Using the Internet for selling to niche markets

in Internet Marketing Strategy

Chris Anderson wrote an article about ‘The Long Tail’ in a wired magazine article in October 2004 followed by a book, The Long Tail: Why the Future of Business is Selling Less of More. The article and book describe the niche business strategy of selling relatively small quantities of products to a large number of niche markets. The article and book generated a lot of interest, discussion and debate at the time.

The statistical frequency distribution basis for the long tail was known and studied since at least 1946. The Long TailThe basic premise is that the volume of potential sales decreases as products address more specialized or niche markets as indicated by the yellow long tail in the diagram. The earlier business response to this phenomenon was applying the Pareto principle to focus on the 20% of products that generate 80% of the sales volume as indicated by the green area in the diagram.

The Internet enables online businesses and retailers to profitably reach buyers for increasingly smaller niche market segments. Books and recorded music are good examples of long tail opportunities. Local stores, regardless of their size, have limited shelf space and only stock the most popular books or music. It wouldn’t be profitable to stock and only sell a few copies of a CD to a small sub-segment of the local population interested in a niche genre or obscure artist. However, if you aggregate these small sub-segments across the population of a country, you now have potentially thousands of customers for a niche market segment. An online store can be profitable focusing on niche markets in the long tail.

Since Chris Anderson published his long tail article, much of what he discussed has happened and is still occurring. Niche businesses are thriving online. Niches are subdividing into many smaller niches. Online businesses are providing unprecedented access to an increasing variety of niche products that were previously inaccessible to many buyers. It is now possible to reach previously invisible or unreachable niche audiences with the dynamics of an online business and infinite keyword search capabilities.

How to use this information to benefit your business

  • Online businesses can thrive in the long tail. A few thousand customers in a country, region or even the world could be a profitable online business.
  • There are many diverse and underserved market segments outside of the mainstream that large companies or physical locations don’t address.
  • If you have a physical brick-and-mortar business serving a niche market, you can significantly expand your potential buying audience by adding an online store.
  • The cost and effort to compete for popular keywords in the fat part of tail is beyond the reach of many smaller businesses. However, competing for niche terms comprising of multiple keywords in the long tail is very viable. For example, getting your business on page 1 search results for “vacation travel” would be challenging and costly. However, appearing on page 1 for “eco travel birding vacations Caribbean” is within the capability and cost reach of a niche online business.
  • Niche markets bring people with common interests together in a community. As a niche online business you can develop and leverage that community by sharing your passion and knowledge for whatever the niche is, with your customers.
  • You can create your own market space for competing on your terms by further fragmenting a niche market into your own niche within a niche.
  • You can reach new audiences in additional geographic areas for your niche product very profitably with an online business.

Copyright © 2009 Ingistics LLC and Marketance™

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