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| February / March 2010 Newsletter
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| Taking Advantage of Long Tail Economics |
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Table Of Contents |
I'm excited to bring you this month's newsletter. We will discuss an economics principle that if understood, will help your business grow online. I'll also share a few tips and tricks.Education: Taking Advantage of Long Tail Economics
This month's education section of the newsletter is inspired by a book I recently finished called The Long Tail by Chris Anderson. For anyone that does business online, this is a fascinating read. The book is about the economic term / phenomenon called the long tail and how it applies to the 21st century of business, specifically online business. I want to share a few principles with you that I found useful. When looking at a typical graph of products that sell, say, in a typical book store, you'll see a supply / demand curve like this:
Few of the products sell a lot, and a lot of the products sell a little. The goal of the traditional retail store with its limited and expensive retail space is to fill the store with the best sellers -- those "hit" items that will sell well. The items that don't sell a lot take up too much precious shelf space, so stores top carrying them. However, as stores move online, the marginal costs of adding an additional product to the online store "shelf" (aka website) is dramatically less. Online stores have the potential of selling not only just the popular items but can offer a much wider selection and can sell more niche items. Each niche item does not sell as much as a hit item, but the collection of the sales of the niche items can make up for a large portion of the business' profits. The Internet has helped many people who offer niche products become successful. Niche products or niche stores are long tail items. For example, a business that specializes in monogrammed pet bowls (something very niche and specialized) could not have been able to reach a substantial market years ago compared to what can be reached these days to the Internet. Good search engines, directories, and the ease of connecting and communicating with others help the niche products and stores gain a wider audience. YouTube.com is another example. Just about anyone with a video camera, professional or amateur, can make a video and upload it to the site. It is now available to a millions of potential viewers. A good search function and recommendation system on the YouTube website makes it easy for people to find videos of all kinds. Not every video on YouTube is a hit, but the far majority of videos watched on YouTube are the sum of the few, not just the hits. Search engines of all sorts, including Google and niche ones (like Quilterblogs.com for finding quilting-related blogs) help people find the niches a lot easier than ever before. It's easier than ever to go into business and be found. As I type this, my father is sitting next to me looking for a car to buy for his parents. Where does he turn to to find a used car for sale in Utah? KSL.com with its hundreds of cars, listed by brokers as well as those selling their cars by owner at no charge. The selection is fantastic and the ability to filter through the large selection to find what you want is very good. KSL.com is a great example of a long tail car classifieds site. The rise of digital-only goods makes more sense of long tail economics. For example, iTunes sells forty to fifty times more music tracks than a good sized record store. They simply can hold more items to sell because the digital songs don't take up any physical space -- they're just bits stored on hard drives. I run an online quilt pattern store that takes advantage of this same concept. The Quilt Pattern Shoppe sells only digital copies (in the popular PDF format) of quilt patterns, bringing warehousing and shipping costs to zero. Another neat aspect of doing business online is that you no longer technically need to ship the products yourself. For example, the e-commerce giant Amazon.com ships only a few of the items on their online store. Amazon is arguably the largest online store because it has such a huge selection of products -- hundreds of thousands of books, thousands of toys, food, home dec, etc. Customers like selection because they can choose instead of having choices forced on them. Here is the neat part: a lot of items for sale on their site are fulfilled by other supplies on demand. Amazon doesn't warehouse those millions of products. Amazon simply takes care of the payment and customer relationship. Amazon contacts the supplier when an item sells and the supplier fulfills the order. In conclusion, the businesses that will succeed online and take advantage of the new long tail economics offered by the Internet will focus on two things. First, they will increase their selection of products because the cost to offer those items are small. Selection interests buyers. Secondly they will make it easy for people to find the items they want through good search functions. Cool Tip: List Your Website on Free Business DirectoriesListing your business in directories is a good way of gaining more exposure. There are hundreds of business directories online, some are free, others are paid. Below is a list of a few directories that I've used and recommend.
Upcoming WebinarsWebinars are online seminars. Danemco will be holding webinars every month this year. Each webinar is about an hour long, is educational, and workshop-oriented. Everyone is invited to participate. Please e-mail me if you have any specific topics you would like to discuss. You can always get a list of our upcoming webinars and how to join by going to http://www.danemcoweb.com/webinars/. All times below are in Mountain Time.
How Are We Doing?How is Danemco doing? How is our level of service and quality of
our products? I am compiling a list of ways to improve the way our
products work, subjects for future newsletters, and ways to improve our
service to you. If you have any ideas of how to improve the way
Danemco operates, please let me know. If you have any questions about
the Web, E-commerce, or other topics that may be good for a future
newsletter, please send me a note. Please call or e-mail your
suggestions to my e-mail address and include “Make Danemco Better” in
the subject. Thank you for reading. Please forward to a friend. Dan Purcell If you wish to reprint the Education portion of this newsletter, authorization is hereby granted as long as the source is clearly cited as follows: < Reprinted with permission from Dan Purcell, Danemco LLC. www.danemcoweb.com and www.websitesforquilters.com > If this was forwarded to you and you want to subscribe please go to http://www.danemcoweb.com and click the Newsletter link. Questions, ideas, or thoughts for future newsletters? E-mail service@danemco.net.
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