The long tail

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The Long Tail is the name of the thesis that the classic business ABC analysis no longer applies to virtual goods. According to the thesis, companies with virtual products generate the majority of their sales with many niche products and no longer with bestsellers. This development leads to a more diverse offer that also serves smaller target groups. The term became better known in 2004 through a book of the same name by Chris Anderson .

Reason

The standard ABC analysis strategy for retail retailing with end customers is to identify C products, i.e. H. To list products that are seldom asked for and to order them from wholesalers when requested. This makes sense because C products have low sales but high capital commitment costs.

Depiction of the long tail

Due to their virtual nature, virtual goods only have marginal capital tie-up costs, so there is no need to discontinue these products. On the supplier side, this leads to a larger number of products being offered, because there is no longer any problem with being included in a supplier’s range. On the demand side, this fact means that there is greater demand for C products, since the customer can assume that these products are in the range even with niche products.

The term “long tail” is derived from the mapping of the distribution of sales across the products. The increase in C-products means that the distribution becomes "longer", i. H. has a longer tail. (See picture).

A (fictional) example

A record shop that sells vinyl records and whose range roughly corresponds to the Pareto distribution on which the ABC analysis is based makes 80% of sales with 20% of the products (see figure). 50% of the products together generate only 5% of sales, but cause high storage and capital tie-up costs. The record store has great incentives to delist this 50% and to limit itself to A and B products, i.e. to greatly reduce its range.

An online trading platform like iTunes Store has almost no storage and capital commitment costs (due to the virtual nature of its products). Therefore, there is an incentive to offer the most comprehensive range possible and to encourage musicians to include their products in the range. This increases the number of products on offer overall. In the figure, the number of products increases from 100 to 200. The long tail is created.

As customers know that the online trading platform offers every conceivable musical niche product, the demand for the niche products is also increasing. This makes the tail "thicker". This leads to the fact that the importance of the A-products for sales decreases and the main part of the sales is accounted for by many niche products, which are seldom sold, but generate the majority of sales through the quantity of the various products.

Impact factors of the long tail

Anderson works out three factors, the interaction of which creates the long tail.

  1. Democratization of the means of production : The technology that potential suppliers (authors, musicians, ...) need to manufacture products has fallen sharply in price, so that there are no longer any monetary barriers to entry. Anyone who wants to offer can do that too. In this way, the number of providers and the products on offer increases, with the newly added products generally being niche products.
  2. Democratization of sales : Aggregators like the iTunes Store or Amazon offer themselves as sales platforms for niche products and thus outsource the costs of cataloging to the providers. Since the costs of tying up capital are marginal, there are no longer any reservations about C-products.
  3. Linking supply and demand : The sales platforms can sell their products globally via the Internet and thus reach a maximum number of customer groups. Quick and easy access to the range via catalog reduces search costs for customers who can assume that they will be able to find every available product in the range. This leads to a stronger demand for the niche products, so that the “tail” of the frequency distribution becomes thicker.

criticism

The long tail thesis is largely viewed critically. The increase in the number of niche products is undisputed. However, there is hardly any evidence for the statement that niche products account for the majority of sales.

Evaluations of the sales statistics for music titles in the iTunes Store show that the tail of the distribution is getting longer and longer, but at the same time there is a concentration among the bestsellers. There were similar results when buying and renting videos.

There was a controversy between blogger Clay Shirky and Chris Anderson about the authorship of the term "long tail", as Shirky coined the term in 2003.

literature

  • Chris Anderson: The Long Tail . Niche products instead of the mass market - the business of the future. 1st edition. Carl Hanser Verlag, Munich 2007, ISBN 978-3-446-40990-3 , p. 287 (American English: The Long Tail: Why the Future of Business is Selling Less of More .).
  • Original work: Chris Anderson: The Long Tail . The future of entertainment is in the millions of niche markets at the shallow end of the bitstream. In: Wired Magazine . tape 12 , no. 10 . The Conde Nast Publications, October 2004, ISSN  1059-1028 , pp. 170–177 ( online here [accessed August 8, 2009]).

Individual evidence

  1. ↑ a b Chris Anderson: The Long Tail . The future of entertainment is in the millions of niche markets at the shallow end of the bitstream. In: Wired Magazine . tape 12 , no. 10 . The Conde Nast Publications, October 2004, ISSN  1059-1028 , pp. 170–177 ( online here [accessed August 8, 2009]).
  2. ↑ a b Chris Anderson: The Long Tail - the long tail . Niche products instead of the mass market - the business of the future. 1st edition. Carl Hanser Verlag, Munich 2007, ISBN 978-3-446-40990-3 , p. 287 (American English: The Long Tail: Why the Future of Business is Selling Less of More .).
  3. ↑ Anita Elberse: Should You Invest in the Long Tail? In: Harvard Business Review . tape 86 , no. 7/8 . Harvard business Publishing, July 2008, ISSN  0017-8012 , p. 88–96 ( (can be ordered here) [accessed on March 28, 2010]).
  4. ↑ Anita Elberse: The fairy tale of the long tail . In: Harvard Business Manager . Harvard Business Manager, August 2008, ISSN  0174-335X , p. 32–44 ( (can be ordered here) [accessed on March 28, 2010] American English: Should You Invest in the Long Tail .).
  5. ↑ Chris Anderson: Debating the Long Tail . June 2008 ( here online [accessed August 25, 2010]).
  6. ↑ Anita Elberse: The Long Tail Debate . A Response to Chris Anderson. July 2008 ( here online [accessed August 25, 2010]).
  7. ↑ a b N. Hoffmann: The end of mass taste . News from the network (63). Sueddeutsche.de, August 4, 2008 ( here online [accessed August 25, 2010]).
  8. ↑ Anita Elberse, Felix Oberholzer-Gee: Super Stars and underdogs . An Examination of the Long Tail Phenomenon in Video Sales. In: Harvard Business School Working Paper . No. 07-015 , 2006, pp. 42 ( online [PDF; 267 kB ; accessed on March 28, 2010]).
  9. ↑ Tom F. Tan, Serguei Netessine: Is Tom Cruise Threatened? Using Netflix Prize Data to Examine the Long Tail of Electronic Commerce. September 2009 ( online [PDF; 567 kB ; accessed on March 28, 2010] registration required).
  10. ^ Clay Shirky: Power Laws, Weblogs, and Inequality . In: Clay Shirky's Writings About the Internet . 1.1 edition. Brooklyn, New York February 8, 2003 ( online here [accessed March 29, 2010]).
  11. ↑ http://longtail.typepad.com/the_long_tail/2005/05/the_origins_of_.html