The Long Tail – Why Focusing on the minority can win!
“The Long Tail” as you hear it used today is a term coined by Chris Anderson editor of Wired magazine based on the statistics curve called “long-tailed distributions.” Chris Anderson has brought to light how the technological era and Ecommerce is changing today’s Marketing and Economics strategy. Imagine you own a brick and mortar record store. In that store your physical area is limited as is what you can easily keep in stock and have readily available. Due to this finite amount of space it is in your best interest to only stock the most popular best selling items, not the niche obscure albums. Chances are much like many other businesses, a select 20% of your albums (products or customers) will make up 80% of your revenue and possibly all of your profits. Your statistics curve will look something like this.
Due to the fact that you can only stock a limited amount you will have to make sure you carry Justin Timberlake’s new album to ensure you are making sales and generating enough to pay the bills. Some audiences may not want the latest album toppers so your store should also be able to carry a few copies of some less popular albums such as Gordon Lightfoot’s Greatest Hits. But, your sales stop at some point due to your physical limitation of inventory, your obscure albums may only sell a few copies a business quarter and there isn’t a demand for everything everywhere so you are under constant pressure to ensure your shelf space is only stocked with the best albums.
What happens to this graph when you take away the physical barriers and go to electronic distribution? What changes can you expect? We know that online music stores that distribute electronically have a virtually limitless inventory. This allows us to keep even the most esoteric of albums in stock all of the time. We also know that our location is inconsequential, which means even though everyone loves some Justin Timberlake they might be even more into music that has little or no popularity in the United States. If we are open for business and Justin Timberlake sells like crazy can your obscure genres like Afro-Cuban Jazz and J-pop still sell enough to make a significant portion of our revenue? Will 20% of your sales (your current chart toppers) make up 80% of your revenue?
Here is the interesting part. Due to the amount of available choices to your audience you will find enough demand for all of your obscure albums that the ‘long tail’ (lower right) section of your chart can actually make up a substantial part of your business. Selling very few copies of an enormous amount of different albums adds up to a rather significant part of the revenue. Why? Because the long tail never really gets to 0. Itune’s & Rhapsody’s worst performing albums still get a few downloads every couple of months.
Knowing that the long tail part of the distribution curve can make up a significant part of revenue is what is pushing companies to go online and sell their products. They can carry more products and virtually no extra cost because in many of today’s markets companies can have the products drop shipped directly from the manufacturer’s warehouse.
How can “the long tail” principle make you think different?
We use “the long tail” concept with many of our Search Engine Marketing campaigns. For example: “Golf Clubs” , “Golf Driver” , “Golf Irons Set” are some expensive keywords to bid on and are extremely competitive. Instead of running only a few campaigns and paying $1-$2 for a visitor to come to the golf website I could spend 20-30 cents per click on keywords like “Pink Golf Clubs” , “Square Golf Clubs” and other niche terms which will have the same or better conversion rate and cost me a lot less. In essence we are selling far fewer of a lot of different albums rather than a lot of sales on only a couple of albums.
Can you think of ideas on how this principle can help your business?