Think Niche

A few years ago I read Chris Anderson’s “The Long Tail” and I’ve been reflecting recently that more than ever, our world continues to split and fragment around niche culture.

‘Think Niche’ should be a slogan all small business owners and entrepreneurs operate by. Anderson’s book is widely cited and known but even to this day it still strikes a chord — providing a lens by which anyone from any background or discipline can glean a sharp focus on what is driving consumer demand globally.

The primary premise of The Long Tail is the ‘hits’ (mainstream products, services & markets) that have dominated our culture and economy to date are becoming fewer and farther between. They are being squeezed from the demand curve by a huge number of niches in the tail.

This is due to:

• Democratised tools of production (personal computer, mobile devices, software, 3D printers)
• Democratised distribution (the Internet allows the smallest and most obscure player/product/service to be heard, found and connected)
• Filters and Recommendations (connecting you with the niche people/products/services you are interested in)

Collectively, these niche products comprise a market size rivaling the hits. The now well-known companies that have aggregated niches into Long Tail markets are the likes of Amazon, iTunes, Netflix, eBay, YouTube and Google.

These companies employ a range of strategies such as digital production, self-service models and marketplace programs to ensure their marginal cost of carrying further inventory is close to or equals zero. For them, riding the long tail as far down the demand curve as it goes, makes sense — to do so is virtually costless.

But what about products which are produced in the physical world or which must be stored in a warehouse somewhere incurring real costs along the way? What can companies and startups do to offer a wide variety of products that cater to the many different niche preferences of its customers — and still be profitable?

Here’s some tips for thinking differently about a one-size-fits-all product offering:

• Offer a range of core products to resellers — and offer a vastly expanded range of products online. For example this is what LEGO does with it’s LEGO sets. The costs of centralized warehousing and distribution is much lower than decentralized distribution via many resellers — therefore range is limited via decentralised distribution, but vastly expanded via centralised distribution.
• Offer each product in a range of core, proven colours to resellers — and then in a vastly expanded range of colours online. Use this as a way to measure — rather than predict — what’s going to be a hit with your market and what’s going to be niche. Keep the niches online where the costs of distribution are lowest and channel your high-volume hits to your retailers.
• Allow your customers to customize the delivery time of your product online. Some customers want your product tomorrow or even today — some don’t mind getting it next month — give them the option. If your currently only offering the fastest mode of delivery — you’ll reduce costs, improve cash flow and maximise demand this way.
• Produce a range of casings/attachments for your product or open this up to third party developers. For example, this is what Apple does by endorsing third party iPhone cases — allowing customisation right down the tail of customers preferences for how their iPhone exterior looks and feels.
• Give your customers a forum and mechanism to rate your products and services. This provides social proof for your prospects but also provides great R&D for future product development. Map the demand curve and know what is likely to shape the hits and niches moving forward.

Hopefully this refreshes what are only some of the tried and tested ways of allowing customisation in satisfying niche tastes and demands. No longer are we dictated to by the mainstream moguls of the 20th century. Today, the economic and cultural landscape celebrates and satisfies the diversity of society.

Giving people the variety they want is critical to exploring the Long Tail of everything.

This doesn’t mean the hits will cease to exist — but “Thinking Niche” before thinking big is likely to yield more surprising results.