The Long Tail
I have been hearing and reading about "The Long Tail" for quite some time now. Not sure about what exactly it meant, I set about trying to understand the concept. To help me understand better, let me rephrase what I have understood about "The Long Tail" and its business impact here. Your comments/clarification are welcome.
The concept of "The Long Tail" comes from statistics where certain distributions have shape shown in the figure below. Imagine a graph of movies vs. the number of copies of these movies sold. Certain movies which are purchased often will be on the LHS of the graph while others which are not sold so often will be on the RHS. This set of movies which individually dont sell too well but together represent a huge opportunity are often referred to as "The Long Tail".
The products that make the long tail can together make a market share that exceeds that of the current best sellers. They can dramatically increase the market size. But till recently this market was untappable.
Imagine a neighbourhood video store with limited display space and limited inventory carrying system. Which DVDs do you think such a store will carry? Obviously the latest chart busters!
Now imagine a Net based retailer for whom display space is not a problem and inventory carrying system is not a bottleneck. For such a retailer, the long tail suddenly makes a lot of sense. In the long run, it is possible that such retailers will make more money stocking these rare titles than from popular chart busters.
Implications for businesses:
- Make everything available. The additional cost of making an MP3 or an e-Book available is ZERO.
- Lower prices as far as possible. If you are selling e-books, the marginal cost for you is close to ZERO. Maximize your revenues by selling more.
- Provide search that helps users find what they want. With out good search, it will be hard for you to capitalize on the long tail.