The long tail of consumption

No, this is not about THAT long tail! It is not about the economics of media choices (covered very well in the think piece by Chris Anderson), but about the economics of consumption itself.

Some statistics – Nearly 40% of the world’s population lives in less than US$ 2 per day. Out of these, more than 60% live in less than US $ 1 per day. Combine this with the fact that nearly 75% of the global poor live in the Asia Pacific (with the largest numbers coming from India and China). These people are the true ‘long tail’ of consumption – very large numbers of people consuming very small amounts (individually) of essentials – leading to gigantic volume opportunities.

However, converting this opportunity needs careful navigation. Most conventional understanding has to be unlearnt and yet, some basics have to be adhered to. Here is a short check-list of the basics

Squeeze the last drop of paste from that toothpaste tube – COST ENGINEERING:

Every penny of costs saved means reduced prices to the end consumer. And that means getting new waves of consumers as a part of your franchise. Hence, marketing needs to be obsessed about delivering at the lowest cost (period).

A good example of this can be found in the Indian cellular market where the cost of a one minute call is now less than 2 cents (and is among the cheapest in the world). Every wave of price reduction (both of the handset and the call) bought an entirely new wave of marginal consumers giving a CAGR of more than 18% for the industry!

Tips for marketers

1. Flag the price prominently on the product
2. Communicate aggressively about every price reduction
3. Focus on per unit costs rather than value added features, freebies or guarantees
4. Create brand associations with ‘cheap’ without compromising on quality

Making one do the work of three - SMART INNOVATION:

The long tail consumer demands innovation. And this is not the innovation of new applications, but the smart innovation from the creativity of everyday consumer (some people call it being ‘street smart’!)

An award winning example from Unilever – A hard plastic nozzle was added on the top of every small shampoo sachet, so that the contents of the sachet could be consumed over multiple uses. This ensured larger family consumption and a reduced consumer feeling of ‘wastage’

Tips for marketers
1. Make consumer observations and home visits – a regular part of your research program
2. An internal innovation (smart) contest unleashes the creative potential of ‘regular’ employees
3. Test everything – what works for us rarely works for the long tail consumer
4. Innovations get copied quickly – be prepared with a calendar of initiatives

Small is the new big – THE POWER OF ‘MICRO’:

The long tail consumer has almost similar needs and wants as your regular consumer (he only does not have the financial wherewithal to afford them). Hence, miniaturization of anything (not the quality, but the size) is a sure formula to target the long tail consumer. And this works across products and services.

A world’s first would the miniaturization of finance / lending by the Grameen Bank in Bangladesh – finance of small amounts (of less than US$200) to enable the poor to establish any self sustaining business (and hence make better lives for themselves and their families). Visit http://www.grameenfoundation.org/ for more details.

Tips for marketers
1. Abandon “per-capita” thinking
2. Think about how you can reduce the entry barriers to your consumer
3. Sharing of services and Pay-per-use are great ways to miniaturize without any compromise
4. Even distribution can be miniaturized – make every consumer your retailer too!

I see you but do I understand you? PATHWAYS TO COMMUNICATION:

Targeting and communicating with the long tail consumer is particularly challenging because of poor knowledge (due to lack of adequate education) and the lack of any single effective medium. As a simple illustration of the above, mobile phone marketers are grappling with the fact that emerging markets have higher numbers of textually non-literate people who are challenged in several textual prompts and contact management. This requires a fundamental re-thinking of the interface itself!

However, inspiration is at hand. Both governments and non-governmental organizations have created a number of protocols (most available online) while tackling this problem in communicating about deadly diseases like HIV AIDS and other health issues.

Tips for marketers
1. Keep the benefit basic and simple
2. Think about visualizing the benefit in a single frame
3. Simple analogies, fables and folk tales align to the current consumer environments
4. Participating in community initiatives like the local health center is great for CSR too!

Wrapping it up - Cost, Innovation, Miniaturization and Communication are the four poles of success to convert the long tail that beckons tantalizingly into its labyrinth. Do navigate carefully (the above tips can only help!)