Home > Enterprise 2.0 in Industry, Longtail Effect, Web 2.0 > Less of More – Your New Online Selling Strategy

Less of More – Your New Online Selling Strategy

Thinking of running a business online? Well what if I told you that focusing your sales on a small number of products was not the way to go? What if I told you that to gain your advantage over a bricks and mortar competitor you would need to sell less of more! No I am not crazy, I am referring to the theory of leveraging the longtail which was coined by Chris Anderson, the editor in chief of Wired Magazine.

Courtesy of Alex Osterwalder

The first graph is an example of the Pareto principle which is also known as the 80-20 rule. In a business context it suggests that 80% of your sales comes from 20% of your your products. Chris Anderson argues that as demand shifts down the tail, the effect would diminish.

The next below is a visualisation of the effect of leveraging the longtail. According to Anderson’s long tail blog, over the course of time if you grow the tail portion of graph,

the potential aggregate size of the many small markets in goods that don’t individually sell well enough for traditional retail and broadcast distribution may someday rival that of the existing large market in goods that do cross that economic bar.

The Long Tail theory suggests that, as the Internet makes distribution easier and technology systems allow consumers to become aware of more obscure products, demand will shift from the most popular products at the “head” of a demand curve to the aggregate power of a long “tail” made up of demand for many different niche products (Wharton, 2009).

Online companies are already identifiying the power of leveraging the longtail and have based their buisness models on this exact theory. Within the music industry platforms such as Garageband and iLike have provided the avenue for smaller bands and musicians to market their product to a specific audience which may not be catered for by the larger commerical music stores such as Sanity Music.

By selling and advertising online through platforms such as Garageband low distribution and inventory costs can allow businesses to realise a significant profit by selling a small volume of hard-to-find items to many customers, instead of only selling larger volumes of a reduced number of popular items (Anderson, 2004). By making their music available online and market it through online communities musicians have the ability to profit from the Long Tail and overcome the limitations of geography and scale. By employing web 2.0 tools to its fullest potential musicians now have the opportunity to discover new markets and expand existing ones, and ultimately expand their fan base.

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