In Chris Anderson's book, “The Long Tail: Why the Future of Business is Selling Less of More,” he argues that many products in low demand, but personalized to individual tastes, can rival or exceed that of a few bestsellers or blockbusters. This concept is central to long tail e-commerce, where businesses focus on niche products instead of popular items. Of course, there must be resources to distribute these products, whether it be a big enough storehouse or a functioning online store. At first this seems to run counter to another concept in the industry as the paradox of choice. This paradox refers to the phenomenon that when customers are given too much choice, they freeze in indecision, even abandoning their online shopping charts!
In this post we will discuss how an online business can both offer customers enough variety in products so that they feel they are customized according to their needs, yet not enough to paralyze them from purchasing.
Understanding the Long Tail Business Model
The long tail business model is a concept that has revolutionized the way companies approach their target markets. It involves embracing the power of niche markets, rather than relying solely on mainstream offerings. The long tail model is driven by the power of the internet, which has empowered businesses to reach and connect with even the most specific customer preferences. By catering to niche markets, businesses can tap into previously untapped market segments and unlock new revenue streams.
Benefits and Challenges of the Long Tail
The long tail business model offers numerous benefits for both businesses and consumers. From diversifying revenue streams and expanding reach for businesses to providing unprecedented choice and variety for consumers, the long tail model has revolutionized the way we do business and consume products or services. However, implementing this model comes with its own set of challenges, including inventory management and tailored marketing efforts.
Effective inventory management in the long tail model often involves establishing strong relationships with suppliers and implementing advanced analytics and inventory management systems.
The Role of the Internet in the Long Tail
The advent of the internet has been instrumental in shaping and enabling the long tail business model. The internet has provided businesses with valuable tools and platforms to reach their target audience more effectively. Through search engine optimization (SEO) techniques and targeted online advertising, companies can now connect with potential customers who are actively searching for niche products or services. The internet has facilitated the growth of online marketplaces and platforms that specialize in connecting buyers and sellers of niche products.
Niche Marketing and Personalization
Niche marketing is more directed to the individual consumer than ever before, thanks to technology. The way to think about niche marketing and the long tail today is fairly well encapsulated in the world of search presence optimization. SEO professionals focus on helping companies or clients rank on the first page of Google for high-competition keywords. However, a full 14% of search queries are phrased as questions, and almost 25% of all search volume happens outside the top 100 million keywords. Businesses can tailor their systems to serve up relevant search results when long-tail keywords are searched for.
Demand and Profitability in the Long Tail
Understanding customer demand is crucial for identifying the optimal pricing strategy for each product in the long tail. A pricing algorithm that takes into account customer demand can help maximize revenue and profits while providing customers with fair and reasonable prices. By analyzing customer behavior and preferences, companies can identify emerging trends and tailor their offerings accordingly. The long tail model recognizes that niche products or services may not generate blockbuster sales right away, but their long-term potential is immense. By catering to specific customer preferences, businesses can build a loyal customer base and benefit from repeat purchases and positive word-of-mouth.
Smart Limiting of Customer Choices
Here are a few success stories from businesses who found the right balance for allowing individual customization of their customer’s products.
First, there’s the case of the now successful customer design handbag line Laudi Vidni. When Laura Kofoid began her business, she originally wanted consumers to be able to design all details of the bag. Instead, she found that by giving her customers limitless color and stitching items, she was actually hindering their options. After creating different designer bag templates that customers then used to add personalized touches, she found that orders skyrocketed into was more than $1 million in sales.
Similarly, Motionware, a Doogma customer and a leading provider of superior dance, gymnastics, team and cheer apparel worldwide, allows customers to create endless mixes and matches between various skirts and tops. Its Lettering Studio also enables custom text, style and color to appear on each cheer uniform in real time. These different details both create an illusion of unlimited choices yet limit these choices to specific personalized touches.
About Doogma customer decal and apparel store, Sportsdecals, takes customization even further, allowing customers to upload their own unique images. After completing their designs, Sportsdecals’ customers continue to engage with the brand by showing off their customized products to their friends and family via various social media platforms.
To speak to someone about customization click here.Interactivity as the Personalized Experience
Leading customizers will not only provide users with a finished design as a starting point, they will also offer customization and personalization at the precise level a customer requires.
In addition, there are a few concepts of customization that not only assist your customers in having a better user experience, but provide them with a seemingly wide array of choices. The first is called interactive bundling, which can greatly increase the average site of a cart on your site. Users mix and match different items such as skirts and blouses, furniture items, or bed linens – with all of these purchases bundled together.
Social media sharing of customer designs also adds an element of interactivity, with the share of each different design offering a different experience.
Solving the Paradox of Choice
When customers feel as though they had a hand in making the product themselves, they psychologically feel closer to it. It’s similar to investing in a child’s growth and development – you truly love the child because no one else understands how much work you’ve put into it. Odd as it may seem, this translates into online products as well.
To further illustrate this point, let’s examine the chart below:
Figure 1: Data comes from “The Ikea Project” and the “I Designed it Myself Effect in Mass Customization”
As you can see, customers who built their own t-shirts, snow skies, origami and Ikea boxes all were willing to pay more for their item than for a similar item that was already built. This perception translates to higher revenue and earnings.
As your company develops, you might consider integrating customization into your business in order to grow your business. Understanding the paradox of choice and what the long tail has to offer, how to solve the paradox of choice and the reward that results from it will give you a strong foundation for deciding more minute details of your product customizer and how it can best be tailored to suit your customers’ needs.
To speak to someone about customization click here.
