The Long Tail by Chris Anderson Book Summary

‘The Long Tail’ by Chris Anderson is an interesting observation on the present state of markets, distribution channels and modern technology. All these factors have led to a movement away from mass consumption products to a niche market.

In this book, Chris Anderson convincingly argues that profits are to be found in niche products and businesses must harness latest technology to harvest this rich market.

Traditionally, markets were driven by products which were consumed heavily and this meant that fewer products drove sales and profits. The 80:20 formula, where eighty percent of profits were made by twenty percent of goods, compelled marketers to push fewer items.

In an interesting phrase called the ‘tyranny of locality’, the author submits that traditional goods which are sold in supermarkets are restricted in their reach because of the physical constraints.

Howsoever large a retailer might be, it is still unrealistic to expect customers to drive in from a hundred miles away. Essentially, selling was a local activity constrained by physical distances and requirement of warehouse facilities for storing the products.

Zoom in to the twenty first century and things have changed dramatically. The internet phenomenon has revolutionized the markets. It is now possible to sell thousands of products online without having an inch of storage space.

The tail has now started wagging the dog. Markets are moving away from the 80:20 norms and providing a larger list of niche products. In fact, profits are being generated by selling small quantities of a large number of niche products. The sharp peak which used to characterize sales earlier is now gradually replaced by the long tail of niche products.

There is another parallel phenomenon which is impacting on traditional sales approach. Consumers are becoming more aware and conscious of their tastes and this has led to a fragmentation of the market.

This means that the earlier ‘one fit for all’ is no longer valid. The internet has not only created awareness but has provided a platform which gives access to an infinite range of choice.

The consumer is pampered by variety, assortment and a range of products. This paradigm shift in market dynamics means that there is no option but to accept the phenomenon of ‘The long tail’.

The author, Chris Anderson goes on to discuss the six themes of ‘The long tail’. He states that there are more niche goods than ‘hits ‘in any given market. The earlier barrier of cost for reaching these niches is falling dramatically because of the internet.

However, some kind of filter is required to direct consumers to these niches. By doing this, niche products have become more popular than the ‘hits’. The sales pattern which earlier had a significant head has become flatter and longer.

Though these niches, individually, contribute lesser profits, they add up to rival the ‘hits’. All this has been realized because the earlier bottlenecks in distribution and physical constraints have been overcome by technology.

The long tail phenomenon has been made possible by a process of democratization. Individuals armed with personal computers can now compete with larger institutions in spheres like writing, film making, animation and other creative pursuits.

The distribution cost of services and digital goods has fallen dramatically, making it possible to reach out to niche markets. This has pushed demand down the tail.

The book goes on to discuss the nine rules of the long tail:

Move inventory way in… Or way out: This refers to the use of digital goods or to use warehouses of partners in order to save cost of carrying inventory.
Let customers do the work: Customer review and rating have become a rage on the internet. Amazon and eBay have mastered the art of using the sales channel, both consumers and producers, to provide product reviews.
One distribution method doesn't fit all: The assumption that all customers prefer the same sales channel has to be revised. Traditional retail outlets, online resources and other niche markets have to be deployed simultaneously to cater to different customer profiles.
One product doesn't fit all, either: ‘Microchunk’ is a phrase coined to denote products which can be used in parts, as a whole or by mixing and matching them. For example, news content can be fed via RSS to individual consumers in myriad ways. The chopping and changing of content is now in the hands of the consumer.
One price doesn't fit all: Markets are ever price sensitive. By providing flexible pricing schemes, it is possible to convert potential customers into buyers.
Share information: The consumer today is spoilt for choice. The information required to make an intelligent purchase should be made available, in order to ensure that consumer makes the right and informed choice.
Think 'and,' not 'or': This refers to a psychology of abundance as against that of scarcity. Consumer must be propelled to buy many products instead of making a choice between them.
Trust the market to do your job: In a market of abundance, one should not predict the outcome. The market forces would take their own course. One can only learn from experience and alter marketing strategies as a response.
Understand the power of free: Though things change, yet they remain the same. The power of freebies should not be underestimated. We, as individuals, always fall for discounts and concessions.