I can’t take credit for any creative thinking here, but I had such an epiphany reading Fred Chong’s most recent post on the Long Tail that I had to write about it. In his post, Fred proposes a 4th force to be added to the three identified by Chris Anderson in The Long Tail:
- democratize production
- democratize distribution
- connect buyers/sellers
To which Fred proposes to add “democratize capitalism.” My first impulse was confusion,
having had a fair amount of economic theory drilled into me at the University of Chicago,
and knowing that “capitalism” is clearly too broad as it encompases virtually all capitalistic economic theory.
But, then I realized what Fred was really talking about was pricing, or monetization in
Web lingo. And it hit me! If you add pricing, the long tail forces correspond
EXACTLY to democratizing the 4ps of marketing, i.e., the go to market “forces” that every MBA student learns in marketing 101 and have solid microeconomic underpinnings (just the sort of perfectly structured idea that appeals to an ex scientist geek like me).
More plainly
product = democratize production
place = democratize distribution
promotion = connect buyers/sellers (or how about democratize promotion!)
price = democratize pricing
The microecconomic equivalents being commodity, transaction costs, information, and price
for the other econ geeks in the audience.
The relevance to SaaS and Web Applications being (as Fred discusses in his post) that
often pricing must be adjusted at the customer/transaction/user level in real time to bring SaaS and Web applications, e.g., Search advertising. But, the examples are not limited to SaaS products. Consider eBay and Priceline, both strong Long Tail examples that rely heavily on democratizing pricing, i.e., allowing a Long Tail seller negotiate or set a price directly for an individual buyer.
Notwithstanding my earlier post on the Long Tail, this (arguably more complete) model of the forces that enable the long tail provide the roadmap to mass customization for SaaS and Web applications.