Long Tail Essay Example For Students

Long Tail Essay ail Project #4: Literature Search â€Å"The Long Tail† by R. Cros Table of contents I. Background II. Thesis 1 and 2 III. Thesis Findings A. Thesis One – Consumer-Driven B. Thesis Two – Higher Consumer Engagement IV. Thesis Objections V. Unanswered Questions VI. Bibliography VII. Abstracts (compiled) I. Background As a part of the MBA curriculum, a class titled Management Information Systems was given at Roosevelt in the fall of 2009. The class dealt a great deal with how information, innovation and technology were fundamentally changing business in America. The course focused primarily on the importance of gathering data and converting it into information (for use by managerial decision makers) and on the myriad uses of internet technologies in modern business, from the supplier intinamcy to the management of the collective knowledge of employees. During the course, the professor presented students with an interesting article titled â€Å"The Long Tail† written by Chris Anderson of Wired magazine. The Long Tail, as presented, was a fascinating concept, in the context of discussions of core business functions like the value chain, consumer-driven decision making and the use of technology in marketing. As presented by Anderson, the modern internet, with its ubiquity, super-fast times and access to an unlimited cacophany of products and services, was not just another way to market products; a new-fangled television or another â€Å"space† in which a firm must have a presence. To the contrary, per Anderson, the internet was changing marketing, branding and consumer behavior completely, at elemental levels. The theory stated that bricks and mortar have traditionally abridged the number and variety of products an enterprise could reasonably stock and sell, as space is limited. Because of this, firms have had to rely on â€Å"hit† products – general items with broad appeal, of value to the widest cross-section of consumers. But the concept of the long tail states that the internet has created a new reality of infinite choice, no space limitations, low-to-no marginal costs for production and lower â€Å"search† costs for the consumer. As a result, consumers of the future will no longer focus on the blockbuster movie, the album made by the latest record company pop star, or the video game that’s ‘everyone is playing’. Instead, with the help of clickstream tracking tools (that collect data on customer web activity, process and feed to firms as useable profiling data), collaborative filtering (software that makes recommendations on future visits, based on past web visits), firms will know more, and in more detail, about consumers (Oestreicher-Singer, G 2009). These recommender systems (as exists on Netflix and Amazon for example) and product reviews from product users, consumers will be led down the tail of the curve, away from few items that sell heavily, to an almost infinite number of lower selling yet value-ladden items – selling less of more (Vallance 2007). The argument goes that, because costs to house these products are virtually nill (especially for, but not limited to digital products), retailers can â€Å"stock† them. Not only that, but Anderson argues that because consumers have been slaves to bricks and mortar, there is pent up demand for niche products whose sales will not only thicken and lengthen the tail, but also equal or best the sales in the head of the curve. This theory throws the Pareto Principle (the 80/20 rule that says, in retail, for example, that 80% of your sales will come from 20% of your products) up in the air. II. Thesis 1) The long tail concept is valid and quintessentially customer driven, not only for digital media, but also a growing number of other items in the retail universe. ) That by its nature, the long tail engages the consumer in an affective and cognitive manner that is transcendental and more impactful. III. Thesis Findings The â€Å"blockbuster† model is illustrated well by looking at Grand Central Publishing. This former subsidiary of Warner Books publishes anywhere from 250 to 300 books per year; most at a loss. The leadership of Grand Central make tou gh decisions each year, as their strategy calls for them to cull 2 books from their three hundred, on which to focus most of their marketing time, energy and resources. The theory is that the couple books with the most potential will â€Å"carry† their year in terms of generating revenue. This strategy bears out for them. The sixty-one titles Grand Central had on its front list in 2006 incurred marketing costs of $650,000, and generated $100,000 in revenue. However, the company’s best seller from 2007 incurred marketing costs of $7m, while generating nearly $12m in revenue (Elberse 2008). This tried and true method has been used for years, across industries, to great effect – basic Pareto Principal. But the argument can be made that this is not a market-driven consumer approach. To the contrary, this can be seen as an approach that works in the perceived best interests of the firms (in terms of things like budgeting and projecting), and while it may make some use of customer opinion data (polls, responses, feedback, market-study), it can almost not help but be flawed. In reality, this may be an example of self-fulfilling prophesy, where the blockbuster products sell successfully, almost arbitrarily, because of the great investment in resources and marketing. The above scenario is one that the long tail theory tries to directly annihilate. In premise, there may be great value in the sixty-one Grand Central titles that lost $550,000 using traditional marketing strategies. Instead of the major investment, smaller, niche titles could be found on web-sites like Amazon. Reviews and recommendations could link them to other, similar items (maybe even blockbusters) and increase their value. To some, their â€Å"rarity† may even have value. Most importantly, the â€Å"spoilage† of these niche items could be alleviated beyond their year of release, beyond being placed out-of-print, to having an infinite cyber â€Å"shelf-life† (Davidson 2009). Thesis One – Consumer-Driven Information and Search The sheer depth, breadth and volume of information available on the internet has created a more knowledgeable consumer. â€Å"Shopbot† sites make it easy for people to compare prices across a multitude of retailers. The impact of imperfect information begins to wane when the consumer has access to a world of data, pre-aggregated and formed into highly useful information. Recommender systems then link consumers to similar items, and/or items bought by similar customers (Park 2008). The idea of search itself changed with the dawn of the internet age, but it has further evolved. In the old days, search meant driving down to the local mall (or two) to make product comparisons and â€Å"shop†. The internet first made this easier with the shop at home emphasis (not unlike the catalogue before it). But innovation has come in terms of making comparison much easier and more robust. The long tail takes the consumer on a journey though products â€Å"ideas†, associating the consumers’ needs in a broader sense, and not just to a certain product (Oestreicher-Singer 2009). This has had several other effects. It has resulted in: * Downward pressure on prices automatic comparison has created more perfect information for consumers (product characteristics for example), hence more competition * More interactive customer feedback and engagement; customers often submit their own ideas and products, or augment existing products directly * Less emphasis on established brands and decreased brand equity and share of customer (Morrissey 2007) Competitive Advantage These new capacities speak to a heightened competitive advantage for a number of concrete reasons. Long tail technologies help differentiate products to the consumer. They help illuminate unique, possibly ‘niche appeal’ product characteristics that otherwise must be de-prioritized in traditional marketing. For instance, reviews of a book might highlight secondary or unrealized themes or ideas not emphasized by marketers but appealing to a niche audience. This allows not just access to, but the ability for firms to focus on niche market strategies, because of superior incoming data and engagement during the purchase. Marketers can use long tail data to reveal how, why and in which ways their products are being connected to other brands and products, and make adjustments in mid-stream to tap the new, niche markets. The long tail technologies also strengthen the intimacy among customers, web-sites and suppliers. Individual customer data profiling morphs into a highly personalized service, adding value to the customer experience. When a site like Netflix already knows what may be of interest to its members, if streamlines the already manageable search and decision processes (Clemons 2008). Inherent Consumer-focus In essence, long tail theory puts the focus back on the consumer, not on arbitrary marketing strategies and brand-based decisions. Technology is the conduit for giving the consumer something they may not even know they want. Instead of filling out surveys or sending back opinion product opinion mailers, consumers leave detailed feedback on products on sites like Amazon, Netflix and the like. The ‘word-of-mouth’ reviews and recommendations act as imperfect market research; not easily quantifiable, but loaded with much, very useful product user information. Important cultural data often lies in the lengthy reviews, such as what products may be attached to certain subgroups, affinity groups, religious groups, etc†¦Particularly for media products like DVDs, music and books, for which sales have been mostly down over the past few years, technology is showing that these niche products may have low volume demand, but high value demand for consumers (Kumar 2009). The book Touching the Void is an example cited by Anderson. Released in 1988, author Joe Simpson’s story of an ill-fated mountain climbing trip in Peru was well-reviewed, but didn’t sell. Child Abuse EssayIn this regard, many found that the 80/20 (Pareto) rule was still intact and in fact the norm, sometimes co-existing with long tail strategies; in this, the top 20% sellers made 80% of the sales, but carried a much wider and varied array of products (Knowledge Wharton). The research theorized that the two concepts are not mutually exclusive. Surprisingly, some of the data showed an inverse relationship with the long tail. There is evidence that consumers may reach a point of information overload with so much choice, or actually not prefer niche products. The question as to whether consumers actually want the 4th, 5th or 80th best reggae album (for example) rises. Some data theorizes that niche products are actually preferred not by the general buying public, but by a small group of â€Å"heavy users†, more prone and apt to venture down the long tail. One study actually found that the long tail actually creates a heightened market for â€Å"hits†, possibly with consumers seeking more familiar â€Å"brands† and offerings and, again, feeling the blowback of so much easy search and myriad, available information (Tan 2008). Anderson’s theory failed to address the idea of inherent inferiority of some niche products – maybe Grand Centrals sixty-one titles were in fact not that good or appealing. When customer feedback is limited Long tail theory also does not address the instances when customer feedback is limited. Systems like collaborative filtering only work well with a sufficient quantity of data input. Research has found that it is often the case that niche products are so far down the tail, or have such limited appeal, that they do not get viewed, reviewed or otherwise evaluated. This is the Achilles heel of the long tail – the oxymoronic condition that for consumers to be funneled down the tail, they must first be funneled down the tail. Sites like Netflix do use an advanced degree of logic in how products are linked for shoppers in a small-cell manner. But sites like Amazon link products in larger categories, making them harder to find and less differentiated (Zhu 2010). This also has a boomerang effect, because ‘hit’ products are generally very highly reviewed and represented in collaborative filtering systems. So these products are more likely to appear as recommendations to consumers, and more likely to be purchased in many instances (Gomes 2008). Sabotaging the Tail Growing evidence supports the notion that major corporations have adapted their marketing strategies to maximize the positive elements of the long tail. In much the same ways that the majors have co-opted concepts like viral marketing through sites like YouTube (which currently has a corporate â€Å"video†/commercial that airs exclusively on YouTube and has received 7 million views), marketers are taking advantage of niches. In addition to simply placing convention advertising on the sites, many have theorized that companies may have found ways to †tweak† collaborative filtering systems to highlight their products, or turn loose associations into stronger connections. And as stated previously, some research is already showing that the long tail may actually benefit ‘hit’ products, as findings indicate says of these products actually increasing because of long tail technologies. In a â€Å"cream-rises-to-the-top† manner of thinking, evidence indicates that as some consumers explore the tail, they realize the products are mostly inferior, i. e. there is a reason they are not â€Å"popular†. Further more, in terms of search costs and information overload, research shows that new products appear at a rate that outstrips the consumers ability to be aware of and process them. The exception to this would be a relatively small group of heavy users (Tan 2009). Similarly, research is being to explore whether some on-line recommendations, reviews and ratings are authentic. Some research supports that sly marketers have tread into these waters as well, either using incentives (for consumers to offer positive reviews) or literally posting their own reviews to their products. Additionally, researchers are studying whether some actual customer reviews are authentic. Particularly among heavy users, opinions for and against certain products can be heavily biased, and the feedback mechanisms can be used for these consumers to voice their discontent for the product, firms or other things. PC users and Mac â€Å"Zealots† have a long-running rivalry. No doubt these computer savvy users could make use of recommendations and reviews to â€Å"slam† new products (like IPad for example) on general principal. Social Beings The most glaring contradiction, that cuts to the heart of long tail theory, is that is fails to recognize consumers as human, social beings, especially for certain products like digital media (music, films, tv and books). It was noted that Anderson did not give enough attention to the â€Å"water-cooler† effect; that consumers do not solely choose certain products based only on their attributes, characteristics and functionality. As has been discussed, culture is the values, norms, morals, symbols and accepted patterns of behavior that help us to communicate with a shared language and experience. These frameworks provide individuals with rules for navigating the world in an acceptable manner. In the same way we stand in line at the bank, or wear the same clothes and do the same cheers at a sporting event, we also seek to share cultural experiences through some of the products we purchase or services we use (Ottenfeld 2010). The viewing of Avatar, the mad rush to purchase the IPad or to religiously view the new episode of â€Å"American Idol† has a cultural element to it that is undeniable. Consumers want to share these experiences with their more traditional sub-groups; their families, their college friends, the people at the dog park or their colleagues at the water-cooler. The latest film by Spanish Director Pedro Almadovar, or album by the German Metal band Rammstein may possess are great deal of artistic relevance, but they are outliers within most of the American sub-cultural groups. Niche products have a tendency to fulfill consumers on higher levels of the needs scale. But those desires that lead consumers to seek connectedness with community, lead them to consume certain mass market products (Elberse 2008). V. Unanswered Questions Anderson’s work on long tail theory, and the subsequent research and writing on the subject have served to illuminate and inform thought and discussion on the subject. But there still remain unanswered elements that seem ripe for discussion and further investigation. Demographics The Long Tail is spoken of as a technological tsunami, universally destroying everything that came before it. While it is true that entities like Amazon, eBay, Netflix and the like possess and seeming ubiquity, an element of cultural examination seems to be missing. Anderson’s theory arguably pays far less attention to sub group demographics and characteristics like age, race. sex, income and similar factors. The Digital Divide that still exists is a major issue that is left under-evaluated. Some consumers have limited to no access to computers, let alone the internet. Though stores like Wal-Mart represent a physical approximation to the long tail (in a manner of speaking), that consumers have access to, the version Anderson purports is much broader and grander than this. Although great strides have been made to improve access to underserved communities, there are still individuals with limited access, training, capacity and/or resources to fully engage in a digital consumer culture. For example, computers with internet access are available in community libraries, but individuals in those communities may lack computer skills to use them, or even the resources to travel to the library. This leads to a more comprehensive contemplation on demographics. We know that older consumers are less likely to use computers. Individuals in certain racial and ethnic groups are less likely to use computers. It has been estimated that significant numbers of people of color and new citizens do not have bank accounts, making their ability to complete on-line purchases unlikely. People of certain socio-economic classes are more likely to use computers more often. There are regional factors that determine internet access; some rural and remote areas have less access than urban, populated areas. These and other demographic considerations pose many questions about the long tail theory. Search â€Å"Costs† Long tail theory also lacks a suitable discussion of search costs (discussed briefly earlier). Access to unlimited choice does not come without costs. In an era where consumers are burdened by time more than ever, an endless array of products can prove daunting and discouraging. Most internet consumers have experienced being taken through a seemingly never-ending chain of products, connected through filtering. The initial benefits of this are often tangible, but an element of â€Å"diminishing returns† often seeps into the process. The further the consumer journeys down the tail, there is a tendency for the products to be less connected to the initial search (Lin 2008). The familiarity of mass market products can offer a remedy to this overload. As consumers travel down the tail, viewing more products, of questionable quality and relevance, the appeal of the familiar, and its cultural significance, can be irresistible.