What the Long Tail isn't, Part II

A while back, somewhat exasperated by a flood of random Long Tail invocations that seemed to have little or nothing to do with the phenomena as I understood it, I posted a grumpy rant titled "What the Long Tail isn't." I started by picking on a post that had described the various permutations of possible toppings on Subway sandwiches as an example of the Long Tail. That was a bit unfair, since the Subway post was only half-serious and there were plenty of more egregious offenders out there. But my broader point was an important one: Long Tails are found everywhere, but not, you know, actually everywhere.

Now Chris Bertelli of CapGemini's innovation consultancy has submitted a quite thoughtful comment to that post, which I'll copy here in its entirety, with my comments embedded:

You were cruel to blow upon the poor chap with his sandwich example, but quote with approval the “Nouveau Niche” hypothesis at trendwatching.com a month later. The sandwich example at least relies on differences in the economics of shelf space and distribution (vs. a supermarket with pre-wrapped sandwiches) to make its case. Nouveau Niche does not.

The Nouveau Niche hypothesis suggests that people will increasingly shun mass-market items because they are mass, and seek niche products because they wish to differentiate themselves from the mass. Difference becomes a positive attribute in itself. This trend does not depend on any changes in the economics of production, marketing, sales, or distribution due to the Internet or anything else. The Nouveau Niche urge would persevere even against unfavorable economics – people would presumably pay more to be different. The Nouveau Niche urge certainly helps long tail businesses, but the two phenomena seem to have entirely different origins.

I think a fair reading of the trendwatching essay would see that the falling costs of both producing for niches and consuming within them is indeed a big part of the Nouveau Niche thesis. One quote: "New production processes, mass (!) distribution, technologies and communication channels, all enabling global economies of scale and scope, allow for virtually everything to be made and broadcast, at whatever specification, and whatever batch size." But let's return to Bertelli's comment:

You also declare that the combinatorics of customization do not equal long tail. But what if you graphed the frequencies of all the combinations sold at Subway and got a power law distribution? Subway probably achieves higher sales by customizing than they would get if they offered just ten varieties of pre-wrapped sandwich. It’s not exactly an earth-shaking example of a long-tail product strategy, but you might be wrong to dismiss it with scorn.

He's right that if you looked you'd probably get something like a powerlaw of topping choice. But most of the examples I've used are not just powerlaws, but cases where a step change in the economic cost of reaching niches has allowed the tail of the powerlaw to grow far longer. Remember that hits have a powerlaw shape too; it's just typically truncated at the point that where the net costs go negative. If Subway could find a way to improve the economics of sandwich-making so it could add another few orders of magnitude of choice to its menu, I'd be more inclined to see it in a new Long Tail light.

I come to this question while writing about the long tail for an audience that is not all scheming about Internet startups. They are companies that already exist, and make stuff. How will they know if the long tail matters to them? In particular, I am considering how long-tail product strategies apply outside of culture and media industries.

The Boston Globe carried a column on 9-1 about multiplication of product choices on supermarket shelves, and the long tail was dutifully invoked. You might say this is another case of abuse. The economics of production/marketing/sales/distribution have not changed. Shelf space at the supermarket is as finite as it ever was. The globe column fell in the “tyranny of choice” genre, which never bothers to ask why the producers add new product variants. Do they sell more in aggregate that way? Are they just trying to muscle their rivals out of shelf space? Just trying to torment us because they are meanies? Probably the latter. Proctor and Gamble really is the devil after all.

As it happens, I'm just finishing the chapter on the variety boom in the supermarket. In it, I gleefully shoot holes in the "tyranny of choice" arguments, mostly on grounds of academic myopia. The reality is that between brands, habit, price sensitivity and promotions, people are well equipped to navigate big selections without too much emotional distress. Companies may be increasingly fine-slicing their product lines and customers groups to fend off commodification and keep their margins up, but if people weren't responding by buying more, that trend would have died out long ago.

In an unrelated column in the same issue of the Globe, Alex Beam whined about the existence of 14 varieties of Coke, up from two 40 years ago. (No long tail reference -- whew!!) Coke is not stupid. Either they are trying to hog shelf space, or the niche variety strategy increases their sales in a constant amount of shelf space. As a counter-point, I thought of James Surowiecki’s New Yorker article about the movie industry changing its product strategy because of growing relative sales of (long-tail-friendly) DVDs vs. the (long-tail-hostile) box office. That seems like a great example of how the long tail actually changes producer behavior – how it becomes more than a curiosity or the stuff of start-up dreams, and becomes relevant to existing businesses.

So … the film industry shifts its strategy toward niche products, because they can make more money doing it, and that is long tail. Coke shifts its strategy toward niche products, because it can make more money doing it, and that is not long tail. Hmmm… why not? Is it because the number of movie titles in the market is four orders of magnitude larger than the number of Cokes? That suggests a difference in degree equals a difference in kind, always a suspicious premise, especially when you are happy to talk about micro-tails elsewhere. The sales of Coke varieties might also form a modest power law distribution. Perhaps it’s also fair to say the “hit” (ordinary Coke) leads people to the niches, by the simple search mechanism of putting them nearby on the shelf with a similar label.

Again, it's not the length of the Tail. It's the change in the length of tail enabled by new economics. That's not just a matter of shift in strategy; it also requires a structural change in the way products are made and sold. If Coke has accompanied its positioning shift with a change in its manufacturing and distribution to make niches more economic, I could easily see that fitting the model, too.

The movie industry example is driven by a change in the economics of marketing, sales, and distribution. Coke’s example is perhaps more of a Nouveau Niche thing, with similar or worse economics than just offering Coke and Tab. Is that the difference? If niche marketing is only consumer-driven (i.e. increases sales), with no change in the distribution model, it is disqualified from long-tailhood?

Well, the two go hand in hand. The cut-off line of retail (the number of sales necessary to make something worth carrying) is typically a matter of economics, not positioning. It easy to say that you want to offer twenty variations where you once offered two, but where is that extra shelf space going to come from? As choice goes up, inventory management becomes combinatorially more complicated, including the increased difficulty in manufacturing to forecast as the number of product variations get larger and larger.

In other words, niche marketing is easy to say. But unless it's accompanied by more efficient ways to produce, distribute and sell goods, it's hard to do.

I don't run the Long Tail Department of Certification, so it's not up to me to qualify or disqualify anybody (although I reserve the right to post grumpy blog entries if sufficiently provoked). But I will say this: any claim to Long Tailness that doesn't come with an explanation of how the economics of reaching niches have improved should be regarded with some suspicion.

Comments

[Ray Lawton]

"Again, it's not the length of the Tail. It's the change in the length of tail enabled by new economics."

I'd argue it IS the length of the Tail that makes it the Long Tail (presumptuous to argue with the guy who created the idea, but...). Specifically, I think the "long tail" exists in the sort of situation where "browsing" is no longer an efficient way to find what you want - in some ways I think the long tail has become relevant NOW because of new ways of finding and selecting items as much as lower "shelf cost."

For example, if Amazon was a REAL bookstore, you could never find anything because of the size of the store - efficient "search" and "browse" mechanisms are taken for granted a lot of the time, but they are really the key to make the long tail work. The Sears catalog has been around since the 1800s, in many ways like the Amazon of its day, but without any real search/browse, free samples, cross-linking, etc. - people didn't explore the tail in the way people can explore music via 30 second clips and playlists and what-have-you now.

You can certainly use the "long tail" label however you want, but the striking economic element to me is how niche items that were previously not readily available can be made available and highly profitable thanks to BOTH lowered display cost (no shelf needed and no store location needed) and enhanced shopping mechanisms (search/browse/related items).

[genevieve]

Agree that niche marketing is tied to economics very effectively where physical shelf space is the question - take the niche market in Australia for left handed Ibanez RG guitars for starters, of which my son is a member. If he (a) lived in America or (b) could convince his mother to buy said guitar on the Internet, there would be no problem with getting the $A1200 model. However the Oz distributor in his wisdom has decided they will only import the $A1800 model this year!! Bad dog, BAD dog. There is only one left-handed Ibanez RG for $1200 in Melbourne as we speak - it was sold to someone else about six weeks ago while we were thinking about all this. Not so much a long tail as a severely denuded one. Now we either fork out the extra dosh or start looking at Fenders with two Humbacker whatsits...or a 'Fat Strat'...

[Barry]

There is more to the "Nouveau Niche" hypothesis than meets the eye: The reason people increasingly shun mass-market items is not simply because they are mass.

There is a quality to these limited run products (as opposed to mass produced items) -- unique, handcrafted, precision made, but above all, a tendency towards a much higher quality in the design, materials and production of the good itself. Even flaws have a quirky, rough hewn quality that adds to the overall gestalt of the good.

On the other hand, defects in a mass produced item are typically thought of as due to cheap materials, poor design shoddy workmanship, least expensive production costs. Exceptions such as Honda and Lexus abound -- but they are the exception to the rule. What makes a Lexus (or even a Honda) stand out is that it is so different than most people's experience with other mass produced items.

Its not just cars, but cosmetics, magazines, food, clothing, and even websites.

Its not that "Difference becomes a positive attribute in itself." Rather, its that people who have experienced niche products have found a large part of the the appeal is the expectation of a higher quality -- due to the way niche products are produced.

Niche usually = better, and hence, and expectancy develops along those same lines -- beyond merely being different.

[Chris Foti]

"It's the change in the length of tail enabled by new economics."

To hopefully shed a little more light on this, Procter & Gamble has been working on changing the economics to enable them to explore more of what I am sure they hope will prove to be a long tail. By investing in manufacturing agility and by changing the focus of the business from "what we sold last year" to "what we sold this morning" they plan to reduce inventories dramatically, giving them the room and the money to send more new products down their supply network to grocers and, ultimately, us.

[Ed Anuff]

It seems to me that Nouveau Niche and Long Tail are opposite sides of the same coin. The companies that benefit from Long Tail economics are mass aggregation distributors, whether Amazon or eBay or even Yahoo or Google. The companies that are enabled (i.e. allowed to exist) by Long Tail economics are the Nouveau Niche suppliers. There are precious few companies that can claim to straddle both - perhaps an Ikea or a Dell, probably not a Proctor & Gamble. The key characteristics of a hybrid Long Tail/Nouveau Niche company are a large number of captive suppliers with (relative to other aspects of the business) low or no investment in the differentiation at the component/supplier level and massive investment in reducing the operational costs of managing an assemble on demand distribution model.

[brian]

Note: the below comment was sent to Chris as an e-mail first and he requested I post it here for all to view:

Chris,

Your latest post (9/6) about what should not be considered long tail phenomena--Bertelli's Nouveau Niche--go me thinking that an important criteria that has not been previously discussed in your blog posts is required for a good to be considered having the attributes of the "long tail." From your earliest comments, you cite Amazon as a retailer benefiting from the long tail because it is able to stock so many more books, cds, dvds, than a bricks & mortar retailer like Barnes & Noble and Walmart. Even more so, Apple's iTunes can profitably "house" 1.5 million tracks because it costs almost nothing to store and distribute (after taking into account fixed costs) digital goods. What both Amazon and iTunes have in common is they get a large chuck of their revenue from media goods whose price to consumers is relatively constant regardless of input costs.

Both the latest Starwars movie and the newest indy flick retails for $24.99 for the DVD despite the enormous difference in what it costs to make between the two. The brand new Harry Potter book will cost about as much as the first time author even though one got an eight figure advance and the other got maybe a few thousand bucks. Green Day's American Idiot CD can be had for the same price as the CD from American Idol reject, William Hung. What I am pointing out is that input costs have little or no bearing on what the final price of the good will be of which the distributors try to make as uniform as possible.

Conversely, for most other goods, the input costs have a direct relationship on how high the retail price will be, regardless of how nichy it is. A custom dress from designer Karl Lagerfeld costs 20 times what an off-the-rack dress from JC Penny's costs. A Ferrari will set you back $450,000 while a Honda Civic goes for only $15,000. A Rolex timepiece commands ten grand while a Casio watch can be had for less than forty bucks. In these examples, the makers of the expensive and niche goods do not and cannot price their wares so that the ordinary person can afford them even if they sought after them. These luxury goods stay niche because of affordability issues not lack of desire.

So, the criteria that IMHO needs to be included when you are talking about the long tail is an economy of production where marginal cost is a negilible amount of overall costs (and hence low distribution costs) and that industry actors price all of their goods within reach of the average consumer.

To summarize...accessibilty is the key attribute to the long tail. If the good isn't accessible to the average consumer than it cannot display the hallmarks of the long tail and becomes only an ordinary niche good.

Ciao.

[John "Z-Bo" Zabroski]

@Chris Anderson

1: If the Long Tail is really "new economics" or "new anything," then it has many eccentricities.

2: The overall theme of your "What The Long Tail isn't, Part II" blog entry is this: People are trying to find out how eccentric the Long Tail is, perhaps under the assumption that each eccentric characteristic actually means something useful.

Don't worry: Businesses will collapse when testing to see how eccentric the Long Tail is. Famous engineer and historian Henry Petrosky has mentioned that great design depends on failure, as failure is a principle of caution that guides us today. The collapse of businesses and there failure will demonstrate to observers which eccentricities are useful and which are too vaporous to make use of.

On the other hand, a collapse of goods and/or services within the business might actually be good for the business. This is referred to as planned obsolesence (deliberately incorporating faults in a product or device that will in time force the consumer to buy a new product), which (I think) is an issue you have not discussed before. A good and/or service can be come obselete either through being outmoded or through being decreased in durability. The speed at which goods and/or services are becoming outmoded is becoming very fast, but it is becoming harder to outmode finely niched products.

So, I think, with the statement "niche marketing [...needs to be] accompanied by more efficient ways to produce, distribute and sell goods" ... not enough attention can be placed on the importance of there needing to be more efficient ways to produce. But, and I suppose this is my question flipped to you, how realistic is it to continue to expect efficiency in this area? The phrase technological singularity comes to mind. What happens (to the Long Tail) if is there is a drying-out of technological innovation?

[Arun D]

I think the anonymous email posted by Brian makes some very valid points on what can truly be considered long tail ‘niches’.

I think this also implies some other important elements of long tail niches.

The individual long tail niches are NOT particularly profitable for anyone in a corporate sense. (apart from possibly the artist/creator) Sony is not particularly worried either way whether they own the rights to our obscure drum and bass artist. As such, the Nouveau Niche does not apply! The Noveau Niche ‘White Company’, is not part of any Long Tail… neither is jewishsingle.com.

However, these niches cannot be found by a consumer (hence exist) unless they exist as part of a Long Tail provided by aggregators such as Amazon and iTunes. And of course the main point of the original Long Tail article – this Long Tail provides lucrative profits and sales for the aggregators. A symbiotic relationship?

Maybe I am getting distracted by semantics, but there isn’t money isn’t in every Niche like ‘Noveau Niche’ suggests, the big money is in aggregation of the Niches. My Long Tail beats your Noveau Niche!
(BTW Not I don’t agree with the theory of an aggregation of mini tails into a long tail)

[David Locke]

So you are saying that anything that has a market smaller than a hit is a long tail market? That's more than a little disappointing.

OK, you've convinced me that the long tail isn't particularly notable.

Still, it seems like a mechanism for organizing an inventory of sub-cultures around the notion of culture as a poisson game.

[chris anderson]

David,

Not sure who you were addressing that question to, but I assume it wasn't me. I've always roughly broken the distribution curve into hits at the top, average-sellers in the middle, and niches in the tail. It's the third category that is lengthened and deepened by the new economics of distribition. All Long Tail markets have all three categories in their own domain; indeed you need the hits and the middle to bring demand to the niches.

[Shawn]

Man, I really screwed myself with that one! I guess I should have hit preview instead of post!! Anyway, what I meant to post was what you see below (the other, I guess you might be able to discern, is part of a film script I'm writing! Please DELETE IT!!)...

I think the long-tail discussion is heavily linked to marketing, so I think that there needs to be a review of marketing concepts as they pertain to it. However, business school was a long time ago for me and I'm not sure the traditional view of marketing really applies anymore. I would want a totally rethought version... a modern marketing, if you will. Technical but simple. Realistic. Not something you normally find in a textbook.

Also, I think that there has been some generalizing of the long-tail phenomenon across various products and industries and I think that takes the discussion into a realm of disarray very quickly. I believe by taking individually situations and going from beginning to end, would be more likely to lead to a full understanding.

Lastly, I discern that some people discussing the long-tail seem to come from a perspective of desiring a greater diversity when it comes to the recorded arts. I know for myself this is most certainly true. The idea is that the long-tail dynamics may lead to getting better recorded arts out to those consumers who really, really want it as this point. Takes movies for instance... Am I wrong for hoping that technology will somehow allow for movies to be created and, more importantly, distributed out to the public, without costing someone millions upon millions of dollars? If this were to become less costly, would we not have to sit through movies that are aimed at everyone, and no one in particular?

[chris anderson]

Shawn. I had wondered ;-) It seems a very creative way to make a point, although I wasn't quite sure what the point was! I've deleted the aforementioned comment, but suffice to say it really was part of a screenplay]

As for your actualy point, I'm sprinking case studies throughout the book to avoid the problem you describe. And, absolutely, long tail dynamics will lead to more culture diversity. Just look at Netflix and you can already see it emerging.

[TWAndrews]

"Again, it's not the length of the Tail. It's the change in the length of tail enabled by new economics."

Isn't it the case that more efficient distribution networks have allowed for slimmer inventories, which have in turn allowed more variety on the shelf space that was available?

For instance, where Coke, in order that it (meaning stores selling it) not run out of a product people bought regularly, needed shelf-space X for it's two products 10 years ago, it can now fit 20+ products in that same shelf space and not worry about running out?

I guess one could be pedantic and say that increases in efficiency aren't really "new economics," but it seems to me that what really does get referred to as "new economics" is just an extension of this.

Amazon doesn't actually have "infinite shelf space." They provide a virtual interface to their "shelves" and by so doing enable a much greater diversity than what one is able to find in B&N, for example. This is great, and I love Amazon, but I don't see that this as different in kind than better distribution and slimmer inventories allowing for increased diversity on existing, physical shelves.

[Elizabeth]

nything that has a market smaller than a hit is a long tail market? That's more than a little disappointing.

elizabeth
Voice of USA