The Long Tail vs. The Parodox of ChoiceAug 09


Meeting #7: The Long Tail Theory vs. The Choice Paradox

This weeks topic will discuss two conflicting theories and the business models supported by each theory. As a group, we will evaluate the Long Tail Theory and The Choice Paradox. Both theories offer great insight into different business models and produce different approaches toward business.

Long Tail Theory:
Original article:

Good old wikipedia offers a summary:

The Long Tail Theory developed Chris Anderson describes the niche strategy of businesses, such as Amazon or NetFlix, that sell a large number of unique items, each in relatively small quantities.

The distribution and inventory costs of these businesses allow them to realize significant profit out of selling small volumes of hard-to-find items to many customers, instead of only selling large volumes of a reduced number of popular items. The group comprising a large number of “non-hit” items is the demographic called the Long Tail.

Given a large enough availability of choice, a large population of customers, and negligible stocking and distribution costs, the
selection and buying pattern of the population results in a power law distribution curve. This suggests that a market with a high freedom of choice will create a certain degree of inequality by favoring the upper 20% of the items (“hits” or “head”) against the other 80% (“non-hits” or “long tail”).

The Long Tail concept has found a broad ground for application, research and experimentation. It is a common term in the online business and mass media, but also of importance in micro-finance, user-driven innovation, social network mechanisms, economic models, and marketing.

The Choice Paradox:
TED Video on the premise of the Choice Paradox:

White Paper attached:

The Paradox of Choice – Why More Is Less is a 2004 book by Barry Schwartz. In the book, Schwartz argues that eliminating consumerschoices can greatly reduce anxiety for shoppers. Reccomended by Kevin Pereira.

Autonomy and Freedom of choice are critical to our well being, and choice is critical to freedom and autonomy. Nonetheless, though modern Americans have more choice than any group of people ever has before, and thus, presumably, more freedom and autonomy, we don’t seem to be benefiting from it psychologically.

In summary, observed in many cases is the paradox that more choices may lead to a poorer decision or a failure to make a decision at all. It is sometimes theorized to be caused by analysis paralysis,  real or perceived, or perhaps from rational ignorance.

Guiding Questions
1. Thoughts on relevance and pervasiveness of both Chris Anderson’s Long Tail and Barry Schwartz’s Paradox of Choice theories. Find an interesting application / case study to  up with a application / case study for each.
2. Do you believe that there is a inherent tension between the Long Tail theory of niche-driven demand and the less is more concept of the Paradox of Choice’s? If this tension is present – is it resolvable, and how might you understand it?
3. How might the idea of crowd-sourcing and mass customization fit within these two frameworks?

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