Long Tail

Accrued Revenue

What is the long tail?

The long tail is a business strategy that allows companies to make significant profits by selling low volumes of hard-to-find items to many customers, rather than selling only large volumes of a small number of popular items. The term was first coined in 2004 by Chris Anderson, who argued that products with low demand or low sales volume can collectively build market share that rivals or exceeds the relatively rare bestsellers and blockbusters. current, but only if the store or distribution channel is large enough.

The long tail may also refer to a type of responsibility in the insurance industry or to the tail risk found in investment portfolios. This definition deals with the use of the term business strategy.

Understanding the Long Tail strategy

Chris Anderson is an Anglo-American writer and editor known in particular for his work at Wired Magazine. In 2004 Anderson coined the phrase “long tail” after writing about the concept in Wired Magazine where he was editor. In 2006 Anderson also wrote a book called “The Long Tail: Why the Future of Business Is Selling Less of More”.

The long tail concept considers less popular goods that are less in demand. Anderson argues that these products could actually increase their profitability because consumers are moving away from major markets. This theory is supported by the growing number of online marketplaces that lessen competition for storage space and allow the sale of an immeasurable number of products, especially via the Internet.

Anderson’s research shows that the overall demand for these less popular products as a whole could rival the demand for current products. While consumer products are achieving more success through the main distribution channels and storage space, their initial costs are high, which affects their profitability. In comparison, long-tailed goods have been on the market for long periods of time and are still sold through non-market channels. These products have low distribution and production costs, but are readily available for sale.

Key points to remember

  • The long tail is a business strategy that allows companies to make significant profits by selling low volumes of hard-to-find items to many customers, rather than selling only large volumes of a small number of popular items.
  • The term was first coined in 2004 by researcher Chris Anderson.
  • Anderson argues that these products could actually increase their profitability because consumers are moving away from major markets.
  • The strategy is based on the premise that consumers move from mass market purchases to more specialized or niche purchases.

Probability and long-term profitability

The long tail of the distribution represents a period in time when the sales of less common products can generate a profit due to the reduction of the costs of marketing and distribution. Overall, the long tail occurs when sales are made for goods that are not commonly sold. These goods can make a profit through reduced marketing and distribution costs.

The long tail also serves as a statistical property which indicates that a larger share of the population is located in the long tail of a probability distribution, as opposed to the concentrated tail which represents a high level of success of very traditional traditional products. supplied by traditional retail stores.

The head and long tail graphic described by Anderson in his research represents this complete purchasing model. Overall, the concept suggests that the U.S. economy is likely to shift from a mass purchasing system to a niche economy throughout the 21st century.

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