Anderson’s Long Tail Theory

Answer

Anderson’s Long Tail Theory

            Chris Anderson, author of the Long Tail, argues that the internet and online commerce has resulted in a rearrangement of consumer purchasing patterns. Unlike conventional markets where a majority of sales are centered around fewer products termed as “hits”, the internet has brought change to the market and now the “hits” are no longer the only market (Anderson, 2006). Anderson describes this as an end to the one-size-fits all era and a birth of a market of multitudes (Anderson, 2006). This paper sheds light on three premises on which Anderson’s long tail theory is based and summarizes a research by Erik Brynjolfsson, Yu Jeffery Hu and Michael Smith testing Anderson’s idea.

Three premises form the pillars for Chris Anderson’s Long Tail theory. First, lower distribution costs ease the burden of selling products without precise demand predictions. Traditional markets required comprehensive demand analyses and predictions since sellers were forced to pay for shelf space and sometimes excessive distribution fees. Thus, demand predictions were necessary to ensure profitability. However, advent of online commerce makes precise demand predictions unnecessary. This is because, for the first time in history, hits and niches are on equal economic footing (Anderson, 2006). For instance, with no manufacturing cost or shelf space cost on iTunes, a niche product sold is just another sale, with the same (or better) margins as a hit (Anderson, 2006). Second, the higher the number of products available for sale, the higher the chances of realizing latent demand for niche dispositions unattainable through traditional retail channels. Keller (2016) explains several factors influence consumer behavior one of which is product availability. Presented with numerous alternatives, customers can realize their desire for niche products which they would normally not know when presented with limited alternatives. For instance, Netflix (due to its ability to present millions of films and shows to each individual customer) has realized a latent demand for films that would otherwise pass as niches in the pre-internet era. Third, an aggregation of enough niche tastes results in a big new market. In his book, Anderson (2006) compares falling distribution costs to a receding tide. As they fall, he explains, they reveal a new, previously invisible land, which is a great uncharted expanse of products. This expanse of niche products (movies that never made it to the local theatre, music not played on the local rock radio station, the sports equipment not sold at Wal-Mart) has resulted in a big new market and the success of companies like Netflix, iTunes and Amazon (Anderson, 2006). Therefore, three premises form the pillars for Chris Anderson’s Long Tail theory.  

Erik Brynjolfsson, Yu Jeffery Hu and Michael Smith conducted a research to measure the long tail in online versus offline book-selling and clothing retail (Kotler, 2019). Their study concluded that online book selling provided a wide variety and thus greater customer choice. It also inferred that the use of online and catalogue channels by customers resulted in a more even distribution of products than would have been the case had they just used catalogue channels (Kotler, 2019). All these inferences confer with the long tail thesis presented by Anderson.

In summary, Chris Anderson argues that the internet and online commerce has resulted in a rearrangement of consumer purchasing patterns. Three premises form the pillars for Chris Anderson’s Long Tail theory. First, lower distribution costs ease the burden of selling products without precise demand predictions. Second, the higher the number of products available for sale, the higher the chances of realizing latent demand for niche dispositions unattainable through traditional retail channels. Third, an aggregation of enough niche tastes results in a big new market. Finally, all the inferences from the research by Erik Brynjolfsson, Yu Jeffery Hu and Michael Smith confer with the long tail thesis presented by Anderson.  downsides, hence facilitating an effective engagement process.