Your Business Could Be Losing Nearly 50% Of Potential Income

If you haven’t already read Chris Anderson’s seminal book “The Long Tail”, you could be leaving a lot of business and income potential on the table, especially if you’re an affiliate marketer.

The premise in the long tail is that Pareto’s 80:20 rule has been skewed due to the variety of choice in the marketplace. In an interview with the CEO of “digital jukebox” service provider Ecast, it’s mentioned that of the top 10,000 albums available, the number of tracks that sold at least one track a quarter amounted to 98%.

Additionally brick-and-mortar retailers like your Targets and Wal-Marts probably stock an average of 20,000 and 50,000 of the top CDs, DVDs and other merchandise, which comprises the bulk of their transactions. This is known as the “head” of the tapering tail graph.

In contrast, the “long tail” or selections outside the bestsellers (the orange sector in the graph above) can still account for 50% of your total revenue.

Does this have any implication on internet marketing and affiliate marketing? If you’ve ever created content optimized for 4 or 5 keyword phrase for an SEO or bid on such a phrase for a PPC campaign, you’ve harvested long tail traffic.

The “high competition” keyword phrases like “payday loan” and “webhosting” are in the “head”, and unless you have some capital to fight the merchant or the top affiliates head-on, it can be a losing proposition.

Long Tail’s author Chris lists 9 recommendations for leveraging on the long tail which can give you an advantage in growing your business:

#1: More inventory in, or way out

One of the constraints in affiliate marketing is that when you’re dealing in physical products, it’s because of the fixed costs associated with manufacturing, stocking, shipping this merchandise, which leads to the single digit commissions you’d typically see.

With “virtual inventory” fast becoming a trend that’s here to stay – think Kindle ebook, software downloads – the potential for fatter margins can be a good way to grow your bottomline. The ultimate margin grower in areas such as lead generation/CPA marketing, where you’re selling a name/email address to a merchant might be the ultimate “virtual inventory”.

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#2: Let customers do the work

Sites like Wikipedia, Craigslist, MySpace already boasted content numbering in the millions of pages through the efforts of its community. Leveraging on visitors to your site whether as blog readers, forum members, article submitters able to publish their content on your site enables you to fatten up your site in terms of content to create a better Google-compliant “user experience”.

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#3: One distribution method doesn’t fit all

Again, choice is kind. Some like to shop in stores, some buy online.

Long tail markets aren’t constrained by time, space, geography.

With the US, Canada markets becoming more saturated, as the affiliate industry grows up and more affiliates enter the market place, expanding offer distribution to markets like Latin America, Europe, Asia could fuel the next stage of growth for affiliate marketing.

Likewise, affiliates who pooh-pooh offline media for lead generation might want to look at brick-and-mortar based media buys and customer acquisition to expand their business.

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#4: One product doesn’t fit all

Most consumers will not be happy with just 5 network channels in their local area. Choice gives consumers perceptual freedom, even if they’re buying the same flavor of spaghetti sauce every week from the choice of 50 on the shelf.

Adding a mix of different strategies to your promotion mix – pre-sells, reviews (which are a form of choice), blogs, even direct linking – can give your campaigns more vitality than just focusing on one method alone.

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#5: One price doeesn’t fit all

50% of sales on eBay are completed using the auction format, another 50% via the “Buy It Now” feature.

Likewise, coupons and promotions can create a range of prices for affiliates to determine their optimal price/profit ratio.

CPA offers are now incorporating “coupon codes” as part of their creatives, and there are more than a few affiliate programs which offer their products at different price points for affiliates to make their selection.

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#6: Share information

Being able to sort by price, reviews, popularity, sales is one way to provide choice to consumers when it comes to making their purchases.

Being able to harvest buyer behavior and demographics via analytics and data mining tools can give you the edge to better target leads…and convert them into customers.

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#7: Think “and”, not “or”

Zero sum thinking assumes that a consumer will buy one product from a variety of choices. The reality is that most will likely buy multiple products from the same niche, on the basis of different benefits, bonuses and promotions.

Planning your campaigns that your prospects will make multiple purchases versus just making a single purchase and leaving can change the way you include elements such as emailing/collecting opt-ins in your business.

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#8: Trust the market to do your job

Guess market demand and trends is a poor way to run your business, especially with the available of promotion methods such as PPC networks which let you conduct market surveys which would otherwise take weeks in the offline world, in just a matter of hours or days.

Making judgments based on market data, instead of selecting “hot” offers will give your business more stability and solid ground to move forward.

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#9: Understand the power of free

With the number of choices available, the concept of a free trial allows consumers to try before they buy.

Although “free” has garnered a bad rep, especially in the ringtone industry, it’s still got a lot of life in it, especially since trials are low-cost, compared to the financing required for other parts of the campaign. In large markets with lots of competition, having the consumer sell himself or herself on a product can help seal the deal.

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About the Author: Andrew Wee is an Asia-based Internet Marketer focused on blogging, social traffic generation and affiliate marketing. Previously rated as one of Asia's top technology journalists, Andrew covers breaking news and industry developments at WhoIsAndrewWee.com