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.
Rafat Ali of PaidContent has pointed me to what may be the first pure-play Long Tail IPO. I'll quote from his post in its entirety, since as always he does a great job with the background info:
