How to profit from the Long Tail: catering to savvy consumers

A new article by Anita Elberse in the Harvard Business Review is challenging some of Chris Anderson’s conclusions regarding the importance of investing in the long tail (for a short description of the long tail theory please see here

The article titled “Should you invest in the long tail?” is based on research into buying patterns of digital media like movie rentals and song downloads.

While Mr. Anderson puts emphasis on the long tail as accounting for approximately 25% of total sales and encourages companies to spend resources building the long tail and directing users there, Elbrese cautions against it. She shows that the cut-off point happens early, the tail becomes very narrow quickly and that the hits at the head are still the main drivers of business. In her conclusions she recommends to invest only minimally in the long tail as it contributes little to the bottom line.

One of the more interesting insights in the article, is the observation that light users of these services consume almost exclusively hits, while more savvy consumers venture into the long tail but are not always happy with what they find.

In short:

The bars of the chart show that the higher the decile, of course, the more customers rent titles within it. Note that the average number of titles shipped is much higher for customers of titles in the lowest decile than for customers of titles in the highest. Heavy users are more likely to venture into the long tail, but they choose a mix of hit and obscure products.

It seems that more attention should be given to the different behaviors of user segments as to marketing and tools that support them.

  • First time users or light users should be directed to the hits table where in over 90% of the time, they’ll find what they want.
  • Heavy users should be taken to the hits area but with recommendations and more options to explore.

Is the key to making a user a heavy user lays in the ability to introduce them into a broader set of options and by expanding their horizons making them a more profitable consumer?

Neither author addresses this question but in many cases, this is the right thing to do for long term audience cultivation and the right strategy for profiting from the long tail.

If movie buffs are the best customers of a movie rental business, invest in making movie buffs hip and in expanding the cinematic understanding of hit buyers. These passionate buyers have a disproportionate influence in the websphere and investing in providing tools for finding gems in the long tail and the context and support of users with similar tastes can help make the long tail profitable. By pushing consumers up the savvy line, they will increase their purchases and venture down the long tail making it a very worthwhile investment.

If, on the other hand you are a producer of long tail products, focus you marketing efforts on the savvy consumers and their exposure. It may be that the unexplained bump in the 6th decile is where the hits of the niche market reside.

In a different take on the long tail, John Hyde of LeftClick has a great example of the long tail as it reflects in SEO terms

It shows that as the search terms used become more specific, it reaches a smaller audience. No surprises there but the opportunity, as in the discussion above is for provider of specialty solutions to make sure they tag and use the specialty terms savvy searchers will be using.

Remember, the savvy consumer is your best customer and they are the ones who appreciate and consume the long tail.

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