Leveraging the long tail refers to how a business make profits by selling specific products that appeal to a specific group of customers (niche market). Generally, these products may not sell alot but there is lesser competition to deal with and therefore, they tend to have the majority of market share. In short, leveraging the long tail aims to let these sellers(mainsteam providers) get noticed by the small niches.
This is a video by Chris Anderson who explained his theory of leveraging the long tail by comparing the power law distribution with pareto distribution (80:20 rule) where a small group of mainstream products can have a big effect (e.g. high sales rate) within a niche market.
Using the film and music industries as examples, he presented a long tail model with a distorted graph (see figure above) to explain how a bottlneck in distribution(ran out of screens) caused the distortion which brings me to my next point of the internet having infinite shelf space. Without the limitations of the physical world such as location and space, there are limitless choices of niche markets on the internet to buy and sell products.
An example of a business leveraging the long tail is GAME. The company specialises in the retail of game related products such as game consoles, video games, PC games and related accessories. Today, it has in excess of 1400 stores in Europe and Australia.
Despite having so many retail stores around Europe and Australia, GAME continues to use the internet to reach out its customers from around the world. A few reasons would be the convenience and a wide range of gaming products to choose from website. Imagine if you went to the store to buy a game only to find out that it just went out of stock? Websites like these allow customers to do pre-orders and stock checks before making their purchase.
By building on the driving forces of the long tail, GAME has reached out to customers who are lazy to make their way down to the shop due to location and without the constraints of a physical space (retail shop), they can promote all of their products through the website. It solves the dilemma of one store not having stock for a particular game but another outlet does.
The website also uses algorithmic data management to recommend other games to customers based on the genre and price of the game they are going to purchase before checking out. The “wisdom of crowds” philosophy is also being leveraged to provide ratings and reviews of the games on sale. Games are ranked by best sellers while consoles/accessories are ranked by top picks based on customer ratings. Comments on the product are moderated to control the “wisdom of the crowds”.
An entire range of self service tools such as shopping basket, wish list, product search and adding of comments are made avaliable upon signing up for an account. Users are given great control over the management of the accounts. Simple tasks such as updating personal details, payment card management and linking of reward cards to their accounts can be done easily.
Youtube Channel: http://www.youtube.com/user/game
For the more avid gamers, here’s another recommandation…
If you are interested in video game rental, visit GameFly. It has many similarities to GAME and most of the best practices of leveraging the long tail can be found on its website but their business focuses more on the rental side of things. It can be a waste of money at times if you buy e.g. a new RPG game and completed the story within a few days of purchase. As time goes, your game boxes start to pile up (white elephant). GameFly provides you with the option of renting or trade-in used video games.