Niches and Riches

So you meet the woman of your dreams. In the course of the discussion she ,asks you what you’d like to see in your ideal partner. And you answer: “Actually, I don’t mind. As long as she’s female.”

Wrong. You go home alone. Again.

And that’s what it’s like talking to folk about marketing. A sample of the daily flow:

“So, Dave, what kind of people are going to be interested in this new ambidextrometer you’ve spent R1 million developing?”

“Hey Pete, that’s just the thing. EVERYONE needs one of these, so the market is HUGE!”

Wrong. You go broke.

Life is all about niches – preferences. What appeals to one of us, doesn’t appeal to all of us.

For example, I grew up listening to a band called Strawbs. (Back then bands had names you could identify with.) And they had a few really good albums, and on each were a few exceptional tracks – at least to a young, impressionable, and often deeply intoxicated mind. (Don’t ever criticise your kids. I am just scared that mine will try to do some of the stuff I did.)

The Strawbs produced some really cool music, which I used to have on LPs, which I vaguely recall an ex girlfriend testing her discus hurling skills on from the window of the 18th floor apartment we shared in 1979 overlooking the Goodwood air force base.

But once you’re hooked, no matter how weird the obsession, you stay hooked. So it was onto the Internet a few weeks ago to find some Strawbs music, and into the iTunes music store – and voila’: every album and single the Strawbs had ever produced was there for the downloading at a ridiculously reasonable price. That’s the beauty behind the Internet. No matter how esoteric your taste, no matter how narrow the niche – there are enough people, interested enough to buy, to make someone very rich.

If you doubt this, Chris Anderson, in his exceptionally powerful book The Long Tail quotes an example that I find truly astounding. Ecast is a digital jukebox service. (Their physical jukebox looks like a regular one, but instead of CDs it has a broadband connection, and in 2004 they had about 10,000 albums available in their selection. (This is huge compared to the average jukebox, which only holds about 100 CDs.)

The Ecast CEO asked Chris to guess what percentage of their 10,000 albums sold at least one track per quarter. The normal answer – based on our understanding of economics and business – would be about 20% because of the 80/20 rule, which seems to apply almost everywhere.

Chris took a flyer at 50% – absurdly high because in a typical bookstore nowhere near half of the top 10,000 books will sell more than once a quarter. (Only 25,000 of the 1.2 million books tracked by Nielsen Bookscan sold more than 5000 copies in 2004 – once of the reasons guys like Charles Dickens were so poor.)

The answer: 98% of the albums in Ecast sell at least one track per quarter. No matter how many new titles Ecast adds, niching deeper and deeper, they continue to find that just 2% of the titles don’t sell. The reason?

In the words of the Ecast CEO, “In a world of almost zero packaging cost and instant access to almost all content in this format, consumers exhibit consistent behaviour: They look at almost everything.”

Given that 940 million people or so have access to the Internet (a startlingly large number of people) and even if just 1/1000 of a percent of them are interested in Strawbs – that’s still 9,400 of us loyal (although aging) fans – and that’s 20 years later. Which means, in my simple mind, that no matter what your poison is there are a bunch of other folk who share the same passion (even though many of us might be a tad embarrassed to broadcast it widely).

Now if it should happen that the Strawbs return in some weird hip-hop latino-afro-asian dj blend – yet another niche within this niche, it would bring in a completely new audience, although I doubt it would appeal to an old fudster like me.

Internet ‘economics’ is about abundance, whereas the stuff we learnt at school and Varsity is all about scarcity.

They are poles apart. And if we want to stay in business, we’d better start catching up. Do yourself a favour and get the book. It’s enlightening.