BOBC Podcast #2: The Power Of Niche, Scarcity and The Long Tail
INTRODUCTION:
What does a long tail scarcity and niche have to do with creative business? Everything. And if you’re really not sure what the long tail scarcity and niche even mean in this context, that’s all right. I’m just gonna tell you the story of Blue Bottle Coffee and hopefully it will all make sense.
BODY:
What does the long tail scarcity and niche have to do with your creative business? Well, and for that matter, what does long tail scarcity and niche actually mean? Well, how about we start with a story? And it should frame the entire conversation.
So, the story is of Blue Bottle Coffee. And so for those of you who love coffee, maybe you know who Blue Bottle Coffee is?
Well, Blue Bottle Coffee got started oh 6, 7, 8 years ago by a couple guys, in Oakland, California near where I live, and they’re obsessed with coffee and so they wanted to create their own sourcing, found the farms that they want to get the beans at, and then the roasting process, the brewing process. And they opened 40, 50, 60 stores by themselves and were selling their beans and things like that, and we’re going along great. And what they promised was the very best cup of coffee for people who really know coffee. And so you’re saying to yourself, well, what does this have to do with anything? Blue Bottle Coffee? I hardly know who they are. Don’t really have any clue about where this is going.
Well, in 2017, in August in that summer, Nestle, who knows a little bit about coffee since I think they’re one of the biggest, if not the biggest, coffee owners of different brands in the world bought Blue Bottle Coffee for $500 million.
So wow, 50 stores, 50, 60 stores, $500 million. That’s a pretty big deal. And so you’re saying to yourself still, what does that have to do with anything? Well, um, what it lets us do is compare it to, oh, another coffee maker, let’s call it Starbucks. So Starbucks, um, not anymore since we’re in the time of Corona, but you know, recently, you know, it was worth about $80 billion and had about 23,000 stores.
So if you compared those two, right, that’s a fun thing. ’cause you know, me being the math geek that I am, I let you compare, right? Those two stores and these two businesses and the average value of a store, if you will.
So just basically doing division and dividing, you know, 50 or so stores into 500 million versus 23,000 stores into 80 billion.
You get the idea that a Blue Bottle customer is worth about four to five times what a Starbucks customer is. And that doesn’t mean that sometimes a Blue Bottle customer is not a Starbucks customer and vice versa. But as a rule, blue Bottle customers are worth about four to five times what a Starbucks customer’s worth.
And that is a story of long tail scarcity and niche. And what it means is the following. The long tail is if you kind of look it up online and, and see it it’s , the curve where, you know, you, it goes out forever. Right. And there’s a big hump, it’s like a camel hump and it goes out forever.
And the long tail is the second half of things, which is actually equal to the big hump, half of the big hump. Right.
And so that was a concept that was, you know, it’s an old concept in math, but Chris Anderson, when the internet was first getting started , wrote an article, um, in Wired Magazine about the long tail. And what he said was, is that when everybody can find anything, then finding, , what you want right is incredibly powerful. And owning the niche is incredibly valuable. And meaning that you want to own the, the best inventory, kind of the breadth of inventory that you can, right? And so that’s why things like iTunes and Amazon and Netflix and everything else got started because if, even if nobody bought the one thing, you had this ability to kind of attract the smallest possible audience.
That has evolved, that concept of long tail has evolved and it’s evolved into the idea of really talking to the smallest possible viable audience, which is a Seth Godin idea. And the key component about that is that you are actively shunning non-believers. Meaning that you built it for the people that care the most, right?
And provided you have a viable audience, meaning you can run a business with it, then that’s enough. It’s more important to have your best customers because those best customers will pay you the most, right? That is the definition of the long tail as I am contemplating it. And so what that means then is for your creative business, is that you understand that all creative businesses are niche.
All creative businesses are talking to the smallest possible, viable audience, just like Blue Bottle is. And that value is related to that, right? That you want the people who love you the most to pay you the most because they want to, right? And that drives forward the idea that you’re going to live in a scarcity model.
And what scarcity means is the following. It doesn’t mean that scarce resources and oh my God, if you don’t eat it, you’re gonna starve. That’s not what I’m talking about at all. What I’m talking about is the difference between a scarcity model that I only have so much for so many, right. And a capital asset model.
And so, not to speak too much Greek about it, the best example of a capital asset business is a hotel. A hotel predominantly only makes money if there’s a head and a bed. Pretty well-known concept. It makes money other places, but really it’s principal amount of money is made in the head and the bed, which means that if this is a Beachside hotel on a rainy day in January, let’s call it on a Wednesday, right?
And someone comes along and wants to stay in that hotel, but only wants to pay a third of the price that the person would pay if they were in a sunny weekend in June, the hotel’s gonna say yes. Because use it or lose it, head in the bed better to get the 30 cents right on the dollar than no cents. So that is a capital asset business that is Starbucks.
That is a mass business. Starbucks wants you to come in no matter what. Starbucks wants to mean something to you in every level. Whether it’s a place to hang out, whether it’s a, place to get a nice cup of coffee, whether it’s your office, whether when, you know, in normal times, what is it that Starbucks offers it offers a lot to a lot of people.
And that’s mass. That’s the thick part of the long tail, right? That is, antithetical to creative business to me. Why? Because you’re speaking to everybody. You’re trying to get everybody to find something that’s valuable to them, and that’s wonderful, except that’s not creative business. Creative business is for people who care the most, right?
And that means you have to do the work of being radically authentic and you have to appreciate that scarcity of scarcity, meaning that if you’re going to do, let’s call it 10 events a year, or you’re gonna. Create, you know, 50 cakes a year. Well, you’re not gonna create 5,000 and your hope is not to get 5,000.
And if somebody wants that proverbial rainy day in January, it’s gonna cost the exact same amount as it costs for the perfect day in June. They all go together. Those three concepts, long tail. I am specific to who I care about because I can make a business with this viable audience. Scarcity, I only do what I want to do, for the people I most want to do it for. And niche is I own that place for myself and I am going to be outrageous.
So let me go a little deeper into niche and a little deeper into Blue Bottle Coffee. Niche means that you make an outrageous promise. Blue Bottle Coffee, I make the most outrageous cup of coffee for people who love coffee. If that was all that niche was, we’d be in great shape.
But that’s not what niche is not to me anyway. What niche is to me is you have to pair an outrageous promise with an outrageous demand. So Blue Bottle Coffee. In order to get that great and fantastic cup of coffee, for people who really know coffee, you have to do what? I didn’t give you this part. You have to wait twice as long and pay twice as much.
So Starbucks, four bucks, four minutes, Blue Bottle coffee, roughly eight bucks. Eight minutes. Yeah. And yet, remember, Nestle’s not stupid and it bought Blue Bottle coffee for $500 million, and they haven’t been wrong in the three years, almost three years since they’ve owned them. So that’s the definition of niche to me, is outrageous promise goes with an outrageous demand.
And if you don’t have all of those components, then your creative business is at risk for being attacked by those that do because they are making a better promise to those that care. And if you are just a slightly underneath it, then my point would be is that you’re 211 did their 212. And you’re like, what are you just talking about, Sean?
Well, 212 is when water boils. Right? When water boils, we get steam. When steam happens, we get an engine and we can do anything and make anything. And because we have the power to basically industrialize our world, right? But at 211 degrees, we just get a nice cup of tea.
So that difference is niche. That difference is scarcity.
That difference is the long tail and the place that I want to say that you’re saying to me, well, why are you talking about this now and so early in your podcast? Well, we live in this time of Corona. We live in this time of, unbelievable uncertainty. My point is, and and to anecdotally, someone said to me, you know, Sean, you’ve been talking about this for a really long time. It took a pandemic for me to figure it out, and so I hope you are all the same. That your responsibility going forward is to own the fact that you are actually part of the long tail. That your job is to create scarcity and to live a niche with an outrageous promise and outrageous demand, and make it happen for yourself so that what happens is that you get paid the most to do what you do, so that you get permission to only do your best. That is the definition of an outrageous promise and an outrageous demand. You do both so that you can provide your best and are given the stage to do your best. And when that happens for yourself, then you’ll find that you’re gonna have to make some really different choices for yourself. You’re gonna have to use words that the opposite has to be true. ‘Cause when the opposite can’t be true, you haven’t told me anything.
Let me land that for you.
If you tell me that you do beautiful work, that you provide great customer service and your client’s happiness is your main priority, right? You’ve told me nothing. Nothing. You’ve given me something that has to be true. Meaning that the opposite? Well, we do really bad customer service and we’re not really easy to work with and our work is kind of ugly, right? You could never say that. You couldn’t ever say that. And so because you can’t say it, it means that you must say it.
And if that is what you fill up your world with and that’s what’s on your social media pages and your website and your collateral and everything else, then it’s impossible for you to do what? Be in the long tail in scarcity, in niche, making an outrageous promise and outrageous demand.
So here’s a little task for you. Go on through every single thing you’ve written in the past month, right? And have a look and see whether or not the opposite can or cannot be true If it can, that’s amazing. I do blue weddings. That means that someone else can do white weddings, right? Great. But if it can’t, meaning that, Hey, I do beautiful weddings, then now you know what your work is.
Now you know what’s in front of you. And now you know the challenge of putting yourself out there when you live in the idea of the long tail and scarcity and niche, that is change that is really challenging. That’s not raising or lowering your price for anything that’s about taking the responsibility for creating an outrageous promise, an outrageous demand.
And when you do that, what I hope you’ll find is that you’ll have earned permission to create joy. And again, that’s the primary goal of your business. And then you’ll do it for those people that care the most, and you’ll live in scarcity. And that scarcity will provide you abundance. Hope you have a great week.
