The Role of Business in a Market Community

I’ve been spending a lot of time recently researching the origins of marketing. I’m convinced that one of the reasons marketing is in so much trouble as a profession today is that we have no sense of history. How can you know where you’re headed if you don’t know where you came from? When I read about the early days of business, it helps simplify and crystallize a lot of complex and often confusing ideas about marketing’s role in business today. While a lot of things have changed dramatically since the days of caravan routes and souks, many of the most important fundamentals remain.

At its core, marketing is about establishing the conditions for an exchange of value. First you have to determine what others value that you can provide at a profit. Then you have to produce, package and deliver in a way that clearly communicates your value to buyers. Unless you have an enforceable monopoly, marketing involves negotiation with your market—often continual negotiation with the same participants over and over again. In fact, for many thousands of years, marketing was not simply a business activity, it was the most important social activity in the community. Even in the days of powerful kings and powerful churches, much of the community’s social life was shaped around the marketplace. As a business, you were part of a community, and whether you were predatory or benevolent, the market knew clearly where you stood, even if there wasn’t always a lot of choice about how to respond.

The relationship between businesses and their community changed dramatically with advances in technology, especially during the industrial revolution. Advances in manufacturing let businesses create vast surpluses that called for bigger markets, while advances in transportation allowed businesses to pursue those markets farther and farther from home. While communications technology also progressed, it didn’t move fast enough to sustain the kind of real-time word-of-mouth communication that galvanized the small market community. In effect, businesses were able to move beyond the boundaries of community that had framed their reputation for ages.

From the mid-nineteenth century until the end of the 20th, businesses were largely able to assert their own reputation through mass media communications and marketing. The way a company treated its employees and customers, the way its production impacted a community, the claims it made for its products and services, were rarely considered news worth reporting unless it involved something momentous—or catastrophic. When businesses appeared in the media at all, other than through advertising, it was more often than not part of an orchestrated public relations campaign design to shape the market’s attitudes and opinions.

For the first time in 150 years, social media is changing the balance of the equation. But unlike so many assertions and fears that this is something new and dramatic, it’s simply a return to a market balance that has existed as long as business itself. The ability of businesses to extend themselves beyond the boundaries of a networked community was a short-lived anomaly. Just as the market became global, so now has the community. Just as the members of a small community naturally monitor and discuss every aspect of the local businesses that serve them—because it is in their interest to do so—members of a company’s community, no matter how scattered they may be around the world,  now have the means to monitor and discuss the behavior and reputation of that company.

Does this change the role of marketing? You bet. Since marketing came of age as a profession at the height of industrialization, many businesses continue to have a skewed idea of the relationship between businesses and their market, and assume that marketing has always been about shaping the customer relationship unilaterally. Mass media tactics that have become characteristic of marketing are blunted in a networked community where customers are in constant dialog. Effective marketing now requires businesses to play an active role in their market community, rather than simply trying to limit the relationship to a beneficial value exchange shaped by manipulative communications.

But something else has changed, too--something that puts new emphasis on the balancing influence of community. Unlike the days before industrialization when businesses were able to aggressively enforce monopolies and sustain predatory market relations, most industries today face intense and growing competition on a global scale. That means for the first time not only do customers have the opportunity to know everything they want to know about your business, they have also have the means to choose whether or not they want to support you. For many companies, this won’t really change the way they do business. For others, it changes everything.

Comments

[john kottcamp]

I applaud the clear historical summary presented in “The Role of Business in a Market Community” and I agree that the role of marketing is changing as a result of social media, but where I disagree is the premise that the result is that “for the first time…customers…have the means to choose whether or not they want to support you.” This choice has always been an inherent part of the marketplace, except in cases of enforced monopolies. It is one of the primary foundations of a market economy. What has changed is not the market, but the way companies are able to relate to that market.

A lot of the buzz around marketing in an age of social media is focused on an online extension of traditional personal referrals as a dynamic marketing engine. Viral and Word of Mouth marketing channels are as old as communication itself. How many of us don’t reach out to our own networks of friends and family when we are looking for a dentist or a good bottle of wine. What has changed is that instead of asking two or three friends at work or at a backyard barbeque, we now have the ability to reach out to thousands and millions of “friends” through our online social networks. We rely on their ratings, rankings and testimonials just the way we historically relied on our face to face friends over the water cooler or back fence.

Throughout most of the Twentieth century, marketing has been all about interruption. It interrupts our reading the newspaper, it interrupts our drive down the expressway and most pervasively, it has interrupted our TV experience. It had to interrupt because it wasn’t willing to rely solely on our limited networks of friends and families for referrals, especially when it was either introducing something new, or in more cynical circumstances promoting something with dubious value, like cigarettes or boxes of cereal enhanced sugar.

Today, consumers are finding multiple ways to prevent that interruption. I won’t go over the entire list, but we all have seen the impact of cable, TiVo and the Web on the relevance, impact and spend on traditional 30 second TV spots. Companies are being forced to strip away some of the sizzle and actually produce good bacon. And when they do, they are finding that individuals still like to do the same thing they’ve always done, talk about what they like and dislike and tell their friends. The only difference is that their reach can now be global and the distribution is in real time. And that is the challenge for marketers in the future, not to tell people what to think, but to let them us what to make.

[Chris Kenton]

John--

Thank you for a very thoughtful response. I agree with your correction about choice in a market economy--I'm guilty of a frequent error for amateur historians: compressing the time frame. When I say "for the first time", I meant that in the context of a few millenia, based on the reading I've been doing about very early trade systems and markets.

Your points about Word-of-Mouth are spot on. I did some research for Yahoo! a year ago on the impact of the Internet on in-store purchasing decisions, and was not surprised to see that online peer groups had surpassed friends and family as purchase influencers among buyers who researched their purchases online. It only makes sense: my friends and family may or may not have direct experience with a product I'm considering, but I know online I can find loads of people who do.

Also, thanks for reminding me of the "interruption" meme. That's a good one to call out for consideration.

/chris

[jens]

Just for the sake of the historical perspective let me offer you this point of view. i copy and paste it from s.th. else that i have written - and i hope it makes sense in this context:

Interestingly enough both 'management' and 'design' are children of the industrialisation and both were 'invented' at the end of the 19th beginning of the 20th century.
Still they both have a slightly different focus. Management basically looked inside the organisation - optimizing and streamlining processes. Design though had a slightly different perspective. Design looked at both the inner capabilities of a corporation and at the outside needs of customers at the same time - striving for 'holistic' and if one wants to say so 'sustainable' solutions. Design was "invented" to bridge the gap between the capabilities of a modern and industrialized world on the one hand side and human needs on the other. Still: all through the 20th century the concept of running companies based on the rationality of metrics proved vastly successful and the attempted balance that design as a concept had to offer remained uncared for. It is just now that in our globalized economy design gets a lot of new heat. And it is just now that the concept of design fundamentally challenges the way corporations are run. Even companies as classically built on metrics and economics of scale as GE and P&G have realized, that they have to invite creativity into the organization rather than keeping it out.

The offer that design made ("art and technology a new unity" Gropius 1919) appealed to some – but not to many. The concept of flooding the world with cheap goods and giving them some soul through styling and advertising seemed sufficient to make the numbers. And boy, what numbers did it make?!... Taylor’s Concept of Scientific Management (Taylor 1911) proved incredibly resistant against all changes of fashion – just as the beauty of numbers often does – and can today be found alive and well in its grandchildren Operations Research or SixSigma.
There was so much to do, so much to take care of, to hammer the slag out – that management mostly concentrated on the things they really could manipulate (and measure) – and those were mostly the things that happened inside the company. Streamline the processes, make them effective and efficient!
As it showed, the sole focus on the inner things was not enough in markets that were developing a good amount of competition. That was when marketing arose to give a little bit of love and affection to products that were born and run as children of pure calculation.
Surely enough now it needed more than numbers to make these products successfully loved in the marketplace and after the second World War propaganda wizards and spin doctors were hired to push product offerings straight into the hearts and minds of potential customers. This practice actually proved so successful, that CEOs decided to have these people work with their companies permanently - if they so can transform the stuff that they are doing into a language that is understood in the company: numbers.

Imagine companies as entities that are run purely on metrics. - But the market wants other things than pure numbers... Easy! Lets install 'marketing' as an interface, providing the clients with something they can relate to - and providing management with something they can relate to just as well: numbers.

The concept of design is quite different though. In the process of design a lot of qualitative data is integrated in the creation of products from the very start.
Meaning: when in the classical marketing organization creativity is used to sell products, in a design organization this creativity (= risk) already happens much earlier in the value chain.

Quite different to common belief the role of the marketing department in the classical sense is not to bring creativity into the organization. Its job was to put some Christmas glitter onto the stuff that was shipped... that’s all. The classical job of marketing is to keep creativity out of the management organisation.

...

The classical job of marketing is to keep creativity out of the management organisation.

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Corporations today are both fundamentally challenged through social-media and through the design paradigm.

The role of marketing as a push-interface on a one-way highway has ended.

[Chris Kenton]

Jens--

Thank you for a very considered reply. There's quite a lot to parse in your post, and these are topics I've also spent a lot of time researching and pondering--the role of marketing in the corporation, it's evolution in parallel with management, and its many strengths and weaknesses. Instead of going point by point through your post, I want to mull this for a few days and resurrect some material I wrote a few years ago about the battle between corporate strategists and marketers, and how it informs the current trend in metrics and business intelligence. It's an incredibly important story that very few marketers really know, and you've rekindled my interest in exposing it again. I'll post it some time in the coming week as a new blog entry.

Thank you for the inspiration, Jens.

/chris

[racquel robinson]

well put together