Harvard Business Review had a great review of The Long Tail by Chris Anderson. Mr. Anderson posits two theories:
- First, the variety of merchandise is increasing significantly thanks to the world wide web. As the costs to merchandise additional SKU’s decreases because there the products are either digital, or because physical products don’t need to be displayed in a storefront.
Like Apple’s iTunes store, which has millions of songs, podcasts, television shows and movies
which are stored on hard drives, physical products can now be converted into digital images and can still be sold anywhere around the globe and the merchandising costs are minimal. Search and recommendation tools significantly simplify the shopping process for customers.The second theory has to do with the demand curve of unique or niche products. As transction costs are reduced, the customers with unique preferences are willing to pay more money for niche or specialy products. Digital products can be stored on inexpensive hard drives and the cost of storing and digitally merchandising these products approach zero.
The attached graphic is taken from a recent Harvard Business Review book review (try saying that 5 times fast).
If you want to read the full review, here is the address:
http://harvardbusinessonline.hbsp.harvard.edu/hbsp/hbr/articles/article....
The hard part is figuring out how these theories can be applied to your business.
Know thy customer,
Chris Hawkes
