Surviving on the long tail: An empirical investigation of business model elements for mass customization

Abstract

Manufacturers operating in long tail markets attempt to generate sales by offering countless product varieties, with each targeted to one or a few customers. The research on mass customization suggests that modular products, flexible automation, a flexible workforce and effective toolkits are requisite business model elements to successfully operate in these markets. These elements, however, represent only one perspective on a successful long tail business model. We contend that their effectiveness is contingent on the firm's market orientation, i.e., its ability to correctly interpret customer needs and infuse them into the product space. We investigate this argument using a sample of 112 manufacturing ventures operating in long tail online marketplaces. We find that a manufacturer's market orientation increases the effect of modular product architectures, effective customer toolkits, and flexible automation on the manufacturer's probability of survival over a four-year time horizon. Surprisingly, the probability of survival for firms with a low market orientation is unaffected by investments in creating modular architectures and flexible automation, while, paradoxically, it is decreased by investments in creating more effective toolkits. Our findings offer insights on the characteristics of business models for long tail markets while also contributing to the literature on flexibility and mass customization.