Scott Ballum … started the Consumer Reconnection Project: a yearlong effort to only make purchases if he could make a personal connection with someone along an item’s production chain. – Rebecca Sheir, NPR, 1/19/09

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Bloody Monday is the name given to a day – January 26 to be exact – when 71,400 jobs are lost. Blue chip companies like Caterpillar, Starbucks, Pfizer, Google, and Microsoft bleed jobs and whole companies disappear at an alarming rate. Economists keep bidding up their unemployment projections – seven per cent, who’ll give me eight, now eight-fifty, nine?

The marketing question is how will the current state of the economy change longer-term customer buying attitudes and behavior? Aside from a short-term migration from luxury items to lower cost purchases, what strategic shift will take place? Let’s begin by looking at how the current marketplace assigns cause and blame for how we got here.

It seems a global age of electronic information and transactions has accompanied us to this cliff. It used to be that people mostly purchased and did business with people they knew. They bought food, borrowed money, got their cars repaired, and went to restaurants owned and operated by locals. Even things manufactured from far away like cars, hardware or clothes were sold and serviced locally. However in the last few decades we have given ourselves over to global, specialized and fragmented institutions, especially as we migrated to large urban centers. Now we mostly do business with people we don’t know. We buy our coffee at Starbucks, our drive-through meals at McDonald’s, our discount items from Wal-Mart and other stuff at Target. Our money, whether invested in stocks and bonds or in interest bearing or income producing products, is mostly with strangers. Perhaps no example is more illustrative of our dis-connected world than our current mortgage debacle where mortgages were originated, packaged, securitized and sold around the world.

This was the ultimate world of disaggregated relationships. Depositor, lender, borrower, packager, seller, and investor – all like blind mice on the transaction merry-go-round that had no room or tolerance for relationships. The compelling urge from an earlier time to give a heads-up – ‘gee, I don’t know, I sit next to them at my son’s baseball games’ or ‘we attend church or belong to the PTA with them’ – has long since washed away. In the electronic information age here in Transaction-ville there are virtually no relationships, just a bunch of blips on a screen. This new electronic information-driven, global economy made us temporarily rich and now we fear it will make us permanently poor.

What is worse, as a debtor in a relationship-less transaction, we live and die by information-based rules (i.e. ratios, formulas and scores) that leave little flexibility or grace. Doing business with strangers has a very real and significant cost.

It is our practical experiences and intuitive wisdom that are now causing the marketplace to question, fear and even disdain relationship-less transactions – whether it is tech support from India or local mortgages now held in Asia. As the financial advantage of the global, transaction model loses steam and fear and distrust for doing business with serial transactors grow, the swing back to more local, connected relationships will re-emerge. As the number of unemployed grow and become more reliant on existing personal and business connections for support, the value of relationships will rise.

The trends are apparent and growing. In a number of communities now in San Francisco, Chicago, New York and in New England towns, local community groups actively attempt to block entrance of large, remote institutional and franchise organizations (think Wal-Mart or McDonalds) who are increasingly seen as foreign to the best interests of local communities According to U. S. Banker, eighty-seven percent of the top 50 banks report competing more against community banks for small-business customers than they did three years ago and nearly half of community bank customers were satisfied while only about 36 % of big banks customers were. A recent survey reported seventy percent of community banks saw an uptick in deposits in the past year, often attributed to the spectacular failures of large institutions.

However, in these trying financial times, preferring to do business with a friend over a stranger is not just financial. In the British Medical Journal, scientists from Harvard showed that happiness spreads readily through social networks of family members, friends and neighbors. Business relationships are also a source of this relational happiness.

The great depression of the 1920-30s informed three generations of the value of saving and frugality. The lessons of this era will instruct future generations on the vices of too much credit but it will also carry a lesson about the hidden cost of doing business with those who have no vested interest in longer term relationships and our well being. The marketplace is becoming averse to the short-term incentives of strangers who prioritize personal gain over mutual value, enduring relationships, emotional fulfillment, and support in tough times. Scott Ballum will be one of many seeking to make purchases based on a personal connection.

(Column appeared originally in ABA Bank Marketing magazine – March 2009)

By ROBERT E. HALL

Not to be reproduced without written permission. All rights reserved. © Copyright Robert E. Hall 2009