Long Tail Business Model

What Is The Long Tail?

The Long Tail: Why the Future of Business is Selling Less of More. The area under the long-tail distribution curve was said to represent the sales volume for these particular items. It showed that most inventory sales were driven by a small group of high-demand, large-volume products (similar to the Pareto Principle/Curve). Many products are sought by customers less frequently, leading to low demand and a relatively lower volume of sales. The key is selling long-tail items.

Understanding The Long Tail Strategy

It offers a solution by promoting the sales of a wide range of low-volume, low-demand, hard-to-find items to a much wider market base. This may not always drive more sales than high-demand products, but it does add significant revenue to your business and at a much lower customer acquisition cost since fewer resources are expended trying to drive sales due to the reduced competition for these items.

New Opportunities Offered by E-Commerce

One of the factors that drove the push for high-demand, large sales volume items was the inherently limited nature of traditional brick-and-mortar storefronts. Limited shelf space led to the adoption of the “Blockbuster Strategy”, whereby businesses attempted to optimize available shelf space through the sale of only popular items. However, e-commerce has no limit for goods types or quantities.

Changing Market Environment

The hard-to-find items that were initially sold through more traditional distribution channels are now slowly being adopted by an increasing number of online retailers. So businesses can capitalize on this trend to corner a piece of the niche market by building a base of loyal customers.

Increased Distribution Channels

One of the biggest challenges facing the long-tail business model was the limited distribution channels offered by most other available traditional business models. The rise of e-commerce and digital marketing has opened an entire world of channels for businesses to interact with their customers. It includes more than e-commerce platforms, but also SNS platforms, as well as other online channels with nearly limitless shelf space.

Balance between Probability and Profitability

It takes advantage of the careful balance between profitability and probability, as illustrated by the long-tail chart. The probability of selling high-demand products may seem higher initially, and in turn, this seems like it will lead to higher profitability as well.

Statistical Basis

The changing environment of the digital market means that the long tail is becoming a lot longer and flatter than more consumers are introduced to a wider variety of products and niches, most of which they may have never been exposed to if not for the digitization of the marketplace.

The Blockbuster Business Model

It is the exact opposite of the long-tail model, which means that instead of capitalizing on the long-tail segment of the distribution curve, a company would focus most of its resources on customers at the head of the distribution. It is done by selling high-demand, high-volume products which are more likely to drive a high sales volume. A relatively small number of products will drive a majority of the sales for this business.

What Are the Factors Supporting Blockbuster Strategy?

Ease of Adoption

It is one of the easiest business models that one can adopt. It involves identifying the most popular products and focusing a significant fraction of your available resources on marketing them based on the assumption that the high demand for these items will drive massive sales.

Reliability of the Method

The blockbuster does offer a degree of reliability, as more businesses attempted to add the long-tail strategy to their business structure as well.

Limited Shelf Space

One of the major drivers of the blockbuster strategy was the limited shelf space that plagued retailers. Faced with the situation, businesses decided rather take the safer choice and stick to well-known products which will help them maximize their shelf space for profit.

Trend Following

Humans are by nature highly social entities and by nature prone to creating fads and trends. Therefore, once a product has started to gain traction, it is likely that many other customers will purchase it as well.

Limited Distribution Channels

Companies with limited channels typically focus more on their popular products because they cannot afford to allocate limited key resources on low-demand items which may not give a large enough profit margin.

Individuals Tend to Want the Best

Many consumers want the best product they can get in terms of cost-effectiveness and popularity. They are reluctant to settle for less popular products, sometimes even when the low-demand product is significantly cheaper.

Profitability

Most businesses prefer to combine the blockbuster strategy with low-cost production techniques. This combination of high-demand products and a low-cost price has the potential to create significant business revenue.

What Is a Long-Tail Business Model? (Essential Ingredients)

It Lays a Strong Emphasis on Niche Products

Due to the popularity of the Blockbuster strategy, the market is saturated with high-demand items. It leads to increased competition and reduced profitability as customer acquisition costs rise in a bid to drive sales through costly marketing campaigns and distribution channels.

A Large Catalog of Items

When the total volume of a wide range of low-demand items is pooled together, it significantly increases total sales volume. This may not represent a complete abandonment of high-demand items but merely allows you to take advantage of some unique benefits of operating an e-commerce business.

It Requires Cost-Effective Management of Large Inventories

Long-tail businesses have to deal with a significantly larger inventory than other retailers, they must also find cost-effective ways to handle this challenge. One way is by utilizing centralized storage facilities, which tend to be cheaper than maintaining several physical stores.

Wide Distribution Channels Are Necessary

Distribution channels are the key tactic used to overcome the inherent disadvantage of marketing low-volume, low-demand items. It involves the various methods a business communicates with its customers and delivers value. It is the interface between the merchant and seller.

High Degree of Customer Retention

Lower-demand items may not attract a high degree of sales, but they usually encourage longer lifetime value due to greater customer loyalty. Therefore, businesses must capitalize on this to build long-term relationships with their clientele.

They Work Well For Crowdsourcing Platforms

Long-tail businesses thrive off diversity. It makes them a fertile ground for crowdsourcing platforms that attract a large degree of collaboration and co-creation from numerous paid & unpaid participants. It allows for the availability of a much wider range of products & niches. It also supports co-creation platforms as input from the customers is supported and vastly increases the product pool.

Optimized Search & Filtering Options

With the large increase in products & services, it’s necessary that users can quickly and effectively systematically navigate those options. It gave rise to a whole slew of search engines and algorithms that categorized these services & enabled customers to navigate the platform with ease.

What Does Long-Tail Mean in Marketing?

It is a marketing strategy that involves targeting a wide range of niche markets with certain products or services. It can be used by dominant businesses to increase their share of the market and attract more customers. The idea behind this theory is quite similar to the original long-tail strategy itself. Individually the markets may be seen as low-volume & unprofitable, yet when combined they can be a significant source of revenue for any business which can create a loyal customer base from later.

By focusing on niche markets there is less competition with potentially larger brands for a limited customer base, leading to higher customer conversion rates. The customer acquisition costs are typically lower due to this same reason. Customers from niche markets typically have longer lifetime value as well and offer better profit if the system is carefully employed.

Applications of Long-Tail Marketing

Long-Tail Keywords for SEO

Long-tail keywords are lengthier than average keywords, are more specific, and rank less strongly with search engines. However, they can go a long way in distinguishing one webpage from another and driving search engine users towards a particular website.

Increasing Content Using Long-Tail Content

An easy way to adopt a long-tail marketing approach is to simply increase the amount of content you create. Creating increased amounts of varied content makes it more likely for you to gain popularity amongst a wider audience. It is especially useful for a brand that has built a strong reputation through its high-demand content, though it can be utilized by smaller businesses as well.

Growing Your Followers Through Long-Tail Fanbases

It is a great way to boost further engagement is to reach out to your long-tail fan base and encourage more participation from them in any way you can. A strong focus should be placed not on just gaining more followers, but on also increasing engagement as well.

Invest In Long-Tail Link Building

Backlink is a great indicator of organic growth and a proven way to drive traffic to your website. A small number of websites provide a majority of the backlinks to another platform, leading to rapid saturation and reduced unique traffic. A good marketing strategy would be to reach out and create effective partnerships with platforms that provide you with a lower number of traffic or backlinks. Building a strong relationship with such platforms is a good way to funnel unique visitors to your platform.

Increase Your Website Footprint

Instead of focusing all resources on a single webpage, it may be more effective to spread them among various microsites and web tools, which would drive even more traffic toward the main page.

Microfinance Using the Long-Tail Method

In developing countries of Africa, some microfinance institutions have taken to giving out small-scale loans to a wide group of entrepreneurs and businesses who have been overlooked or marginalized by the traditional banking sector most likely due to their high-risk nature or lack of well-structured credit score systems in these areas.

What Kind of Customers Is Long-Tail Marketing Effective?

Culturally Diverse Clients

A company may be able to attract a particular customer segment and increase brand inclusivity by promoting the use of a particular language or factor that appeals to their unique tastes.

Crowdsourcing

Online musical platforms that practice the long-tail method through virtually unlimited online space offer a great opportunity for individuals with different backgrounds, and interests to meet together and share expertise which better drives innovation and expansion. This form of co-creation allows niche markets to have a louder voice within the market and achieve commercial success and acclaim.

Enthusiasts of Obscure Products

Many niche customer segments have a hard time finding particular long-tail items due to the challenges of chronic under-supply due primarily to poor demand for those products. By offering a stable source of obscure items for various niche groups, you can build a much wider business network through positive feedback and comments. It allows businesses to tap into patients who would have normally sat outside their core sales target and of course, increase revenue.

Things to Note when Adopting Long-Tail Model

Don’t Radically Alter Blockbuster Resource-Allocation Strategy or Product-Portfolio Just Yet

Keep Your Long-Tail Costs As Low As Possible

Focus on Marketing Your More Popular Products

Don’t Be In a Haste To Direct Customers To Your Long-Tail Products

Offer Niche Products to Loyal Customers

The Long-Tail Method Requires Significant Creative Thinking