The Infinite Circle of Commerce
What happens to marketing and advertising when their basis for existence fundamentally changes?

Something truly fundamental on an historic scale has changed when it comes to marketing and advertising: the consumer is becoming knowledgeable. It is worth reminding ourselves what precisely has changed.

For most of human history, people lived in small trading communities bounded largely by how far one could travel (usually walk) back home in a single day — a “circle of commerce.” Let’s take a step back in time and think about a perishable farm product such as eggs tounderstand what has changed in our time. The egg-selling farmer in the village sold his eggs to those who lived within his circle of commerce. Sure he may have had competition from other nearby egg-sellers, but consumers likely used other factors to decide from whom to buy. If the consumer felt that basically all the different kinds of eggs sold by the very few local egg-sellers were good enough, then a short walk to the egg-seller three farms away might outweigh walking to get eggs from someone three miles away. Also, the consumer might feel a sense of social obligation to buy from their immediate neighbor than from someone with whom the social bonds are looser.

And, consumers were largely competitive-price unaware. So, we have at play here a few important factors to keep in mind when it comes to traditional commerce: (1) the geographic radius of the circle of commerce, bounded by distance and available transportation, (2) the importance of social bonds, and (3) consumer ignorance on price and choice. Let’s skip ahead in time to a town with a bustling market. The variety of products available to the consumer is now hugely greater. Advances in exploration/ transportation have created a much wider trading circle of commerce. The sophistication of the consumer has grown, with a concomitant rise in expectations about what the market might offer next. Advances in transportation might mean to the egg-seller that new varieties of eggs from much further afield are now competing against their own product. Competition is now real, as the egg-seller’s stall sits right next to many others.

Again, we skip ahead in time. The market town has grown into a major city. The variety of products available is enormously greater than in past and there is no way the busy consumer can discover all that is new. For eggs — a perishable commodity — the rules of transportation (time and cost) might mean that a global market for eggs makes less sense. But for manufactured goods, the market now becomes truly large, and competition, therefore, starts to exist within the radius of a much larger circle of commerce. It is in this context, that the marketing/advertising industry (integrally bound up with “media”) really hits its stride. With masses of befuddled consumers trying to decide between one purchase or another, someone has to be the “middleman” trying to make sense of it all… bridging the producer to the consumer with information and interpretation. The ignorance of the consumer creates a market “friction” — compounded by the realities of transportation, among other challenges. This inherent “friction” of imperfection in the markets is the key underlying basis for the modern marketing/advertising profession and, indeed, of economics. The consumer needs help learning about what is available and the producer needs help reaching the consumer. It is not a frictionless economy and it is one that requires lots of traditional marketing and advertising.

Enter our transitional age.... Today’s technology (particularly theso-called Web 2.0) means the circle of commerce has almost no outer limit and consumers have a nearly full variety of choice (with all the related expectations) and price-awareness. This is a TRULY FUNDAMENTAL CHANGE. Marketers must realize that the newest class of “middlemen” will be those who gather information on available choicesand compare them on behalf of consumers.... In such an environment, the psychological or physical packaging of products or services — counting on consumer ignorance or laziness — will not as easily apply. Trusted relationships with consumers established through great products, perceived value, and social bonding/loyalty will increasingly triumph over “b.s.”, however creative. The circle of commerce is becoming nearly infinite and players in a marketing and advertising industry built upon the presumed ignorance of the uninformed consumer will fade away unless they embrace the changes made possible by technology. We are at a turning point. Those who do something about it first (including truly experimenting with different strategies and business models) will be the ones who thrive. If you are up for the challenge, the opportunities are, dare I say, historic.

Contact James P. Clark at jpclark@cogitostrategy.com