In support of the Long Tail

The special (Jul-Aug) edition of Harvard Business Review released this week to commemorate the 100 year anniversary of the Harvard Business School includes an article by Anita Elberse "Should you invest in the Long Tail" (page 88). In the article Anita questions the way in which online sales have played out over the last couple of years and compared this to the behaviour predicted by Chris Anderson's model of The Long Tail.

The Long Tail's general thesis is that the reduced costs of inventorying large numbers of low-volume products (the 'tail') will lead to companies generating new revenue streams beyond the traditional model of 'block-buster' or 'superstar' products (the 'head').

Elberse inspects sales data from sites such as QuickFlix, Rhapsody and Nielsen VideoScan and Nielsen SoundScan 'which monitor weekly purchases of videos and music through online channels and offline retailers'. Looking at Rhapsody over a 3-month period Elberse finds that 1% of titles accounted for 32% of sales; 10% accounted for 78%; and a total of 1 million titles were available for download.

Chris has already commented on the article over at thelongtail.com where he looks at the different definition of 'head' & 'tail' he and Anita use in their analysis, and the different conclusions one reaches as a result. I won't bother going through the same points other than to say that: if you're going to critique a theory based on data your gathered, the least you should do is use a definition consistent with the original theory.

So, lets look instead at the part that really caught my attention - Implications for Strategy - the recommendations for retailers Elberse puts forward based on her analysis of the retail data.

1. If your goal is to cater to your heavy customers, broaden your assortment with more niche products. Despite the earlier conclusion about the Long Tail not being borne out by the data, this is essentially a long tail strategy. Although Elberse offers it with the full expectation that those niche products won't really sell, but will attract more people to the store to buy the block-busters.

The success of a long tail strategy relies on a strong referral network fueling new customer acquisition as a way of maintaining the low-cost positioning necessary. The breadth of the offering is one of the key factors attracting new customers.

2. Strictly manage the costs of offering products that will rarely sell. If possible, use online networks to construct creative models in which you incur no costs unless the customer actually initiates a transaction.

This recommendation seems to me to be so obvious as to be trivial. A Long Tail strategy is impossible to pursue effectively if you are accumulating costs associated with inventory regardless of sales. In order to offer a broad catalogue of product for sale it is imperative that inventory costs are either zero or entirely dependent on a sales transaction occuring.

3. Acquire and manage customers by using your most popular products. Again, this seems like trivial advice. Of the examples offered, only the provision of a recommendation engine provides any real value to the customers. Unlike "designing the flow of web pages so that consumers, even those searching for hit products, are naturally directed into the tail" - I was really surprised at this as it appears to fly in the face of any modern concepts of service design and customer-centredness. Especially as it also seems to conflict directly with the fourth tenet:

4. Even though obscure products may have a higher profit margin, resist the temptation to direct customers to the tail too often, or you'll risk their dissatisfaction.

I was a little disappointed to see no mention here of social networks and their value as a means of promotion of the store as a source of obscure products. As a form of essentially free marketing, it would seem to me that actively cultivating social network effects as a promotional tool would be high up on the list of advice to retailers hoping to take advantage of long tail economics.

I was also disappointed that Elberse performed no analysis (at least none that was shared) on how the product profile of heavy customers changes over time. Were their early purchases block-busters or obscure products? How about their more recent purchasing activity: in the head or the tail?

Finally, I would have like to have seen a comparison carried out between online & offline purchasing profiles with respect to the purchase of 'head' or 'tail' products.

I do agree with Anderson's happiness to see such a well-researched piece appearing in the HBR, and on a topic so close to our hearts. Following so hard on the heels of Tim Brown's article in the June 2008 issue on Design Thinking, it is especially pleasing. However, I don't agree with the slant Elberse has taken in her interpretation of the data, nor the strategy advice offered to retailers.

Take a read and let me know what you think.

Workshop ideas - which would you prefer

Planning ahead for a few conferences that are coming up in the next 6-9 months and I'm looking to develop a half or full-day workshop...

I have two ideas and I'm curious what people think:
i) Creating research-based personas - from surveys& analytics to finished product; or
ii) UX Strategy - defining & aligning UX strategy to meet corporate goals.

Which would you prefer to see at your next UX conference?

Busy times for Meld; busy times for me.

The past month has been a really jammed-pack one over here at Meld.

You probably already know that I was invited to speak at the Web Direction UX '08 conference down in Melbourne in May. The conference went off really well, and a lot of kudos is deserved by the organizers and the other speakers. And of course, presenting at a conference like that is pretty flat without an appreciative audience, which was a biggie. I was happy to receive some very positive feedback after the talk, including this nice piece from Matt Magain over at Site Point.

Personal stand-outs from the event were Andy Budd's opening keynote, and Jackie Moyes presentation on creating design deliverables for your internal stakeholders. Unfortunately, my own presentation meant I was unable to watch Lisa Herrod (from Scenario Seven) or Donna Maurer (from Maadmob) - two of my favourite UX pros in this country.

The conference came hard on the back of a quick trip to Vancouver for a meeting - it went all day, but yikes! - on a project to integrate 10 global legacy systems into a single customer service interface. I was fortunate to be able to have my wife along for the journey, since she's the lead developer on the project, which made the travel itinerary that much easier to handle.

Since then I've been working on four projects: two for clients; one for the business; and one personal.

The two client projects are both very interesting, but very different. The first was to produce a UX strategy for an online resource, and included a set of recommendations around the adoption of social media inside a large government department as a way of increasing engagement with one of its constituent groups (read 'audience'). That was tricky, since it involved balancing current organizational capabilities with a very distinct need for progress in this direction. The final report - which was only completed earlier today - now goes through some internal reviews before we move on to the implementation stages. But that's all for me on that one for a little bit.

The second client project can be described in a few words: 'massive', 'complex', and 'political'. I'm leading up the redesign effort on a large government intranet, and so far we have undertaken our initial planning and are three weeks in to a 6-week program of stakeholder research. We're holding one-on-one interviews (of around an hour), although sometimes with two or three people; or 3-hour workshops with up to 10 people at a time. I think so far we've fronted about 75 people, and will at least double that before we're done with this stage.

Unfortunately, I can't say too much more about this one for now, but it will make for an awesome case study in about a year.

On the business front I've just finalised the design of a logo for the company (!!) and am getting business cards printed this week. You can see the logo and design style over at the Meld site. I'd love to know what you think. A very big thank you to the folks over at Boomworks for their patience and expertise in dealing with such a noob client. In all my years in business, this is the first time I've gone through this exercise, so I needed a fair degree of hand-holding :)

And finally, my personal project. I'm in the process of developing what I hope will become an interesting workshop for people who'd like to learn step-by-step how to develop research-based personas or audience segments. I'm doing some reading of fairly heavy-duty statistical modelling and analysis texts, with the aim of translating that knowledge into some fairly simple, actionable steps starting with surveys and finishing up with either audience segmentation or fleshed-out personas. I'm not sure yet how it's going to go, but I'm aiming to be in a position to deliver it in late September at the next Oz-IA conference.

Of course, at some point I'd also like to get an actual presentation written for Oz-IA on something other than statistics! I have an idea, which I think might be appropriate, but more on that another time.

Don't forget - tell me what you think of the new logo!