The Long Tail is Chunky
The long tail is chunky? Yes.
This diagram represents an overview of 'markets'. On the fat end, we have the largest, most general 'buying/consuming' (hate that classification) segments of the population, often represented by statements like:
"18-34 year-old males"
...all the way down to statements like:
"30-34 year-old college educated Indian women in technology with young children at home who enjoy the outdoors."
(NOTE: the diagram is only 2-dimensional, so it doesn't represent where certain markets cross over and include/exclude...for the purpose of my argument, I've kept it really simple.)
The issue arises when companies take a look at the diagram and think, "I want the fat part". For instance, everyone talks about wanting to 'target' the MySpace generation these days. With numbers like 20 million this and 500,000 new members everyday, dollar signs dance in the heads of entrepreneurs. With that kind of traffic, imagine what kind of money one could make...
...but you aren't the only company with that thought. In fact, the competition for this larger group is totally fierce:
The pie here represents the piece of this market you may be able to actually attract with your product/service. Generously + for simple calculations, I've broken this up into 16 slices.
Let's assume that there are 2 million people in this segment. That means, if you were to attract 1/16th of them, you would have 125,000 customers.
Another strategy may be to talk to a smaller, less 'targeted' segment. Say, "Young women on MySpace." Perhaps you have created an online scrapbook that imports their MySpace photos and friends:
The advantage here is that you can have a slightly better idea of who your market is and what they need. The disadvantage is that it is still a pretty obvious 'play' and there are probably still quite a few others who are trying to attract this group.
Let's assume that there are 1 million young women in this segment. If you can attract 1/8th (still being generous) of them to use your scrapbooking tool, you would end up with...hey...125,000 customers. Hmmmmmm.
It's looking like there isn't much disparity between the number of customers you can win, even though the market segment is half the size. ;)
So, let's hone that down even moreso. Okay, now you are trying to attract an entirely different person. Forget MySpace. Whatever you can come up with, Tom will probably add to the feature list anyway, so why not come up with a tool for someone slightly under-represented online? Let's say, "Stay at home moms with a high speed internet connection that want to connect to other adults." This is actually quite a large market:
As you see, you get a bigger piece of the pie in this case. Sure, there are plenty of online resources for this group, but not quite as many as there are targeted at the previously mentioned groups. Here, you start to really be able to respond to the needs of your audience. Features are not totally universal, but more likely to be desired by the entire segment. In other words, you can make more people happy more of the time. Besides, they aren't 'targeted' by everyone, so winning their favor isn't as much work. The feedback loop is quite a bit tighter.
And, once again, for argument's sake, let us say that there are 500,000 "stay at home moms with a high speed internet connection wanting to socialize with other adults" and you can attract 1/4 (generous again) of them. You get...aha!...125,000 customers.
So, as you go down the long tail, you may lose sheer numbers of potential customers, but you will have an easier time actually reaching those customers. The long tail is actually very 'chunky' in that, there may be oodles of more niche markets out there, but in each of these segments, you will find a dedicated, under-represented, overlooked and easier to reach community. They may only represent 4% of the population, but if 75% of them respond to you, you reach 3% of the population. If the frequently targeted segments represent 50% of the population, but you can only reach 10% of them, you only reach 5% of the population. Not a big difference for a smaller amount of effort.
Then there is the added level of complexity that says that:
The larger the population segment, the more marketing $$ you will have to spend
Plus, it is common sense in marketing that there is also a 'ripple effect' that occurs when you delight your customers. i.e. Online moms will tell their offline mom friends, who will get online, then tell their online and offline dads...and then you have a much larger number of customers. (but this happens only when you create passionate users...see Kathy Sierra for how to do this)
I don't know. The choice is clear to me. You?
:: Brilliant quote: "As you move down the long-tail, your marketing becomes less about the product, and more about the people." - Mack Collier
NOTE #2: As well, market segmentation is very much a traditional way of thinking (demographics) about the issue, whereas, needs-based (ie. tagging, social networks, etc.) segmentation is much more powerful and crosses demographic lines. I find, however, that in the needs-based segmentation (ie. more people need clean water than fizzy water), there is still a good deal of "Who drinks fizzy water? Where do we find them?" types of questions asked. So, I am discussing demographics here to...again...simplify a very complex issue.
NOTE #3: As a Pinko Marketer, I would also never suggest speaking "to" or "targeting" or even picking a "market" - this is written as a response to a number of people asking, "How do we target the MySpace Generation?" And there are a number of companies doing this. They are actually changing the direction of their product development to 'target' this juicy market. [bonus link: Marketing vs. Micromarketing]
This diagram represents an overview of 'markets'. On the fat end, we have the largest, most general 'buying/consuming' (hate that classification) segments of the population, often represented by statements like:
"18-34 year-old males"
...all the way down to statements like:
"30-34 year-old college educated Indian women in technology with young children at home who enjoy the outdoors."
(NOTE: the diagram is only 2-dimensional, so it doesn't represent where certain markets cross over and include/exclude...for the purpose of my argument, I've kept it really simple.)
The issue arises when companies take a look at the diagram and think, "I want the fat part". For instance, everyone talks about wanting to 'target' the MySpace generation these days. With numbers like 20 million this and 500,000 new members everyday, dollar signs dance in the heads of entrepreneurs. With that kind of traffic, imagine what kind of money one could make...
...but you aren't the only company with that thought. In fact, the competition for this larger group is totally fierce:
Let's assume that there are 2 million people in this segment. That means, if you were to attract 1/16th of them, you would have 125,000 customers.
Another strategy may be to talk to a smaller, less 'targeted' segment. Say, "Young women on MySpace." Perhaps you have created an online scrapbook that imports their MySpace photos and friends:
The advantage here is that you can have a slightly better idea of who your market is and what they need. The disadvantage is that it is still a pretty obvious 'play' and there are probably still quite a few others who are trying to attract this group.
Let's assume that there are 1 million young women in this segment. If you can attract 1/8th (still being generous) of them to use your scrapbooking tool, you would end up with...hey...125,000 customers. Hmmmmmm.
It's looking like there isn't much disparity between the number of customers you can win, even though the market segment is half the size. ;)
So, let's hone that down even moreso. Okay, now you are trying to attract an entirely different person. Forget MySpace. Whatever you can come up with, Tom will probably add to the feature list anyway, so why not come up with a tool for someone slightly under-represented online? Let's say, "Stay at home moms with a high speed internet connection that want to connect to other adults." This is actually quite a large market:
As you see, you get a bigger piece of the pie in this case. Sure, there are plenty of online resources for this group, but not quite as many as there are targeted at the previously mentioned groups. Here, you start to really be able to respond to the needs of your audience. Features are not totally universal, but more likely to be desired by the entire segment. In other words, you can make more people happy more of the time. Besides, they aren't 'targeted' by everyone, so winning their favor isn't as much work. The feedback loop is quite a bit tighter.
And, once again, for argument's sake, let us say that there are 500,000 "stay at home moms with a high speed internet connection wanting to socialize with other adults" and you can attract 1/4 (generous again) of them. You get...aha!...125,000 customers.
So, as you go down the long tail, you may lose sheer numbers of potential customers, but you will have an easier time actually reaching those customers. The long tail is actually very 'chunky' in that, there may be oodles of more niche markets out there, but in each of these segments, you will find a dedicated, under-represented, overlooked and easier to reach community. They may only represent 4% of the population, but if 75% of them respond to you, you reach 3% of the population. If the frequently targeted segments represent 50% of the population, but you can only reach 10% of them, you only reach 5% of the population. Not a big difference for a smaller amount of effort.
Then there is the added level of complexity that says that:
The larger the population segment, the more marketing $$ you will have to spend
Plus, it is common sense in marketing that there is also a 'ripple effect' that occurs when you delight your customers. i.e. Online moms will tell their offline mom friends, who will get online, then tell their online and offline dads...and then you have a much larger number of customers. (but this happens only when you create passionate users...see Kathy Sierra for how to do this)
I don't know. The choice is clear to me. You?
:: Brilliant quote: "As you move down the long-tail, your marketing becomes less about the product, and more about the people." - Mack Collier
NOTE #2: As well, market segmentation is very much a traditional way of thinking (demographics) about the issue, whereas, needs-based (ie. tagging, social networks, etc.) segmentation is much more powerful and crosses demographic lines. I find, however, that in the needs-based segmentation (ie. more people need clean water than fizzy water), there is still a good deal of "Who drinks fizzy water? Where do we find them?" types of questions asked. So, I am discussing demographics here to...again...simplify a very complex issue.
NOTE #3: As a Pinko Marketer, I would also never suggest speaking "to" or "targeting" or even picking a "market" - this is written as a response to a number of people asking, "How do we target the MySpace Generation?" And there are a number of companies doing this. They are actually changing the direction of their product development to 'target' this juicy market. [bonus link: Marketing vs. Micromarketing]
18 Comments:
This looks like the 'categories versus tags' problem again.
You shouldn't be aiming your product at demographic sectors, you should be aiming it at people who need it. We all have a lot of overlapping roles - even 18-34 males aren't homogenous.
If you think tagging you have a lot of co-existing tails, of people who have school-age children, or who like strong cheese, or who commute.
mapping the affinity that fits your product back into a demographic slice is old media thinking.
I know, Kevin. These are merely examples and written as a response to the growing:
"We have to attract the MySpace kids"
dialogue I hear all around me.
I will append my post.
Nothing quite beats that myspace generation does it.. But really, it's sad how abused it has become.
I agree with your argument that smaller groups are disproportionately under-served. Or rather, larger groups are disproportionately over-served. I'm willing to believe either that a lottery effect at the top-end makes it somewhat rational of entreprenuers to focus their energy there, or that there is a lemming-like herd mentality that causes entreprenuers to over-focus on the biggest groups. Your observation could have either cause, and certainly I'd have an easy time believing either. Certainly, your observation is not altered, no matter what we decide the cause is.
However, I've thought about this issue, and personally I feel locked-out of the potential of your idea. I can think of lots of niche groups that are being underserved online - you mention stay at home moms with good internet connections. I think that the entreprenuers who will, in the end, serve these sectors best, are entreprenuers that arise from these sectors. At some point one of those stay at home moms, bored and frustrated, will decide to start an online service or community that is absolutely perfect and entertaining for stay at home moms with good internet connections. Maybe she is only waiting for her youngest child to get old enough, in another year or two, and then she will be starting her site. And I would not want to be competing with her, because she will understand how to serve that market much better than myself.
So while I agree with you, I also can't think of a way to utilize your insight. Because I wouldn't want to start something that in the end competes directly with a company lead by someone with a lot of experience with the under-served niche.
Teenagers are somewhat special category in that they don't start companies themselves, but historically the most innovative ideas for dealing with youth markets have come from entreprenuers in their early 20s - people who are still close to the teen world. Certainly it used to be common for the music labels to have a lot of 25 year olds working as talent scouts. If you've a 25 year old entreprenuer reading this blog post, then they should take encouragement from it, but for myself, I find myself in one of the largest demographics online (white males under age 40) and am not sure what under-served niche I could usefully serve.
But your post was probably not written exclusively for my benefit ;-)
And there are a lot of people reading this post who perhaps can take more inspiration from than I can.
RE: ... tagging you have a lot of co-exsting tails ...
Tagging is a good start but its still not totally clear (to me, the old guy) where this will take us.
Tagging isn't universal, and if it was, then who would trust the "tagee" (is that a word).
What I mean is, that the usefulness of tagging is limited by the aspirations, understanding and needs of the tagger, person who tags. Its personal.
At the root, is the alignment of needs with a product or service. How do we gain alignment of needs across a seemingly diverse group, and tagging is held out as one way to achieve that. I am not there yet ... when I click on a tag, I get a lot of noise, and immediately cocoon back to my own tags. My tags are cool, they resonate with me .. oh right ... they are my tags - rats!
So, having gone full circle here, the challenge for companies is to gain customers trust and belief in their product, such that they will buy it. Cluetrain says thats about consumer networking, and employee networking, otherwise known as conversatons.
So how can we get tags to be meaningful to those individual conversation threads.
I need a drink!
Colin
Another good post Tara. And you are right that it is usually just as productive to go after a niche market as it is a sliver of a large market. Also, as you move down the long-tail, your marketing becomes less about the product, and more about the people.
And I think it's much more difficult to successfully reach the niche markets, which is why many companies don't bother. The market is much more fragmented, and their wants and needs are much more tightly defined. Learning their wants and needs means surrendering some control, joining them in their community, so that their wants and needs become yours. Very scary stuff for many marketers.
It reminds me of something else Erin Kinghorn told me when I talked to her, I asked her why other record labels weren't looking at the success that Nettwerk was having with marketing 'female rockers', and saying 'we need to be doing that too'. She said "I think that they are trying to find female artists and develop them, but really they’d need to change all aspects of their company from the top down, and most labels aren’t able to do that right now....they would have to change their corporate culture".
I think that's the key. Once you find a way to marry your wants and needs to those of the community that you are marketing to, then you've created a terribly powerful barrier to entry for the competition. Not only because you are able to satisfy the community's wants and needs much more efficiently than the competition(because the community's wants and needs are also now your's), but doing so means taking what is basically a blind leap of faith in the community. And that's not something that many companies are comfortable in doing.
But those few that are, will reap big-time rewards.
I think it's about how to give control to the people you're interacting with on the goods you make.
I love this. I produce a daily national TV show aimed squarely at the 18-34 Male and it's definitely getting harder to message out to that broad of an audience.
Not that it can't be done, of course, but it's much much harder than ever before.
Wow -- you did a lot of work on this Tara--nice.
Lawrence: you make a great point, and one that I struggle with (developing for those much younger than myself). Yes, it's a big disadvantage, but then it forces you (if you're aware of the disadvantage) to listen to and get to know those you're trying to serve in a way that someone IN that group may not. You might be able to see a broader perspective and bring something in from a different domain that could add great value.
That said, I think finding and pairing up in some way with someone who IS right in the middle of your niche group is really important.
enric: ... I agree -- it's about the "how" you give control to your users, including knowing when not to.
Perhaps you might want to update this post with links to the many references to the Long Tail concept? At least to the wiki article on the subject.
Otherwise, it's a nice, accessible, very readable presentation of this important idea. And I love the term "pinko marketing". Definitely blogrolling you. :-)
@IVSTINIANVS...
Good call! Fixed. I posted in haste between a podcast and a talk...so I was majorly bad at linking out. :|
@Lawrence...
I agree that you can't be a cultural tourist. But I also agree with Kathy that, if you are solving a problem for someone not in your community (maybe a friend or a family member has inspired you?), you actually should team up with someone in that community. We are doing this with WineCamp - bringing together programmers and non-profits, and seeing what will transpire! ;)
Great post - it gets to the heart of the mass marketing problem - there are actually very few mass market products.What brands can you think if that are used by more than 5% of the population? PS2, Nokia, Coke - thats about it
Most products are niche and if you target that niche then the economics make more sense. And we can now target niches by developing stuff they're interested in.
Its what they used to call direct marketing before that business got hijacked by spammers
IMHO the "targeting" is a red herring that is part and parcel of the traditional marketing metaphor of "hunting" for customers. What you describe is a more distinct "target" which is what marketers have talked about for years ala the shotgun vs. the rifle approach. You do mention the fact that a "passionate" group that you delight is more likely to talk about your product, but I think that's a much bigger part of marketing to a perpertually connected group of customers. I have posted an article that compares "marketing vs micromarketing" that tries to describe the different approach that marketers need to take when approaching a perpetually networked group of customers.
I like the colours. :-)
Nice post !! Excelllent visuals and demographics :)-
The issue at hand is what product does that real 'niche' market want ? How will we know what is wanted and by whom, when we don't even understand what is out there !!
I think you're correct that far too many people focus the largest segment, without considering the number of competitors that may be doing exactly the same thing. A lot of this is motivated by trendiness, rather than serious analysis or strategic thought.
Re the issue of "demographic sectors" vs "people who need it", Clayton Christensen has many wise thoughts on this subject in "The Innovator's Solution."
I'm late to the party here, but I just wanted to say this is a really, really well-done explanation. I like to say that it's not about the size of the audience, but about the quality of the audience.
I think we're singing from the same hymn sheet, Miss Rogue. I believe the chunking of the long tail is a very important phenomenon that we should all be aware of. I blogged today on a similar theme in a post entitled, The Long Tail In Open Space
Congratulations on the work you put in to this. I hope it gets the visibility it deserves.
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