Long-tail businesses: what they are, how they work and how to create one

long tail business

What do you know about long-tail businesses? Do you know what their strategy is and why many entrepreneurs recommend them to start projects?

Next we are going to give you a small guide so that you understand this business model, from what they are to their characteristics and how it works. Shall we start?

What are long-tail businesses

business results

Long-tail business, also known as the “long tail” business model, is actually a sales-based model. But not in the usual ones. And it is that, if you look closely, they often teach us to pay attention to a type of product, to specialize. Instead, this one does the complete opposite, at least at first.

The person to whom we owe this term is Chris Anderson who, in 2004, referred to it in his article The Long Tail. Shortly after, he put out a book delving into this business model titled "The Long Tail Economy."

For Anderson, long-tail businesses had a very simple idea: use the Pareto rule. This indicates that 20% of the products are the ones that will generate 80% of the sales. Therefore, if you focus directly on them you will sell more.

Therefore, the main idea of ​​this entrepreneur was to focus on the most popular products, in those that are in high demand, because they are the ones that will provide us with the most sales. And yet, those with less demand, who will be behind, will gradually lose that demand.

Now, it is not just about that, but the objective is to sell many products, but of each of them few quantities. They must be products of great demand. Actually, they can be divided into three groups:

  • In great demand: top products, the best sellers... that you know they are going to buy no matter what.
  • Average demand: where they are sold but not as much as the first ones.
  • Low demand: because they are products that, although they have little demand, sell something.

Separately, each one would have a success or failure, but if all of them are grouped together, the volume of business they generate is often higher than what would be achieved in the traditional business model.

How long-tail businesses work

Entrepreneurship and business project

When working in a long-tail business you must take into account its operation to achieve success. In this case, you will have to differentiate two parts:

  • Head: in the sense that in them you will have many clients and products that are top sellers. These are the ones that create a high demand.
  • The tail: It is where you have more special clients, who are looking for products with less demand but which are also sold. These don't have to be cheap; quite the opposite.

The objective is that you cover the needs of all the users that arrive, either with demanded products or with those that are not. ANDFor this, you must take into account the following:

  • You must have products and/or services for each niche, group, public...
  • You need to reach that low-demand audience.
  • Catalog all your products based on demand and manage them all.
  • Optimize the resources you have so that all products/services are visible and can be promoted.

How to create a long-tail business model

business strategies

If long-tail businesses have caught your attention, know that when carrying it out, you need to take into account several important details. Specifically, three of them, the ones that support the entire system.

  • Demand: in the sense that you have to add a lot of maximum and average demand products to make it profitable. Likewise, you must also have products that are in little demand independently, but that, as a whole, are worth it.
  • Storage: Since you have to have a lot of products, you will need a storage space that is much larger than you might think. Unless you get other options, like dropshipping, for example.
  • Recommendations: We are not referring only to recommendations between customers and users, but recommendations between the products that are available. Sometimes, some of them can only be hook products, which are there to attract attention and which are directed towards what we do want to sell.

Examples of long-tail businesses

Finally, and as we know that sometimes the theory is not easy to understand, even less at first, we wanted to find examples for you. And it is that, without knowing it, you may be using businesses that apply this model right now. Do you want to know what they are?

Netflix

We start with Netflix. As you know, at first it started as a video store where people would find a movie they liked and rent it. The difference with other video stores was the fact that they had a wide range of products to cover almost every niche one could think of.

At present Netflix we could say that it also follows that model, albeit digitally, through its platform by offering products for almost all tastes (and in greater quantity than we can find on other sites, unless we focus on just one). .

Amazon

What happens to Amazon when we go in? That has millions or billions of products, from different categories. It is one of the clear examples of the model by offering many products of different demands to satisfy different customers.

editatum

You may not know it, but it is an editorial that has known how to disassociate itself from the usual ones. In this case, it has a large number of guides from anywhere in the world. In this way, it attacks all the niches it addresses to present the GuíaBurros with which a person will find what they are looking for.

Google Ads

This Google tool allows you to create ads with which users can offer products or services. By having different options, different niches are served that will depend above all on the demand that each one of them has.

Now that you know about long-tail businesses, and that you have been able to see examples of them, it is time to think about whether it could be an entrepreneurial project for you. Do you have any doubt left?


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