Retension and The Long Tail

Why is it that I know enough about the Rocky Horror Picture Show to know that I never want to see the Rocky Horror Picture Show?

Answer: Retention and the Long Tail

The Rocky Horror Picture show is a brand that knows how to keep and replenish its base. It is largely kept alive by the fan base, however the fan base doesn't have any control over whether it will stop circulating on DVD or in Theaters or in special big screen releases. 20th Century Fox has the call on that, and as long as they keep making money (as long as there is still a demand), they will continue to supply.

Compared to other movies produced recently, the Rocky Horror Picture Show ranks toward the bottom of the list in overall revenue. Its fan base/followers are a niche group. So why does 20th Century Fox waste their time. Because they are turning a profit. The Rocky Horror Picture show exists somewhere in the Long Tail, a term popularized by Chris Anderson, author of The Long Tail. He says "if you combine enough of the non-hits, you've actually established a market that rivals the hits" (22). So, if the Rocky Horror Picture was the only niche product they had, 20th Century Fox might have had to cut the ropes long ago. But in combination with its other niche, non-hits, Rocky Horror Picture Show is part of a market tap that runs long. For instance, Anderson explains that 1/4 of Amazon's book sales come from books that are not in the top 100,000 titles. 45% of Rhapsodies purchases come from outside of their top titles (Anderson, 23).

Retaining these niche groups is becoming of vital importance to companies. Anderson explains that The Long tail can be attributed to lower production, shipping, and storage costs along with rises in demand. But, it can also be attributed to social media. These niche groups tend form around an idea or some brand identity like the Rocky Horror Picture Show or some obscure indie rapper. These groups use Facebook, blogs, wikis, YouTube, Twitter and other social platforms to organize and ultimately make purchasing decisions. As long as this group maintains its size in relation to other groups in the Long Tail, then the companies who supply these niche groups will continue to turn a profit. That means that members have to remain involved or be replaced if they become inactive.

So when Jeremy Richardson of Mixpanel, Inc. said in his Mashable post that Retention should be a greater Analytical concern than virality, he may have had a point. He says that virality is measured in three factors:

"It’s computed by multiplying the percentage of current users who invite other people (X), the average number of people who are invited per user (Y), and the percentage of invited people who accept an invitation (Z). Many companies use this –- and only this — to determine the success of a product" (Richardson). This equation is known as the K-Factor. The problem is that Y is the middle man in this this equation.

As Richardson puts it . . .

The first and last numbers, X and Z, are conversion rates. By definition, they are always going to have a finite limit –- 100% engagement. While having perfect conversion rates would be amazing, it wouldn’t really mean much if Y, the number of people invited, was only one.

So, if conversion rates are maxed out, then the only thing left to tweak is the number of invites sent out. There are two main contributors to this:

Invite Rate: The frequency with which users send out invites

Engagement Period: The duration that users actively use a product


By determining the Invitation Rate and Period of Engagement, a social media analyst can determine how well a product, video, idea, application, game, etc. retains consumer demand. Richardson argues that by tracking retention rates, an analyst can determine why consumer demand is decreasing or why users are not sharing at high frequencies.

In a market driven by non-hits, retention becomes vital to the bottom line. Niche groups gather around a product, movement, idea, etc. because they strongly identify with it in some way. If the consumer is not able to act on that feeling, then there goes the business. By analyzing why videos are not being shared, a social media analyst could respond by redeveloping the social media strategy to maintain the community of consumers. That means building strategies for retention and building strategies for virality are both separate and interwoven tasks. Different calculations are applied to determining both, but both are applied for the same goal: positive Returns on Engagement