Monday, January 03, 2005

The Long Tail Concept

While reading through my daily blog list starting with Hugh Hewitt's blog (www.hughhewitt.com) and moving to the next which is the evangelical outpost (www.evangelicaloutpost.com) I came across the fourth in a great series of posts about starting a blog. It should be read and listened to (specifically by me who is just getting started).

While in that part IV post the 'long tail' was mentioned. The long tail concept is some greate biz-wiz-dom. It was written about in Wired magazine a while ago and can be found by doing a search on the long tail concept (http://www.wired.com/wired/archive/12.10/tail_pr.html). Written by Chris Anderson

As usual, I have gleaned a few nuggets from that article that I will share with you here:

Long Tail Thinking

●The Pareto Principle is the 80 / 20 rule
●The scarcity of delivery channels with an abundance of things to deliver
●The 20% rule is traditional success (fits the Fortune 500 structure)
●We have so many in the 80% (so many MORE than the 20%) that if we manage the contribution from each the money will add up fast.
●Volume no longer has a monopoly on focus or profitability
●Our business is NOT about big hits it’s about sales (there are so few big hits).
●Big hits and small hits need to be on strong economic footings, both equally worthy of paying attention to.
●Do we know what our small hitters want?
●The bottom 80% sells also!
●What the hitters really want is MORE! (Products, Services and will pay for it)
●You can find everything on the Long Tail
●Oh sure, in the 80% there is a lot of undesirable, but manage against it, filter it, establish firm baselines, and the amount of undesirable you get will be minimized and the amount of profit will be maximized.
●Barnes & Nobles carries on average 130k titles, 50% of Amazon’s sales are outside the 130k!
●The biggest money is in the smallest sales. (if you contribution manage)
●Think about how to aggregate the Long Tail
●The Long Tail is where you need to provide automated self-service
●The sheer size of the Long Tail is amazing
●The market outside the 20%, in other words the Long Tail market (which is outside the reach of many of the big players) is big and getting bigger.
●How do we construct ourselves FOR the little hitter, instead of being set up for the big hitters, and living off the little ones with a big hitter structure?
●The Long Tail Rules:
1. Make Everything Available
2. Cut the Price in Half, Now Lower It
3. Help the Small Hitter Find What He/She Needs
●Long Tail Lesson: Embrace Niches
●How to aggregate disbursed small hitters?
●Almost anything worth offering as a service will find a buyer.
●Unwrap the costly packaging and sell the basics (all of them).
●By divorcing infrastructure, create a liquid market at low volumes easily available with self service and grow the business.
●Small hitters cost less to get than big hitters!
●Two and three tiered pricing structures work wonders on profitability
●Pull customers down the tail with prices directly related to services.
●Free has a cost, the psychological value of convenience, this is the ‘not worth it moment’ that the wallet opens.
●Offer fair pricing, ease of use, consistent quality and you can compete with anyone, even free!
●Business cannot be only Long Tail, it must be able to deliver in the mainstream 20% as well.
●Use recommendations to drive hitters down the tail (customers who used this service also used this….).
●Long Tail is REAL mass-customization.

7 Comments:

At 1:31 PM, Blogger Greg Banville said...

I recently read that wired article about the long tail that you mentioned (I was directed there by reading catallarchy where a commenter posted the link) and I have been very excited by it for the past two days. It seems to bear serious thinking about.

Regarding the soundbites that you distilled from the article, I was a bit confused by your use of the term "hitters" I would have intuitively supposed that it meant one who creates hits, but at other times you seemed to be implying that a "hitter" was a customer, one who is consuming the hits, or products. In the process of writing this comment it has occurred to me that you may have meant it as a term for one who accesses a website, since page views are typically counted as hits. But I am not sure that this ends the confustion because a customer may buy both the very popular and the very obscure in the same shopping cart. I know that I do whenever I shop Amazon.

I note that the long tail is true of my own buying habits, plenty of the books I have bought have been used and often out of print, but I am confident that I will always be able to find whatever I want.

 
At 6:53 PM, Blogger livingthedream said...

Your confusion is my fault, but your logic surrounding the options for 'hitter' are great! Actually, my intent was that the 'hitter' is the customer, the second of your logical choices, but I like the other options as well. Thanks for the comments.

 
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