Marketing

Offline Businesses Cannot Compete in The Long Tail

long tailSeth Godin reports on his blog that Borders has increased its sales figures 9% by reducing its stock by 10% and thus being able to present more books with the front to customers as opposed to presenting the spine. He goes further to state that this contradicts the long tail theory that a broader choice increases sales. Seth concludes the article by saying you can either try to stock the largest selection possible (long tail) or you can try to present the best selection possible (‘marketing’ books).

I am not really sure what to say about this analysis. I think it has some limitations and several thoughts came to my mind.

My first thought was that this is a problem of specific search vs. recommendation-based search vs. ‘I want a book now”.

Let me give you some background. I am a very avid book reader. I guess I read about 50 books a year or so. I visit book shops a lot, both online and offline. Thinking about the 250 books that I have bought in the last 5 years, I can only recall three ways of buying them.

Specific Search. I know exactly what I want. I know I want to buy Book A. I usually don’t mind whether I get that book today or in three days, but it must be that exact book. In this case, I go to Amazon and buy it online, because I am 100% sure that they have it. This is the shortest, fastest simplest way of getting exactly that book.

Recommendation-based search. The second mode is, when I am searching for a book on a topic that I don’t know that well, but I want to buy a book that is high quality. For example, I want to buy a good book on graphics design. In this case, I rely on online recommendations to find a good book on a given topic. Again, I use Amazon for this.

I want a book now. The third case is the typical: “I need something to read for the plane trip/this evening/this weekend; which book should I buy?” situation. In this situation, I have a rough idea of what I want, but it is not specific. I usually go into a shop and browse the selection. I peruse the relevant categories in the shop and choose the book that I like the best. Key is that I can take the book with me and start reading immediately.

BTW, can anybody explain to me, why ‘airport specials’ are always these massive, large, heavy books? Who came up with that idea?!

My second thought was that physical shops and online shops have different abilities to compete in these scenarios.

Specific Search. Physical shops will always have much more limited space that online shops. This means that physical shops simply cannot compete with Amazon on coverage. Amazon will always stock 10x or more than they do. So, the old business model of the super-large book shop is simply outdated. Amazon is the ultimate bookshop. Regardless of how large a physical bookshop is, it will always be smaller than Amazon. Amazon wins in specific search. Of course I could walk to the shop and order the book, but why should I go through that hassle?

Recommendation-based search. I have bought several books online that came recommended. I never did in a bookshop. They simply have no way of displaying the recommendations. Or maybe they do, but I have never seen it. So, maybe shops can compete here, but they currently don’t do this beyond best-seller lists and ‘our staff recommends’. Also, I still have a specific search requirement in this scenario and book shops cannot list recommendations as well as Amazon can. So they loose, Amazon wins again.

I need a book now. The bookshop wins. Every time. Amazon cannot compete on this. I am sure if you did a poll in the bookshop, 80% of customers would say that are looking in this kind of way. They want to have a book now, but don’t mind so much which one, as long as it roughly fits some criteria.

My third thought was this. Given that bookshops only compete in the ‘must have a good book now’ category, what matters to them is to offer customers a sufficiently broad selection in each category and to make that selection easily accessible.

In this scenario, I know roughly want I want, say a thriller or a business book, but I don’t have an exact requirement. I don’t mind whether it is book A, B, or C, as long as it is one of them.

What does that mean? What I mean is that it simply doesn’t matter whether a normal physical bookstore has 1,000 cookbooks or 10,000 cookbooks. (Note, the exception are specialist stores like BooksForCooks where they only have cook books and also cook their favourite recipes: what a fantastic shop!) The reason is that I won’t be able to browse them all anyway. What matters is to have a sufficiently large selection so I can browse a sufficient number of books and find at least one that matches my criteria. However, it probably won’t make much difference, whether I find 5, 10 or 15 that match. Because I will only buy one, maybe two books maximum, anyway, the rest is just surplus to requirements.

Conclusion

So, I disagree with Seth. Physical shops (not just book shops, but any shop) don’t compete along the long tail, this is simply an illusion. Large physical shops out-compete small shops, because they have a higher probability of being able to offer at least one item that is relevant to the buyer. Making items easier to browse by displaying them better and in such a way to maximise revenue, reducing the stock that nobody buys, and making sure stock that is frequently bought is present in sufficient quantities and is quickly re-stocked, is therefore a logical move. However, there is a point where having more stock simply does not deliver additional return. The shop is simply overstocked.

I think they key for book shops, or any shop really, is to understand how their customers buy, what the strategic drivers are that allow the shop to compete well in order to meet customer demand, and then to optimise their offering accordingly. The long tail is an online strategic competitive advantage that offline shops have to deal with, but where they can’t win. And why would you focus your business on an area and in a way where you can’t win?

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Customers Want to Find You

This morning, I found a statistic that affirms my belief that buyers become customers when they believe that they have discovered and understood a product without outside help. I touched on this in a recent post, here.

The statistic that I saw was that 80% of customers believe that they found and discovered a product themselves, whereas only 20% of customers think that they had been ‘found’ by the vendor. These statistics were reported last year by a company called Marketo and commented on the blog Enterprise Software Executive here.

find customers

There are a number of interesting points about this statistic.

My first thought was, okay, so how do we think about who discovers whom? For example, when I google for a phrase and find a company/product, I think I found it. When I see an advert and then go to the company’s website and then approach the company, I think I found the company. Or, when I am at a conference and see the company’s stand or representative and approach them for more information, I think I found the company. Or when I read a newspaper or blog article on a company, I think I found it.

The only instance when I think I didn’t find the company is probably when I get cold-called, spam-emailed, and direct-mailed.

The truth is: if the company didn’t have a website, didn’t search optimise it, didn’t advertise, didn’t attend conference, didn’t have anybody available to interact with bloggers and journalists etc, there would be hardly any way for anybody to ‘find’ the company. Well, maybe apart from direct word of mouth that is.

Obviously, none of the above is truly earth-shatteringly new. Marketers constantly talk about ‘lead generation’ and ‘brand building’.

Here is my penny’s worth of thought. Buyers don’t want to get advertised to. They don’t want to get discovered. They want to discover you.

I think marketing is a great deal about enabling people to discover you. Not the other way round. If you don’t believe me, just look at the statistic above.

So, how do you structure your marketing campaign? As a net that is supposed to enable people to find you? Or as a mechanism to establish brand and leads?

Maybe, this is the reason why search engines work so well. They are, by definition, there to help people find stuff. Maybe this is why buyers use them so much. It helps them find the companies they will buy from. And that is what they actually want.

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Undisclosed Affiliate Links

Jason Calacanis has an interesting discussion around undisclosed affiliate links on his blog.

productFor those of you who don’t know what an undisclosed affiliate link is: it is essentially a hyperlink going from a publisher’s website to another website, but the link is paid for by the target website, but the fact that the link is paid for is not disclosed on the publisher’s website. People do this for two reasons. First, to increase their Google page rank, second, to generate traffic to their site.

There are two problems with this. First, Google has a problem, because its search algorithm becomes less effective. This makes Internet search less effective for all of us. The second problem is somewhat bigger. Essentially, users of the publisher’s site get ‘duped’ into clicking these links, many of which will not provide much value to the user.

I think there is a very good reason why you shouldn’t have links that you get paid for without disclosing that you get paid for them in a reasonably obvious way. The reason is that having these kinds of links has the potential to lower the usefulness of your site. As a principle, when links are not useful, they waste a website visitor’s time. This means the you lower the benefit users can generate from the site in order to make money. You should be doing the opposite. You should be increasing the benefits that users generate from your site.

At the end of the day, links should only be there when they are useful. It is fine to have paid for and useful links, but they should be labeled as such. After all, when they are labeled and still useful – what would be the problem with labeling them? Requiring labeling means only those loose out that don’t actually add value. In the long run, this will benefit us all.

As a side comment, I guess the reverse type of this form of marketing would be “push polling”, where you spread negative marketing messages about a political candidate without making it clear that you work for the other side. I guess we all know what we think of that kind of tactics.

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