Marketing | Chicago Venture Magazine

by William Arrington

While most of our lives have transcended into the digital world through experiences such as social networks, friends are still very much tangible. We make friends because we share common ideals, motives, beliefs, activities, influences, communities and even consumption patterns. Social media sought to capitalize on this relationship by broadcasting our lives to the world and then selling them to the highest bidders (i.e. advertisers and retailers) for lack of a better illustration. The effects of this commercialization of our digital lives has left a divide in the purpose and utility of social networks begging to ask the question whether our friendships and connections online have become nothing more than apparatuses for advertisers and marketers to spam us through?

This year I began to take a hard look at this question and re-examine the usefulness of social media in my own life, but also how I engaged with my friends and how those relationships evolved over time through the lenses of social networks. What was meant to be a study of how my own friendships have evolved as a result of social networks however sparked an idea that has since taken on legs of its own. That sliver of opportunity that emerged is a concept I’ve dubbed hyperlocal social economies. The terms hyperlocal and social economy are not new: Hyperlocal referring to well-defined communities generally segmented geographically or demographically; Social Economies referring to the third sector of economies bridging social elements with business and politics with a common mantra of people over profits.

A Hyperlocal Social Economy (HSE) takes some elements from both concepts, but the intended function is to integrate consumption behaviors of a common group, i.e. friends, in order to benefit the group as a whole. The basic elements of an HSE include the following:

A well-defined group of consumers sharing similar lifestyles (i.e. friends) – An HSE requires a distinct group of individuals that share similar lifestyles, routines, professions and backgrounds. This is important because these individuals tend to share common activities and consumption patterns which overlap each other.
A common set of goods/services consumed by the group regularly (seasonal or common intervals) – An HSE requires the group to not only have similar consumption patterns (i.e. disposable income) but also common goods and services they consume. The other key element is regular consumption intervals because an HSE relies on the assumption that these groups are comprised of repeat consumers.
A competitive market for goods/services being consumed (some standardization or democratization of the good/service) – An HSE requires that the market for goods and services has some standard or baseline value that’s common across the marketplace. For instance, going to a movie theater is relatively ubiquitous no matter the operator of the theater chain.
Geographically agnostic – An HSE requires that no matter the location of the group members, the goods or services encompassing the HSE are geographically unbound.

What’s the Value of an HSE?

Putting the whole picture together, an HSE provides for individuals within a collective group to leverage economies of scale to enhance individual value proposition. One may note this as being similar to group buying or purchasing, however an HSE will thrive whether the buyer is a group or individual. The value creation exists by the boundless ties to the group and being able to participate at will within the HSE yet the individual can still maintain complete financial sovereignty.

HSE’s One example of this would be in the purchase of concert tickets, where a person in NY scores 2 tickets to a show; however another person in the same HSE group was unsuccessful. As the date approaches, the New Yorker has an emergency that will prevent them from attending, so rather than sell the tickets through Craigslist or StubHub, the tickets are opened up to the other HSE group members, allowing the individual who was unsuccessful buying tickets to tap their friends.

HSE’s are micro-economies that smooth consumption among group members as well. As the above example cited there are many instances where an individual purchases a good or service only to go unused, leaving them at a net loss for the purchase. By filtering these consumables through the HSE group, losses and unused goods and services can be flattened or mitigated among the group members, because they share common traits and thus another member of the HSE group can come in to relieve you of said tickets.

This scenario begs to question why this transaction could not exist without the support of an HSE? The answer is actually yes, a person could reach out to friends or post to Facebook that they have tickets available. Where the HSE’s value proposition lies is that the members of the group are already tapped into each other and have a digital inventory of all members’ consumables allowing for exchanges, sales and purchases to seamlessly exist. An individual within the group only needs to broadcast those goods and services relevant to their HSE group, signaling to other members that they are attending these events, or buying these brands or using these services.

As this series on HSE’s continues, the next iteration will focus on the value creation for the service providers and producers of goods as we shift our attention to the benefits of business participation in the HSE model. Additionally, I hope to share updates on my current project which is applying the HSE model to the consumption of experiences.

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