Friday, November 5, 2010

Imperfect Information

I'm increasingly frustrated and irritated that I can't get information to customers, despite the amazing digital tools at our disposal. Facebook, direct email, in-store flyers, an online schedule and good old word-of-mouth all assume that what we have to say is important to those we're trying to say it to, and they have the mental bandwidth to absorb it. Inevitably, these efforts are met with failure, despite our best efforts. However, I have to remember that the entire process of retail, the entire economy, really, is based on imperfect information.

The concept of imperfect information is counter intuitive and completely escapes some people, especially those who believe the Internet is the ultimate killer of brick and mortar stores. Imperfect information is the grease of commerce (it's not money). According to this Wikipedia article on perfect information,
"it would practically mean that all consumers know all things, about all products, at all times, and therefore always make the best decision regarding purchase. In competitive markets, unlike game-theoretic models, perfect competition does not require that agents have complete knowledge about the actions of others; all relevant information is reflected in prices."
In other words, if we could see everything and every possible permutation of the economy, like in a game of chess or tic tac toe, retail would be an endeavor handled by a handful of Internet discounters, entirely based on who had the lowest price (perhaps Amazon's goal). Imperfect information may be highly inefficient, but the fuzziness of that data makes it possible for businesses to survive, especially small ones. It's fuzzy for everyone, including my competitors.

Back in the real world, retailers and all businesses struggle to get their message to their customers, most of whom are completely overwhelmed with messages, most of whom shop at their store for myriad reasons retailers only vaguely grasp. The Internet crowd will claim they're all computer illiterate Luddites, but that assumes price is paramount and perfect information is at hand.

Where one shops is often about human connections, personal conversations, perceived staff expertise and a sense of community. Price is only one factor. My own relationships with vendors are not entirely based on price and availability. They're often based on fuzzier things like hard earned loyalty. My credit card processor is a high school friend. My insurance agent is a local gamer buddy, and my main distributor spent months of weekends getting me set up while the competition simply mailed catalogs and credit applications. I have to say, I'm richly rewarded by these relationships, despite their imperfection. I might find a slightly cheaper credit card processor, but can I Facebook the CEO when my system is down? Will my insurance agent show up at 7am on a Saturday morning after a break in, like mine did? Will the sales rep at my next supplier work to understand my business and look out for me or is he a keyboard pounding monkey?

What we really seek as business owners is that personal connection with our customers. In analytical terms, it's a way to cut through imperfect information so customers listen to us. Not everyone wants that kind of relationship, which is why it's, well, imperfect.

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