Friday, November 12, 2010

Review: The Long Tail

Sometimes it is easy to forget about some important detail of a book, if we don’t make notes (which we are usually lazy to do so while reading).

The Long Tail is quite an eye opener, another brilliant theory and observation in the same category like Crossing the Chasm. Basically most business focus on the top best seller, as 20% of the goods contributes towards 80% of the sales. If I only have 1000 shelf space, I better put in the top 1000 best seller in my store to maximize profit (assuming best seller can sell an average of 1000 copies per year, it would be 1000 x 1000 = 1000000 sales per year). What if I have unlimited store space? If I can put 100000 items in my store, within 99% of them selling an average sale of 10 per year, I would still have extra of 99000 x 10 = 999000 sale per year, which is very significant. What if I have 1 million items?

The Long Tail is all about having more products and more variety as possible (extend your sales volume beyond the best seller), given that the cost of holding stocks is almost ZERO (think Amazon, iTunes, Pandora, Netflix, etc). Even if non-best sellers only sell an average of few items per year, their large number of product do make up the sales volume.

For Example, Google AdWord’s flexibility and low entry barrier allow any business owner in the world to put up advertisement as low as USD 0.01 per click. Rather than depending on a few thousand large corporations to put up advertisement, AdWord allow millions of business owner around the world to put up advertisement based on their own budget.

The local books store chain could probably carry ten of thousands of product, while Amazon offer millions of items yet at a lower price. The local music store is dying, while Netflix and iTunes are flourishing with millions of offering, yet cheaper again and allowing more flexibility (you can buy just one song rather than the whole album).

How can we make long tail work?
  1. We need a large volume of products or contents, and the cost of making these items available must be almost ZERO
  2. We need to reach a large audience, most by utilizing the Internet (with the help of online marketing through Ads and Search Engine Optimization (SEO), Viral Video, Blogs, Social Media like Facebook and Twitter, etc)
  3. We need a powerful search engine, so that people can find the needle among the haystack (and recommend similar products, like Amazon)
  4. We need a good review system, so that people know what’s good and what’s not. Even a niche item could be a potential best seller.
  5. By learning the customer shopping pattern, we could recommend niche product which could be of their interest.
  6. Sampling is possible by allowing downloading one chapter of a book, or preview 30 seconds of a video or music.
The Long Tail is not for every business, but it’s something to look into besides focusing on the blockbuster.

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