Netessine spoke about the paper’s findings with Knowledge@Wharton. Netessine: There are various directions. In other words, the demand curve moves away from the head and flattens toward the tail. Two years later, he publishes the eponymous book, where he elaborates his theory… Knowledge@Wharton: You’re going to talk to us about a paper that has an intriguing title – “Is Tom Cruise Threatened?” — and looks at long tail theory. The offers that appear in this table are from partnerships from which Investopedia receives compensation. “When people search for what to watch in this increasing product variety, they tend to gravitate much more towards hits.”. We have mobile. 'In the past', manufacturers had to have 'hits'. But when people search for what to watch in this increasing product variety, they tend to gravitate much more towards hits. Now we have new levels. According to Chris Anderson, there is a demand curve established in any sector: the most consumed products (hits) generate the highest demand and the least consumed cause the lowest demand. Over time, Amazon might monitor those sales and say, “Hey, this product, which used to be unknown to us, seems to be selling well. This definition deals with the business strategy use of the term. Below-the-line advertising is an advertising strategy in which a product is promoted in mediums other than radio, television, billboards, print, and film. Soon after The Long Tail was published, BusinessWeek declared that Chris Anderson’s theory was the biggest idea of the year. Knowledge@Wharton: Even Amazon seems to have caught onto this. The theory for online music was that a … This article also appears on the Knowledge@Wharton website. My understanding is their physical stores really focus on the hits. In comparison, long tail goods have remained in the market over long periods of time and are still sold through off-market channels. Chris Anderson (canderson@wiredmag.com) is Wired*'s editor in chief and writes the blog* The Long Tail. Netessine: Yes, absolutely. Of course, many niche products will just never come up. But I did wonder whether Netflix should be worried because their business model is increasingly about niches, and more content companies are trying to do the same. The Film Industry 3. An Empirical Study of the Impact of Product Variety on Demand Concentration,” coauthored with Tom Tan of Southern Methodist University and Wharton’s Lorin Hitt, was published in Information Systems Research. The days sales of inventory (DSI) gives investors an idea of how long it takes a company to turn its inventory into sales. for Rhapsody’s more obscure tunes (charted in red) makes up the so-called Long Tail. But a research paper coauthored by Wharton operations, information and decisions professor Serguei Netessine found quite the opposite effect: As consumers are deluged with a dazzling array of choices, they tend to stick to brands they know. A product if able to mobilize the enthusiasm of most of the use of ordinary people , it can be a great success. The long tail theory can be applied to the film industry in terms of how films are distributed. We attribute it to the fact that, first, it’s hard to search this huge product variety. Chris Anderson popularized a theory about the long tail effect in a book first featured in Wired in 2004 and later published by Hyperion in 2006. But so far from what I’ve seen, if anything, we will be living in a world of hits more and more. Only products that run well get a place in this. Beginning in a series of speeches in early 2004 and culminating with the publication of a Wired magazine article in October 2004, Anderson described the effects of the … The long tail is a business strategy that allows companies to realize significant profits by selling low volumes of hard-to-find items to many customers, instead of only selling large volumes of a reduced number of popular items. An Empirical Study of the Impact of Product Variety on Demand Concentration, https://mackinstitute.wharton.upenn.edu/wp-content/uploads/2018/02/20171030-MackTalk-Netissine.mp3, Navigating Digital Disruption: How to Thrive Through Innovation Management. The strategy theorizes that consumers are shifting from mass-market buying to more niche or artisan buying. Take Anderson’s signal example of … The long tail concept considers less popular goods that are in lower demand. In 2006, Anderson also wrote a book titled “The Long Tail: Why the Future of Business Is Selling Less of More.”. Netessine: I think Amazon is particularly good about it. People focused even more on hits probably because they don’t have energy to scroll on this tiny screen. as examples of businesses applying this strategy. Netessine: Absolutely. Anderson is also author of The Long Tail: Why the Future of Business Is Selling Less of More. Knowledge@Wharton: This research looks at movie rental data from about 2001 to 2005. Anderson elaborated the concept in his book The Long Tail: Why the Future of Business Is Selling Less of More. There are lots of titles that Barnes & Noble will offer you online, many more than what you can buy in the store. How can companies get around this problem? The theory of the firm is the microeconomic concept that states that the nature of companies and their existence is to maximize profits. Meanwhile, if there is demand, then Amazon is still getting its transaction. Chris Anderson is a British-American writer and editor most notably known for his work at Wired Magazine. The long tail theory, first postulated in 2004 by writer Chris Anderson, is based on the notion that as retailers use the internet to offer a greater number of products at less cost, they will no longer have to rely on big hits to prop up their sales. Although I don’t agree with many of the conclusions in their paper (like some other academics, they got confused over definitions of “head” and “tail” and fell into the common trap of doing percentage analysis in an absolute numbers world), the data was interesting. 232-The Long Tail-Chris Anderson-Business-2006 Barack 2019/08/13 2020/06/24 - hearts of the people who in the world , the business world is also true . Those products can then be shipped to the store, correct? For example- The head is a high street retailer such as HMV. What they find is, again, you get the reverse of long tail effect. When instead of 20,000 DVDs you can choose from 50,000 or 100,000 or 1 million, what happens is demand for all movies goes down…. The Long Tail: How Endless Choice is Creating Unlimited Demand - Kindle edition by Anderson, Chris. You can also look at music that you play. Now we can think about whether we want to bring it in and sell it ourselves.”. While mainstream products achieve a greater number of hits through leading distribution channels and shelf space, their initial costs are high, which drags on their profitability. An edited transcript of the conversation follows. Long Tail theory in a wider interpretation is the Wired editor Chris Anderson’s brainchild: „The Long Tail, Why the future of Business is Selling less of More” states that the items that individually have low demand, if accumulated can draw in significantly more demand and therefore can imply multiple times more income than popular products that sell in huge volume. Netessine: That’s an excellent point. The long tail theory, first postulated in 2004 by writer Chris Anderson, is based on the notion that as retailers use the internet to offer a greater number of products at less cost, they will no longer have to rely on big hits to prop up their sales. These goods can return a profit through reduced marketing and distribution costs. Meanwhile, even as consumers flock to mainstream books, music, and films (bottom), there is real demand for niche fare found only online. Not everyone has the proper bandwidth. Long-tail may also refer to a type of liability in the insurance industry or to tail risk found in investment portfolios. Chris Anderson
Initially, Anderson was the U.S. business editor of The Economist
In 2001, Anderson became the editor in chief of Wired Magazine
In 2004, Anderson wrote a blog on the Long Tail Theory
In 2006, Anderson’s blog … It used to be about 50/50. He was mostly thinking about comparing internet with brick and mortar. Now author Chris Anderson talks about some of the theory's less-obvious implications. Nevertheless, as a company they captured a big percentage of market share with only 300 or 400 titles. This limit does not apply on … But I think you are right — it’s probably much more towards the niche movies nowadays. Marketing refers to the activities of a company associated with buying, advertising, distributing, or selling a product or service. We looked at movies, partially because movies, Netflix and DVDs were the prominent examples in a book by Chris Anderson that looked at the long tail effect. Knowledge@Wharton: Amazon has relied heavily on offering tremendous variety. Netessine: Right. They allow third-party sellers to come on their platform and sell those products. The book became a New York Times bestseller and won the Gerald Loeb Award for Best Business Book of the Year, simply titled The Long Tail. If there is no demand for those products, then the sellers are going to die naturally. Knowledge@Wharton: People think DVD rentals are going out of style, but you see Redbox in every grocery store. These goods have low distribution and production costs, yet are readily available for sale. They have a box that fits 400 DVDs, and that’s it. Everyone has heard about Chris Anderson's article, book, and blog, The Long Tail. The long tail of distribution represents a period in time when sales for less common products can return a profit due to reduced marketing and distribution costs. What can you do? In December 2012, KISSmetrics … “House of Cards” comes to mind. For example, because a store only has limited shelf space. We found that, if anything, you see more and more concentration of demand at the top. Redbox is a great example. In 2004, Anderson coined the phrase "long tail" after writing about the concept in Wired Magazine where he was editor-in-chief. The long tail is a business strategy that allows companies to realize significant profits by selling low volumes of hard-to-find items to many customers, instead of only selling large volumes of a reduced number of popular items. Some of their original programming has become extremely popular. The term was first coined in 2004 by Chris Anderson, who argued that products in low demand or with low sales volume can collectively make up market share that rivals or exceeds the relatively few current bestsellers and blockbusters but only if the store or distribution channel is large enough. Such is the power of the Long Tail. If you look at an average Barnes & Noble store, they would have maybe 100,000 book titles while Amazon would have 4 million or 5 million. Knowledge@Wharton: An omni-channel strategy for a retailer might be offering their hits at the store but having their niche products online. Chris Anderson is a British-American writer and editor most notably known for his work at Wired Magazine. They look at what people like you have bought previously, for example. A team at Wharton did some Long Tail analysis on the Netflix ratings data the company released for its Netflix Prize. Movie watching increasingly is shifting towards online streaming, but not everyone likes it. Do you mostly visit a few top web pages versus niche web pages? They sell everything. KISSmetrics Received 142,149 Visitors From Long-Tail Keywords. Use features like bookmarks, note taking and highlighting while reading The Long Tail: How Endless Choice is … If you look at how many movies are available on Netflix, over time this number has been increasing and increasing. Distribution management oversees the supply chain and movement of goods from suppliers to end customer. The Long Tail is an online film distribution service such as Amazon. The phrase The Long Tail, as a proper noun, was first coined by Chris Anderson. The long tail theory –chris anderson 1. He said that with the internet and all these digital technologies coming in, people are going to increasingly shift towards niche products that are uniquely tailored to their tastes. The concept drew in part from an influential essay by Clay Shirky, "Power Laws, Weblogs and Inequality" that noted that a relative handful of weblogs have many links going into them but "the long tail" of millions of weblogs may have only a handful of links going into them. Contemporary recommendation algorithms are quite simple. When you looked at hits versus niche films in this case, what did you find? It’s even harder to search on a mobile device. That’s a safe way to offer niche products without committing too much to them. The concept overall suggests the U.S. economy is likely to shift from one of mass-market buying to an economy of niche buying all through the 21st century. Knowledge@Wharton: There’s still plenty of room for hits. Essentially, you supplement your brick-and-mortar channel with your digital channel. My daughter is the example of the average consumer: She always stops because she knows all the movies she wants, which are the hits, will be there. Chris Anderson himself says it best in The Long Tail: “The theory of the Long Tail can be boiled down to this: Our culture and economy are increasingly shifting away from a focus on a relatively small number of hits (mainstream products and markets) at the head of the demand curve, and moving toward a huge number of niches in the tail.” Anderson argues that these goods could actually increase in profitability because consumers are navigating away from mainstream markets. The Long Tail wasn’t just a pet theory; as Anderson sketched it, the phenomenon arose out of actual innovations in commerce. How Theory of the Firm Can (or Can't) Maximize Profits, Why You Should Use Days Sales of Inventory – DSI. Scrambled assortment is a strategy in which a company carries products outside of its primary line of business in order to attract more customers. For example, my co-author on this paper, Tom Tan, has been looking into what happens with product variety when you go from an internet channel to a mobile channel. We found that when new movies appear, some of them become hits, some of them become niches, and product variety keeps increasing. Second, even if you rely on some kind of a recommendation system, which every company uses now, recommendation systems are pretty basic. offerings which are in less demand compared to the actual popular product Its time has come. The paper, “Is Tom Cruise Threatened? Anderson’s research shows the demand overall for these less popular goods as a comprehensive whole could rival the demand for mainstream goods. It’s a big, big challenge to make a nice, searchable interface on mobile. The long tail has quickly become a cocktail-party meme. Let’s face it, we probably don’t watch any more movies than we used to — maybe a little bit more because they’re available on mobile devices now, but not like five, 10, 100 times more. The key difference between the opinion of the book and the study by Wharton researchers is how they define “hits” and “niches.” Netessine: That’s right. With a movie, that would be star power. It’s harder to display search results. This theory is supported by the growing number of online marketplaces that alleviate the competition for shelf space and allow an unmeasurable number of products to be sold, specifically through the Internet. That is not what we found. The head and long tail graph depicted by Anderson in his research represents this complete buying pattern. [Also,] there is only a limited amount of time that we have in a given day to watch a movie. That’s why it is critical for online sellers to develop finely tuned searches for their customers. We don’t have the latest data, so I don’t know what proportion of revenue Netflix gets from top hits versus niches. Of course, people search differently on mobile and use mobile interfaces. Knowledge@Wharton: I wasn’t too worried about Tom Cruise after reading this research. In other words, the demand curve moves away from the head and flattens toward the tail. Corporate Strategy and Innovation Conference, Program on Vehicle and Mobility Innovation, Wharton Technology and Innovation Conference, Individualized Major in Innovation Management, Is Tom Cruise Threatened? The Long Tail theory was developed in 2004 by Chris Anderson, editor-in-chief of Wired magazine. Anderson’s long tail is a theoretical rationale for the explosive growth in numbers of niche apparel brands across all retail sectors. Knowledge@Wharton: One assumption out there is that maybe people go towards the hits because there are a lot of low-quality niche films. They will enjoy those products much more than your normal hits — like hit movies starring Tom Cruise, for example. One could say that with all this internet [availability] and mobile and DVDs and so on, distribution of movies is much easier, so the market gets inundated by low-quality movies made by people we don’t know. I think just like brick-and-mortar retail is not going away anytime soon, DVDs are not going to completely disappear. Here comes the twist. The long tail is a theory devised by Chris Anderson. Knowledge@Wharton: You talk about recommendation systems and setting niche products apart by focusing on their attributes. In his ground-breaking work, The Long Tail, Chris Anderson says that there’s money to be made in the long tail of niche offerings. Topics magazine-12.10. 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