In his book The Long Tail, Chris Anderson, editor-in-chief of Wired Magazine, sheds light on how the Internet is changing purchasing habits. Anderson’s Long Tail theory utilizes the demand curve to illustrate the shift from a one-size-fits-all mass market to one of countless niches now available online. The vertical axis of the demand curve represents sales and the horizontal axis represents products. Popular products, or hits, are shown in the head of the demand curve, whereas more obscure products reside in the long tail of the curve. Hits make up the bulk of products offered by traditional brick and mortar stores, but it’s the niche products within the long tail that extends choice and availability.
Anderson argues that brick and mortar stores have to discriminate what they inventory due to costly distribution, shelf space, and a concern for supply and demand. However, when these constraints are removed, as is the case with online retailers such as iTunes and Amazon, suddenly the niche products become more profitable for retailers. Because Long Tail retailers can stock a large diverse inventory, they enjoy higher profit margins and offer consumers more choice than traditional brick and mortar shops.
Anderson suggests that if you give people what they want with abundant choice and make it easy to find, demand will go into the long tail of the curve, where niche products reside. He illustrates this point throughout the book using real world examples. In one example, Anderson highlights the variation of music choices that are now available online. Music enthusiasts were once at the mercy of the limitations of conventional music stores. Now music is stored in huge digital libraries providing online shoppers a seemingly limitless selection. This sudden abundance provides new challenges for the customers as they attempt to find their way through an overwhelming array of choices. It also provides new opportunities for sellers and service providers to create new tools to help the consumer find the perfect product.
In a recent study, MBOOTH found that purchasing decisions are determined by the type of product, high or low involvement, and the type of consumer, high or low sharer. High involvement products are classified as expensive and ones that require a long-term investment. Low involvement products are distinguished as being less expensive and subject to impulse purchasing. Anderson’s examples all described low involvement, commodity products such as music, entertainment, and books. I would argue that vastness of choice can have a negative impact, especially for high involvement products. Too much choice may leave the consumer waiting for the next best deal. This could result in indecisive consumers and abandoned shopping carts.
Consumer Purchasing Decision Path
Image Source: MBOOTH
Anderson offers advice on placement of products and stretching out the demand curve but he falls short on the conversation part of the interaction. The build-it-and they-will-come mentality doesn’t work. As demonstrated in Engage!, Brian Solis argues that brands must listen to the conversations that are taking place in the social space. Not only must they listen but they also must respond to relevant conversation with appropriate tone. Anderson provides success stories of companies that were at the forefront of digital retail boom. I believe it will be difficult for new companies to enter this space without offering something unique and actively interacting about it.
My client is the Patuxent Habitat for Humanity. Their mission is to provide affordable housing for those in need. To do this, they depend upon donations of both material and labor. Anderson’s Long Tail theory can inform my client’s strategy to not only target large donors such as corporations and philanthropists, but to also target smaller donors and volunteers that fall within the long tail. Those volunteers may include students, community members, and faith based organizations. To reach this diverse group, my client should actively engage where relevant conversations are taking place and provide content that is insightful, has a consistent voice, and builds a foundation for people to follow, admire, and trust. For example, my client may feature guest bloggers from DIY or Lowes to share home improvement tips. They may also consider featuring success stories about projects within the community. My client should also engage on other blogs and social sites to tell their story in a compelling way that reflects their brand.
The Patuxent Habit for Humanity also turns a profit by monetizing household donations through its storefront, Restore. Often times these donations produce niche goods that may have been otherwise written off by others. My client could gain insight from online retailers by providing a means to view and purchase these products online.