Business

Thank you for continuing to read the Business & Culture Blog.  The purpose of this blog is to address those areas of innovation, leadership, entrepreneurship, technology and community that lie at the intersection of business and culture.  My law practice focuses on software licensing, entrepreneurship law, SaaS law, legal technology consulting and private equity.  My goal is for this blog to assist business owners and leaders become more excellent at their craft.  Be sure to subscribe to this blog by clicking the RSS Feed here.

~~~~~~

I read a lot of business books.  Most of these books prove of little worth to me (not worthless, just worth little).  Not every good concept requires an entire book – but it seems like there is a book available for just about every concept.

This week I found a refreshing exception - The Long Tail: Why the Future of Business is Selling Less of More by Chris Anderson.  This book is especially helpful for any marketer, retailer, or any emerging business or technology company looking to define its target market.

The gist of the book is that although large customers make up a good portion of any market, the mid-size to small customers should not be ignored as they make up a larger part of many markets.  With the rise of Internet-based sales and SaaS, it is easier than ever to target these smaller customers.  This is the “Long Tail”.

An example of the Long Tail can be seen in the rise of online sales in the music industry.  Ten years ago and before, sales in the music industry were largely made up by blockbuster album sales and large studio released songs which won radio play.  It was those top blockbuster productions that were guaranteed to sell volume and would therefore carry economic viability to make it worth while for music stores to add the album to their limited shelf space.  Now, with online sales, the cost per sale decreases (you no longer need retail shelf space), and retailers like iTunes can afford to carry hundreds of thousands (probably millions) of albums and songs.  The amazing metric is that iTunes sells at least one of 98% of its available songs each quarter. 

Here is the Long Tail curve:

From this image, the top 20% of sales make up sales in the dark blue shaded area under the curve.  The dark pink region under the remaining 80% makes up sales available in the Long Tail.  Notice that the area in the dark pink is as large, if not larger, than the area under the dark blue.

Under traditional sales approaches, the Long Tail sales were not economically viable.  Now, with SaaS and other Internet-based sales approaches, these markets have opened up.  As an added benefit, traditional business models cannot compete for the area under the dark pink (e.g., think of Walmart selling CDs (dark blue) competing with iTunes (dark blue and dark pink)).

Consider how the opportunity to market to Long Tail customers fits your business model.