Thursday, December 14, 2006

Book Review: The Long Tail

Long tailed marketing and short sighted politifcs

Book Review by Stewart Kiff

The Long Tail: Why the Future of Business is Selling Less of More

by Chris Anderson

As the editor-in-chief of Wired magazine, author Chris Anderson has observed the advent of the Internet and how it changed the way retail business works. His book, The Long Tail, started as an article for Wired in October of 2004 and is augmented by a very thorough and worthwhile website. Although most of us know instinctively that the Internet is rapidly changing the context of retail business, this book provides the analysis and the context to help readers understand these changes.

A long tail is the phenomenon whereby a demand curve for a retail product becomes flatter and longer, and consequently the demand for the product is better met by providing almost infinite product choices to potential customers. Consider Anderson's description of the market for retail music in the United States. Traditional retailers, even large ones like Wal-Mart, will sell only about 4,500 different titles in each store. This of course leaves a large market whose demands are unmet by this limited choice. Online retailers and providers have filled this void by providing a virtual marketplace where the customer can browse through a selection of music that no individual could consume in their lifetime. Web-based music retailer Rhapsody currently offers more than 1.5 million tracks for sale, and because it is online, Rhapsody has a virtually infinite ability to add tracks to its inventory. What it has found is that demand continues to grow as it offers more tracks. A track that ranks only 100,000th in popularity is still being downloaded some 250 times a month. The tracks from the 100,000th most popular to the 800,000th most popular still represent some 15 percent of Rhapsody's total sales. This is probably Anderson's best example of the Long Tail hypothesis: Consumers have been offered a virtually infinite number of choices and have responded positively. The Long Tail tells how this phenomenon is changing our consumer culture and ultimately our culture itself.

Virtually infinite consumer choice generates powerful market pressure, Anderson notes. More and more, individuals become fragmented in their interests. Therefore, to survive in the new marketplace retailers must cater to the idiosyncrasies of their clientele. Greater supply fosters even more demand, so as choices grow, so do those who appreciate them and demand even more choice. Such market pressure is a powerful force for change, and this book explains the phenomenon in a highly readable and straightforward way.

Highly Recommended.