The document discusses how digital technologies have enabled businesses to adopt a "long tail strategy" by democratizing production and distribution. This allows businesses to profitably offer more products by reducing costs associated with storage, distribution, and shelf space. It enables niche products and mass customization, satisfying more customer needs and creating new opportunities. While hits are still important, the long tail strategy serves all customer segments. The benefits extend beyond business to society by shifting from a culture of scarcity to one of abundance, with a more informed and satisfied customer base.
1. The Long Tail:
Democratize Production
Digital Marketing
Group A
Andrea Arenas
Estevam Sa da Bandeira
Hugo Latorre
Leticia Salama
Matthias Holland-Cunz
Natalie Jadalla
Paola Martinez
Tomas Junquera
3. A new Business Model
Before: Pareto Principle
“80% of your sales come from 20% of your products”
Don't just quot;work
Id & focus on Limiting the
smartquot;, work
those products to extension of
smart on the right
reduce Stock supply
things
Vilfredo Pareto
After: The Long Tail Strategy
The group that purchases a large number of quot;non-hitquot; items
is the demographic called the Long
Reducing the
Selling small
Increasing the focus on popular
volumes of hard-
supply of SKU items: less
to-find items
profitable
Chris Anderson
4. Businesses in which the number
of items available is much higher
to their offline equivalents
5. Music Store & Distribution Business
Customer seeking
unlimited offer
Virgin Megastore ITunes Online Store
Product Portfolio Storage & Prices Amount of Convenience & Prices
operating cost SKU`s Information
The lack of shelf space in iTunes allows for the offer of thousands
more titles and also more obscure ones at a better price.
6. Used-Car Business
Crowd sourcing:
Cheaper and better
CarMax Store Carmax Online Store
Product Portfolio Information Prices Barriers of Product Prices
distance Availability
The consumer experiences limitations when
purchasing cars at the physical lot such as higher
prices & limited product availability
7. Auction and Shopping Business
Make everything
available
Traditional Bazaar eBay Online Store
Traditional way Try product Prices Global Presence Convenience Supply and
of shopping before buying Reviews
eBay combines all available inventories from different
location points reducing physical limitations.
8. Travel Business
One size does
not fit all
Travel Agency Atrapalo.com
Non customized Professional Valuable Personalized Customization of Economies of
package offers Advice Offers Advice Trips Scale
The results in atrapalo is unbiased, immediate,
and in greater quantity.
9. Book Distribution Business
Hit products
versus niche
products
Barnes & Noble Amazon.com
High Volume Offers New and Inventory Global Inventory Niche Strategy High Demand
Focus Old Books Space Products
A niche strategy could help to avoid price
battles and focus on high profit products.
10. Why did these businesses not exist 10 years ago?
Paradox: Less time to spare but more interests to pursue
Faster processes wanted
Technology was not available Increased usage of
along with convenience
credit cards
11. Key benefits of the abundance of supply
Capable with online distribution and retail:
Price Battle
+ Real-time information available
+ Practically no storage and distribution costs
Large Volume Items
+ No physical limitation (unlimited shelf space)
= Possibility of lowering the prices
Profitability
Low Volume Items
Higher amount of
options to satisfy Mass Customization Multiple Taxonomies = Higher profitability
specific needs
Opportunities for Non-Famous Artists Cultural Diversity
12. Who produces these articles: professionals or other users?
What are the implications for businesses and users?
Semi- Amateurs
Professionals
Professionals
BUSINESSES USERS
INTERNET PHYSICAL
INTERNET PHYSICAL
Abundance of supply
Sales
Serves all needs
Space and Product
Accessible
limitation
Support
Serves all niches
Face-to-face
Profitable
13. Before the era of the Internet a product was either a hit or a miss
Hit Miss
Unlimited Shelf space
14. What are the benefits of outsourcing the creation of content to the users?
Wikipedia benefits from:
Upgraded Quality Refocus technological and Organization agility
financial resources on core
competencies.
By adding content by amateurs and professionals, the business
benefits in terms of efficiency, productivity (speed up the flow of
information) and organizational effectiveness.
15. Are economies of scale important to this business model?
Higher Volume:
High Volume: High
Hits + Misses = Increase
Net Contribution &
Niches bargaining power
Lower Costs
over suppliers
Economies of scale
Yes, Blockbusters
Satisfy mainstream Satisfy 100%
are hooks to
demand customers demand
attract audience
Are hits Needed?
16. What is the impact not only on business but also on society of shifting
from a culture of scarcity to a culture of abundance?
• Larger customer base
• Increased offering of products
• Better knowledge about customers needs
• More competition and a informed customer
Business
• Information is power for Consumers
• People are satisfied
• Increase of expectations
• Higher demand of quality
Society
BENEFITS OF DEMOCRATIZING PRODUCTIONTransferring the production to customers may achieve a reduction on the cost of training, security, operating system and database<number>
<number>
iTunes vs. Virgin MegastoreThe lack of shelf space in iTunes allows for the offer of thousands more titles and also more obscure ones.<number>
Carmax (online) vs. physical Carmax stores and other physical car dealers: With Carmax online the consumer can view the stats, photos of cars, and availability of different cars in a particular store. If you see a car in a store in another state and want it, you can request it to be delivered to your nearest store, where you can test drive it and see it in person. Carmax online allows for their entire U.S. inventory to be available to anyone in any state. Therefore, the consumer is not limited to the cars in the physical lot…<number>
eBay vs. Bazaar:On eBay for the same reasons as iTunes, the availability of products is much larger than a physical bazaar or street fair that also holds varied products. Just like carmax.com it combines all available inventories from different location points. There are no physical limitations. <number>
Atrapalo.com vs. regular travel agencies:Atrapalo automatically searches for the cheapest tickets according to your requirements (dates, location, etc…). It gathers info from all airlines and gives you all results for comparative purposes. In a physical travel agency, the results are for some reason always less, this might have to do with the programs used by the agent or purely the agent‘s willingness to help. Since there is no human element in getting the results in atrapalo, these are unbiased, immediate, and in greater quantity.<number>
Amazon.com vs. Barnes & Noble: Amazon is the eBay of books and because of the reasons cited in eBay’s case, it is also able to offer more titles than a physical book store such as Barnes & Noble. <number>
Why did these businesses not exist 10 years ago?Simply because the technology was not available, the platforms were not there. As we continued to move towards a more globalized society in terms of trade, aided by the evolution of the internet, it was only natural that we began to trade online. With the end of physical storage limitations and the increased usage of credit cards, trade could be conducted across any place on the globe. As we became accustomed to this new way of purchasing, it has become and still continues to become each time more main stream. Time is each time more scarce, which leads to consumers wanting fast and easy processes. However, at the same time the increase in leisure interests has led retailers to take advantage of the online potential in offering a greater quantity of products to satisfy ever changing and multiple consumer wants. <number>
Capable with online distribution and retail.Ease of access to the Long Tail sheer size: Higher amount of options for customers which generates satisfying demand. Offering of mass customization.Opportunity to discover new markets and expanded in existing onesPossibility of lowering the pricesMultiple taxonomies= classified within genre by genre (recent music/pop music) or offered in different forms (track by track or the whole CD), It attends all niches at the same time.<number>
There are two types of BUSINESSES:INTERNET: As we have mentioned before , sales will increase, due to no space limitation and the ability of attending to all the niches, which will be more profitable because margins may be bigger if cost is mainted, or even if cost is reduced the volume of sales will be higher obtaining higher profitability. Furthermore products are classified with gendre (multiple taxation) PHYSICAL STORE:Can be harmful for the company and may affect on the sales by decreasing them, The fact that they have space constraints and product limitation affects negatively, and they can
Consider Netflix for this question. Are economies of scale important to this business model?
Business:Larger customer base since the physical border has been overcome. Increased offering of products due to:A larger base Decreased costs because of the virtuality of the internet that there is no need for shelf space costs, rental space in an high traffic area, employees, etc. Better knowledge of what customers really want not only what the industry thinks they want. Companies will be faced not only with more competition but also with a more informed customer since now they can search for reviews and recommendations.Society:Consumers have a better knowledge of what they want.People want more products and now they have more options. Customers are happier since they can find exactly what they want not only what’s available. Consumers have more information hence will demand better quality.12