"The Long Tail" Wags the Automotive Dog

Every industry craves a hit, whether it’s a bestseller, a summer blockbuster or 300k crossovers off a Canadian assembly line. It is, however, only one way to make a buck. According to “The Long Tail: Why the Future of Business Is Selling Less of More,” consumers are quickly evolving beyond cookie-cutter mass consumption. In fact, a careful reading of Wired editor Chris Anderson’s tome indicates that the days when a single vehicle could “save” a company may be long gone. Automakers who want to survive must now chase the tail of the dragon.

Anderson defines The Long Tail as a curve on a graph that looks like an old Hot Wheels ramp; the orange kind clamped with a purple vice high on a kitchen table. The tall end represents a few instances of big numbers; the swooping tail represents many instances of small numbers. To illustrate its power, Anderson’s book applies this curve to several industries. Netflix, for example, will send out thousands of copies of a movie the week it’s released. It will also send out tens of thousands of copies of other movies. They may have only one request for that movie that week.

The single requests aren’t as obvious a source of large profits, but experience shows that all these individual orders can conglomerate into a sum that’s greater than the box office boffo “headline” numbers. In Anderson’s words, "Our culture and economy are increasingly shifting away from a focus on a relatively small number of hits (mainstream products and markets) at the head of the demand curve and moving toward a huge number of niches in the tail.”

In other words, you can make more money hammering away at the small stuff than going for the gold. The implications for the US automobile industry are clear: the days when Henry Ford could base an entire company on one black car are toast. By the same token, the one-size-fits-all mentality that assumes hundreds of thousands of people will buy a new Chevy Malibu or Chrysler Aspen is also extinct. Consumer desire for choice has fragmented the automotive market beyond the point of no-return.

Consumer desire for differentiation is stretching the long tail of the US automotive market like so much taffy. You can see these fragments made manifest in the astounding proliferation of automotive makes and models vying for pistonhead patronage. And yet automotive development costs are massive; the development process is complicated, slow and cumbersome. It’s far easier for Hollywood to crank out hundreds of new movies for Netflix than it is for the automobile industry to create 40 plus all-new models per year— never mind adjusting its retail channels to profit from this niche proliferation.

The explosion in the automotive aftermarket hlghlights the discrepancy between supply and demand. In the last two decades, the Specialty Equipment Manufacturers’ Association has grown to represent a $30b a year domestic industry. BMW earns about a $60b a year. In other words, the North American automotive market now supports the equivalent of half a small car company– just so owners can differentiate themselves from drivers of “stock” products.

The mainstream manufacturers’ recent efforts to capitalize on the long tail underscore their inherent inability to rise to the challenge. It took Cadillac an entire model cycle to develop the sort of bling wheels its Escalade owners were buying in their tens of thousands. And almost as soon as they were released, aftermarket wheel makers offered cheaper, more stylish and more exclusive alternatives. Manufacturers know they must create more choice, but their inefficiency means that have to do so with less. Hence their increasing reliance of platform sharing and its evil twin, badge engineering.

To most enthusiasts, badge engineering is about as acceptable as cannibalism. The differences between a Chevy Uplander and Saturn Relay, for example, are so insignificant as to be insulting. A look at the Ford 500 and Volvo XC90 reveals a different tail. These aesthetically and dynamically differentiated vehicles in no way threaten to steal customers from one another. From style to function to price, these cousins are so far from the Patty Duke variety that they do exactly what the market wants. They offer a genuine, easily understandable increase in consumer choice.

Whether or not the long tail turns out to be a serviceable economic theory is irrelevant. The marketplace in general demands, and now receives, more products: more movies, more books, more videos of cats falling off stools, more cars, more wheels, more of everything. The auto companies that can find a way to cater to this desire with authenticity will find treasure, whether that’s by platform sharing or so-called mass customization. The ones that continue to base their business on breakout blockbusters simply won’t survive.