Hayek’s Ideas As Marketing Strategy

In McKinsey Quarterly’s latest paper, “Capturing the world’s emerging middle class”, authors David Court and Laxman Narasimhan recommends several strategic steps for companies to capture and profit from the rapidly growing and huge middle class markets in emerging economies.

It occurred to me that the gist of the proposals have been latched upon harnessing local knowledge which appears no less than F. A. Hayek’s ideals.

From McKinsey, (all bold highlights mine)

``Another tack is to work at a more local level, gaining scale in specific regions and categories by teaming up with deeply knowledgeable on-the-ground partners. They can help not only in product development but also in distribution and market positioning—the crucial final steps to reaching highly local consumer markets.”

More...

``Other strategies for penetrating this affordable, accessible, and local market are to use celebrity endorsements and to leverage local knowledge, either selectively, in areas such as distribution, or through more comprehensive alliances...

And...

```Using local vendors is critical to running a lean operation: many multinationals have found, for example, that capital outlays in emerging markets are often only 30 percent of those required for a factory in the West if they use local resources for plant and process engineering and to execute projects.

Here is Friedrich August von Hayek on “The Use of Knowledge in Society” (bold emphasis mine)

Today it is almost heresy to suggest that scientific knowledge is not the sum of all knowledge. But a little reflection will show that there is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientific in the sense of knowledge of general rules: the knowledge of the particular circumstances of time and place. It is with respect to this that practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active coöperation. We need to remember only how much we have to learn in any occupation after we have completed our theoretical training, how big a part of our working life we spend learning particular jobs, and how valuable an asset in all walks of life is knowledge of people, of local conditions, and of special circumstances. To know of and put to use a machine not fully employed, or somebody's skill which could be better utilized, or to be aware of a surplus stock which can be drawn upon during an interruption of supplies, is socially quite as useful as the knowledge of better alternative techniques. And the shipper who earns his living from using otherwise empty or half-filled journeys of tramp-steamers, or the estate agent whose whole knowledge is almost exclusively one of temporary opportunities, or the arbitrageur who gains from local differences of commodity prices, are all performing eminently useful functions based on special knowledge of circumstances of the fleeting moment not known to others.

Bottom line: The Hayekian concept of knowledge does not just function as an economic theory, but importantly has micro applications in other fields as marketing. In short, the application of Hayek’s Knowledge problem could translate to an edge in business application.