Tale of the long tail

The classic long-tail market for machine building shows that when the costs of product design, marketing, technical support, and distribution fall, then a wide range of substitute, niche products become available.

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Tale of the Long TailBy Dan Hebert, PE, Senior Technical Editor

NORTH American industrial machine builders constitute a classic long-tail market. To simplify a somewhat complex statistical expression, this means that the number of builders and their sizes make up a distribution chart that can be approximated by a mouse with an extremely long tail.

The mouse’s body is represented by the relatively small number of machine builders with annual sales exceeding $20 million. The mouse’s long tail represents the thousands of small machine builders with less than $20 million in annual revenue and sometimes much less than that amount.

Similar to small firms in many long-tail markets, cumulative sales of the long-tail builders are significant. There’s no hard data, but a rough estimate would show that half of the total machines sold in North America are produced by builders with annual sales of less than $20 million.

Likewise, we know about 70% of CONTROL DESIGN’s machine-builder subscribers and close to 100% of its system-integrator subscribers have less than $20 million in annual sales.

Because your company resides in a long-tail market, maybe in the long tail itself, it’s instructive to look at other long-tail markets to see how they evolved. This can provide some guidance so that you can ensure that publications, events, and suppliers serve your needs.

Book selling, for instance, is perhaps the most well-known long-tail market. Traditionally, brick-and-mortar bookstores could only afford to stock popular books that sold in relatively large quantities. This meant that buyers interested in more esoteric fare were out of luck unless they lived in a major metropolitan area with specialty book stores. Subsequently, when Amazon realized there was a very-long-tail market that wasn’t being served, it used the Internet to reach these buyers. Amazon found a way to profitably bring together book buyers and sellers with a mutual interest in titles with minimal annual unit sales.

Of course, an analogy can be made here with the machine builders’ automation market. “Before a long-tail economic event occurs, the market hits are the most popular general-purpose items, such as PLCs or paperback bestsellers,” says John Hanks, director of marketing at National Instruments. “However, when the costs of product design, marketing, technical support, and distribution fall, then a wide range of substitute, niche products become available, such as programmable automation controllers derived from PC-based designs or hardback books about 4th century B.C. China.”

Similar to unusual books, niche automation products can be very useful, if they closely match your particular need. In fact, using a product that fits is always easier and better than adapting a general-purpose product.

Machine builders in the long tail need to understand long-tail market dynamics and supplier motivations, so they can secure better service. Understanding and working with these dynamics can help small machine builders receive the same service as big machine builders, which is a win-win for both buyers and sellers.

Small machine builders are different than other long-tail markets because they require higher levels of service than big machine builders. Unlike the book market, where Amazon can treat each buyer equally, small machine builders often need more personal attention than higher-volume firms.

In addition, smaller machine builders have less automation staff, often just one or two people. These technical experts must not only design, build, and support the automation of their firm’s machines, but also must stay on top of the latest automation technologies.

Larger machine builders frequently have an R&D department that constantly investigates new automation technologies. Automation professionals at smaller machine builders have to accomplish this task in their spare time. Also, small machine builders often have very complex automation requirements, especially if they build custom machines.

Here at CONTROL DESIGN, our mission is to help both small and large machine builders stay on top of the latest advances in automation technology. We do this with application articles, interviews with automation professionals, and in technical columns. We always try to balance our focus between large and small machine builders.

Also, we invite small and large machine builders to our next annual AutomationXchange event. The event pairs each machine-builder attendee with their optimal solution providers based on their specific application needs. It also provides a forum for machine builders to share best practices with peers across the industry.

The next installment of MoJo will look at how machine builders and their suppliers use the Internet and other tools to ensure that small builders get the same service as their larger brethren.

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