Woo, that’s too technical, but what I understand is that the bottom line is to increase sales. Well, this is what any SBU would aim for. We have read about the strategies of doing this in Prof. Philip Kotler’s Marketing Management text book. I didn’t read or hear anything like long tail there. So when I first heard this term it urged me to start exploring about it and how it is related to marketing.
Well here’s what I have understood and found. The term long tail is coined by Chris Anderson, the editor in chief of Wired magazine. He is also a writer and author of his 2006 book, The Long Tail: Why the Future of Business Is Selling Less of More. “Selling less of more” well that’s interesting! It is said, he brought to light how the technological era and Ecommerce is changing today’s Marketing and Economics strategy.
What he meant is that selling small volumes of hard-to-find or unique items to many customers helps organization to realize significant profit compared to selling large volumes of popular items to few customers. The total sale of this large number of “non-popular items” is called "the long tail".
How it works and the way it is different from the traditional sales cycle
I would like to explain this further with an example. Suppose you own a record store. In that store your physical area is limited to what you can easily keep in stock and have readily available. As the saying goes, 20% of sale of the select or popular albums will account for 80% of your revenue. Keeping this in mind and also due to the physical limitation of inventory, it would be in your best interest to stock and fill your shelf space with the more popular items which thereby limits your chances of stocking the less popular or niche obscure albums which will have less demand.
So now just think what can happen if we can take away the physical barriers and go to electronic distribution!
We know that online music stores has virtually limitless inventory. This would allow us to keep even the most uncommon or niche albums in stock all of the time. Here is the interesting part. Due to the amount of large volume and available choices to your audience you will find enough demand for all of your obscure albums which will actually make up to a substantial part of your business. Selling very few copies of an enormous amount of different albums adds up to a significant part of the revenue compared to selling more copies of few albums.
ITunes’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 I feel is pushing companies to go online and sell their products. Thus the boom of digital marketing is happening. The firms can carry more products at virtually no extra cost. Companies like Amazon, Apple and Yahoo have already imbibed this strategy and we all know the result.
An example from Chris Anderson’s…