The Long Tail Theory – How to build a successful company in a brand new business environment

     Chris Anderson’s Long Tail theory is about one the most radical changes in the history of business since the industrial revolution. It describes an increasing shift from a market focusing on a small number of mainstream products, the so-called “hits”, located at the “head” of the demand curve, towards a market of niche products, along the “tail” of the curve. What makes this tail infinitely long is the unlimited amount of offered products, and the countless accessible niche markets that transcend geographical boundaries.

     In what Anderson calls the “old-world”, companies could not afford the storage of every single product; nor did retailers have unlimited shelf space to display everything. Only a small number of products would make the cut every year, the ones that were predicted to appeal to the market. The selected items were produced by thousands, and marketers made sure that their clients would sell big, by promoting heavily the pre-selected “hits” across traditional communication channels. The limited offer and a 360° advertising strategy pointing to the same direction led to the establishment of a locally-based, massive purchase culture.

     With the advent of new web technologies, companies like Amazon and e-Bay changed the rules of the game. By decentralizing the warehouses from one company to thousands, and by replacing physical inventories by virtual ones, this new generation of e-commerce eliminated the geographical, cost, and space boundaries regarding the production and distribution. With storage and display costs now close to zero, digital merchants are able to offer numberless, new and second-hand products from around the world to mainstream and niche markets.

How does this shift affect the consumer experience? Well, radically. The market of “hits” opened up to countless “niche markets”, where everything, no matter how old or how far they might be, can be easily tracked and purchased online, then home delivered, at impressively low costs. The new era of subcultures provides millions of online consumers with endless choices; the satisfaction of selecting what they think best; as well as convenient and economical consumer experiences.

New marketing techniques have followed suit. Ever since people have gone online to massively review and share product experiences, millions of consumers turn to their peers, instead of sponsored ads, to get an objective and trustworthy opinion. Intelligent search engine systems help consumers find brands, forums, and product reviews. Nowadays, a company can gain much more visibility in blogs, online brand communities and search results pages, than in print ads or TV commercials. Thanks to Google, practically anyone with an internet access and a cool idea can turn their hobbies into a million-subscriber community, or fundraise over a million dollars online to launch music albums and sponsor concerts.

     Anderson’s description of the evolution from sponsored to word-of-mouth marketing could serve as a great preface to Solis’s book “Engage!” Solis focused on the ways Anderson’s well-described long tail theory affected the marketing landscape. They both highlighted the need for companies to treat the Web 2.0 not as a new playground for old, one-way marketing communications, such as advertising and PR; the new media provides the companies with a unique opportunity to establish an ongoing dialogue with consumers. This dialogue allows monitoring brand perceptions, protecting reputation, customizing offerings and messages, and building customer relations.

     Anderson used examples from the music and book industries that offer an in-depth understanding of his theory’s practical applications. Anecdotal stories make readers realize that the long tail theory is based on visions that existed for centuries, but technology needed to catch up with them. It would have been interesting if Anderson had also explored the applications of the long tail theory in major service industries, such as telecommunications, banking, or healthcare, and if he had also examined the theory’s impact on Business-to-Business relations.

The Long Tail of Travel

     The transition from the “culture of blockbusters” to the “culture of niche busters” entails considerable adaptations in the business philosophy of the Greek National Tourism Organization (GNTO). Until recently, the tour operators and the tourism offices-major retailers in the industry of tourism-could only display a limited number of destinations, predicted to please their local clientele. Along the same vein, the GNTO’s “shelves” have been occupied, for decades, with pictures of islands, beaches and archeological sites. Today, the limitless website space enables the GNTO to promote a much larger variety of destinations (the mainland, ski resorts) and several types of tourism (cultural, culinary, sports tourism, agro-tourism, spa & wellness etc..) to captivate niche markets of different lifestyles from around the world.

     For a company to be successful in this new business culture, it also needs to revise its marketing goals. Traditionally, the tourism offices were solely aiming at increasing the influx of tourists. Raising tourist receipts must no longer be the end of the GNTO’s marketing efforts, but the beginning of a long-term strategy aiming at creating a community of brand loyals based on a relationship of mutual trust.

     On the tactical level, the word-of-mouth marketing gradually puts traditional advertising methods on the sidelines. A brand is as good as the prevailing perceptions in influential blogospheres. The GNTO must become an active interlocutor in its own blog and in external ones with the help of brand advocates: people who love to travel and have developed a special bond with Greece. Let’s not forget Anderson’s words: “the most effective messages come from peers.”

     Finally, both readings pointed out the importance of monitoring the web discussions. With the travel blogs becoming the new “tastemakers” in the tourism industry, the benefits for the GNTO from following online travel conversations are manifold: Improved brand and tourism services based on analyses of brand perceptions and travel experiences; immediate response to negative information before it leads to a communication crisis; customized offerings and messages.

Photo sources:

The Long Tail: http://www.learningsolutionsmag.com/articles/154/e-learnings-long-tail-leaving-walmart-to-buy-from-amazon

Book cover: http://roomoftheelephant.wordpress.com/2010/11/09/book-review-the-long-tail-by-chris-anderson/

Chart table: http://www.emarketer.com/Article.aspx?R=1008302  

The Long Tail of Travel: http://www.hotelmarketingstrategies.com/tag/pricing/

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This entry was published on June 10, 2012 at 10:41 pm. It’s filed under Social and Digital Media JHU and tagged , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. Follow any comments here with the RSS feed for this post.

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