The Bell Curve and Long Tail of Value Propositions

Been thinking about The Long Tail (and I’ve ordered Chris Anderson’s book) and the bell curve and how they relate to what seems like an ever accelerating array of value propositions.

The premise of The Long Tail is that where the opportunity cost of inventory storage and distribution is high, only the most popular
products are sold. When the Long Tail works, minority tastes are
catered to, and individuals are offered greater choice. The bell curve dictates that there is a tail on either side of the bell curve — one for early adopters that are pre-peak and one for laggards that are post-peak.

So how do these two distributions map to one another? If you identify trends or fads, do you focus on the front part of the tail where the most volume will be sold in the near term…or do that *and* figure out how to keep products around in perpetuity to satisfy those buyers in The Long Tail? Also, how does a Web 2.0 offering (or any product or service) compete and stick around when they’re mainly servicing a small number of customers in The Long Tail?

Since I’m deeply involved in collaboration, social software, community and communications, I’ve invested some time in looking at as many value propositions as I can to see who is doing what and what is being offered. If you just take the web conferencing space alone, there are literally dozens of vendors out there with a handful well known (WebEx, Go-to-Meeting, etc.). But there are literally dozens of others that essentially do the same thing with few points of differentiation.

Couple that with the explosion in Web 2.0 offerings (check out my friend Christopher Mengel’s great compilation of Web 2.0 lists here) and you can see that The Long Tail of possible users is going to have real difficulty supporting all of these Web 2.0 offerings!

Everywhere I turn people are pitching the free model. “Join us now…it’s free!” they scream on their home page in the hope of building a critical mass of users that can somehow, someday be leveraged into a paying business model (which is usually a step-up that is just a hair better than the free version in the hope that the free users will upsell themselves).

I’m involved in a startup right now (and with several firms in a second collaboration) where this free-to-paid-building-a-critical-mass stepup model is key to the future success of both organizations. With all the competition and others trying to build critical mass for their offerings that are only a mouse click away, what are the points of differentiation? How will people discern if “X” offering will meet their needs and be able to self-sustain financially and be around for awhile?

When you look at how big-box retailers have forced out smaller ones (e.g., Best Buy, Walmart, etc.) you can see the drive toward efficiency and lower costs…but at the expense of choice. For example, I often walk into Best Buy and find that they only stock the middle of the bell curve (or mass part of The Tail) and don’t carry either the products I, as an early adopter, want to buy or I, as a Long Tail purchaser of older and sometimes esoteric items, would buy if they were only available at retail.

So I buy on the ‘net again-n-again.

Big questions and they may only be answered as we all figure out more efficient ways of storing and shipping goods and services that have a minimal cost structure or one that can scale without significant increases in cost.

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2 Comments

  1. Ryan Wall on July 12, 2006 at 11:04 am

    I tried to link to the Web 2.0 listings, but the operation failed. Just wanted to let you know. Nice blog. The Long Tail is extremely interesting, esp. with search engines and keyword research. I actually just posted a blog about international SEO and the long tail at the Unfiltered Search Press. This can be found at my company’s websiste http://www.ebizmark.com. Cheers.



  2. jd on July 13, 2006 at 10:37 pm

    You raise an interesting point. I employ a number of Web 2.0 applications for business and personal use (SocialText, Dabble DB, Box.net and BackPack). I have gravitated toward these because they offer paid subscriptions. If the application is useful enough, I am willing to pay for it. And knowing others are willing to pay for it, gives me the confidence these firms are going to be around awhile because they have a sustainable business model.



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