Long Tail

Reviewed by Anjaneyulu | Updated on Aug 27, 2020

Introduction

The long tail is a business technique that enables companies to gain huge profits by selling small quantities of hard-to-find goods to many consumers rather than only selling high quantities of a reduced number of common products.

Chris Anderson coined the word for the first time in 2004, claiming that low-demand items can collectively constitute market share that equals or exceeds the few existing bestsellers, but only if the store or distribution channel is sufficiently wide.

Understanding Long Tail

The long tail idea considers low-demand and less common products. Anderson claims that the competitiveness of such products will potentially increase as consumers move away from traditional markets. This theory is supported by the increasing number of online marketplaces that ease the competition for shelf space and allow an unmeasurable amount of goods to be sold via the Internet in particular.

Research by Anderson shows the aggregate demand for these less common products as a comprehensive whole could surpass traditional product demand. Although mainstream goods achieve a greater number of hits across leading channels of distribution and shelf space, their initial cost is high, reducing their profitability.

Long-tail products, by contrast, have stayed on the market for long periods and are still marketed via off-market outlets. Such products have a low cost of production but are readily available for sale.

Probability and Profitability

The long distribution tail reflects a period where sales of less popular goods will produce a profit due to reduced cost of marketing and distribution. Generally, long tail occurs when the sales of uncommonly priced products are made. By reduced marketing and distribution costs, certain products will return the investment.

The long tail also acts as a statistical property indicating that a greater proportion of the population falls inside the long tail of a probability distribution. This is as opposed to the concentrated tail reflecting a high degree of hits from the conventional consumer goods heavily stocked by consumer retail stores.