CD), It attends all niches at the same time.<number>
  • There are two types of BUSINESSES:INTERNET: As we have mentioned before , sales will increase, due to no space limitation and the ability of attending to all the niches, which will be more profitable because margins may be bigger if cost is mainted, or even if cost is reduced the volume of sales will be higher obtaining higher profitability. Furthermore products are classified with gendre (multiple taxation) PHYSICAL STORE:Can be harmful for the company and may affect on the sales by decreasing them, The fact that they have space constraints and product limitation affects negatively, and they cant attend all niches. There are two types of USERS:INTERNET: The user may find a wider range in the online distribution (abundance of supply) that attends to all customer needs (can supply all niches),It is more accessible (doesn’t depend on local areas).However, user do not receive neither technical support nor customer service due to the impersonal communication and it is necessary to have access to internet which may represent a barrier for users. Furthermore there is a higher risk of damage of the product due to the incapacity of checking it personally causing more devolutions.PHYSICAL STORES: Due to the space limitations they do not have abundance of supply and cannot attend to all the needs of the customers due to the incapacity of having all the niches. Another disadvantage is the limititaions to access to the store s for local area, users would only be able to access if it is in a certain range. However, the advantages that businesses have are the technical and client support that they can offer by having a physical person in the store, the communication business-client is better face-to-face and the devolution is easier and less common. 12
  • Consider Netflix for this question. Are economies of scale important to this business model? Economies of scale are important for Netflix’s business model for several reasons:In the case of Netflix they not only concentrate on the hits but also the “misses”, or better said: they satisfy “niches by the thousands”. As said before the “Misses” can add up quickly to a huge new market.To transpose this concept into economies of scale it can be said that the more volume (niches and hits) that Netflix sells, the net contribution increases while the overall fixed costs reduces.With more volume the fixed costs are distributed over many products rather than just a few. Examples of fixed costs: Rights, deliver services, geography, postal service, negotiation power, bargaining scaleDo we need blockbusters or top hits?YesThe blockbusters are the ones that attract the audience and from there (either by recommendation or curiosity) search down the “long tail”In order to satisfy the mainstream demand it is necessary to have hits.If Netflix does not carry the hits there dissatisfaction may exist.12
  • Business:Larger customer base since the physical border has been overcome. Increased offering of products due to:A larger base Decreased costs because of the virtuality of the internet that there is no need for shelf space costs, rental space in an high traffic area, employees, etc. Better knowledge of what customers really want not only what the industry thinks they want. Companies will be faced not only with more competition but also with a more informed customer since now they can search for reviews and recommendations.Society:Consumers have a better knowledge of what they want.People want more products and now they have more options. Customers are happier since they can find exactly what they want not only what’s available. Consumers have more information hence will demand better quality.12

Transcript

  • 1. The Long Tail: Democratize Production Digital Marketing Group A Andrea Arenas Estevam Sa da Bandeira Hugo Latorre Leticia Salama Matthias Holland-Cunz Natalie Jadalla Paola Martinez Tomas Junquera
  • 2. Democratize Production Democratization of the tools of production to customers Cost of Training Degree of Customer & Production Specification Satisfaction
  • 3. A new Business Model Before: Pareto Principle “80% of your sales come from 20% of your products” Don't just quot;work Id & focus on Limiting the smartquot;, work those products to extension of smart on the right reduce Stock supply things Vilfredo Pareto After: The Long Tail Strategy The group that purchases a large number of quot;non-hitquot; items is the demographic called the Long Reducing the Selling small Increasing the focus on popular volumes of hard- supply of SKU items: less to-find items profitable Chris Anderson
  • 4. Businesses in which the number of items available is much higher to their offline equivalents
  • 5. Music Store & Distribution Business Customer seeking unlimited offer Virgin Megastore ITunes Online Store Product Portfolio Storage & Prices Amount of Convenience & Prices operating cost SKU`s Information The lack of shelf space in iTunes allows for the offer of thousands more titles and also more obscure ones at a better price.
  • 6. Used-Car Business Crowd sourcing: Cheaper and better CarMax Store Carmax Online Store Product Portfolio Information Prices Barriers of Product Prices distance Availability The consumer experiences limitations when purchasing cars at the physical lot such as higher prices & limited product availability
  • 7. Auction and Shopping Business Make everything available Traditional Bazaar eBay Online Store Traditional way Try product Prices Global Presence Convenience Supply and of shopping before buying Reviews eBay combines all available inventories from different location points reducing physical limitations.
  • 8. Travel Business One size does not fit all Travel Agency Atrapalo.com Non customized Professional Valuable Personalized Customization of Economies of package offers Advice Offers Advice Trips Scale The results in atrapalo is unbiased, immediate, and in greater quantity.
  • 9. Book Distribution Business Hit products versus niche products Barnes & Noble Amazon.com High Volume Offers New and Inventory Global Inventory Niche Strategy High Demand Focus Old Books Space Products A niche strategy could help to avoid price battles and focus on high profit products.
  • 10. Why did these businesses not exist 10 years ago? Paradox: Less time to spare but more interests to pursue Faster processes wanted Technology was not available Increased usage of along with convenience credit cards
  • 11. Key benefits of the abundance of supply Capable with online distribution and retail: Price Battle + Real-time information available + Practically no storage and distribution costs Large Volume Items + No physical limitation (unlimited shelf space) = Possibility of lowering the prices Profitability Low Volume Items Higher amount of options to satisfy Mass Customization Multiple Taxonomies = Higher profitability specific needs Opportunities for Non-Famous Artists Cultural Diversity
  • 12. Who produces these articles: professionals or other users? What are the implications for businesses and users? Semi- Amateurs Professionals Professionals BUSINESSES USERS INTERNET PHYSICAL INTERNET PHYSICAL Abundance of supply Sales Serves all needs Space and Product Accessible limitation Support Serves all niches Face-to-face Profitable
  • 13. Before the era of the Internet a product was either a hit or a miss Hit Miss Unlimited Shelf space
  • 14. What are the benefits of outsourcing the creation of content to the users? Wikipedia benefits from: Upgraded Quality Refocus technological and Organization agility financial resources on core competencies. By adding content by amateurs and professionals, the business benefits in terms of efficiency, productivity (speed up the flow of information) and organizational effectiveness.
  • 15. Are economies of scale important to this business model? Higher Volume: High Volume: High Hits + Misses = Increase Net Contribution & Niches bargaining power Lower Costs over suppliers Economies of scale Yes, Blockbusters Satisfy mainstream Satisfy 100% are hooks to demand customers demand attract audience Are hits Needed?
  • 16. What is the impact not only on business but also on society of shifting from a culture of scarcity to a culture of abundance? • Larger customer base • Increased offering of products • Better knowledge about customers needs • More competition and a informed customer Business • Information is power for Consumers • People are satisfied • Increase of expectations • Higher demand of quality Society
  • 17. Thank you!