Week 3: Comments on the long tail theory

The podcast on the long tail theory gives an interesting concept that has become popularized over the last 2 years by Chris Anderson. Complementing this podcast is an interesting perspective of the long tail curves from a traditional and current view point that is showing a tendancy to become horizontal as explained in the 'Long Tail' article written by Chirs Anderson.

This podcast and the long tail article both give an interesting view point based on the theory on the 80-20 rule from conventional marketing getting obsolete. This is based on the distribution from the current trends in sales and marketing that shows a strong deviation from conventional marketing.
The theory says that the tail is getting fatter, because of internet which allows the user to no longer be satisfied by the highest volume or highest selling products, but instead have the luxury of pick and choose. This stems from the wide variety available in the internet, that makes it possible for the user to almost customize the product to their choice.

Amazon selling vs the classic book store concept is a classic example of modern vs conventional sales respectively, simply due to the rarity of the books now becoming a sales hit as opposed to traditional days where only the top 20% of the items accounted for the major revenue.

Also it is a low cost for online sales because production cost is very low where books are stored in central location and therefore per store there is no inventory cost and storage cost, as well as rental and leasing of the individual stores.

From a business perspective, focus changed from a few potential hits towards marketing a lot on them which were considered as no-hits loosing money conventionally. This might lead to the fact the distribution is becoming wider. THis again comes back to this business model discussed in the previous paragraph where the business can make money if it is centralized. This implies not to abandon the less prospects, but also important to retailers who look at hits as their model as losses for neglected hits.
If people are shifting in this direction, then the money spent on conventional marketing might not work and might not even payoff. Current trend is based on profiles and customized online advertising. Again, the trend setter are the books, music and video.

Classic example is the Amazon website and emails I get from them, especially over the last 2 years during my MBA years. I had purchased all my textbooks from Amazon and lo and behold overtime, I get automatic updates on books in finance, marketing etc. as opposed to engineering which was the conventional background.

Likewise another example is Netflix. It gives me a trail of movies that it thinks I would be interested based on my viewings so far.

Contrast iTunes to Amazon.  iTunes is strictly digital whereas Amazon is more based on a distribution channel. It would have implications that rely on big hits and if the long theory holds true, these companies would neglect the increasing thickening tail or the low hits and therefore neglecting the low hits would  have otherwise become a money loosing proposition.

The podcasts however cautions that the long tail might be less predictable when it comes to retailers posting or sending emails on long tail items.

I like the probability concept that the professors discussed in this podcast which could reach the value 1 that one might find the book when all the books on earth are available online in a particular digital link. This would make the distribution tail close to horizontal.