Why Cities Dominate The Marketing Landscape

At root, all marketing is local, but never more so than today. Economically, the geographies that matter to brand marketers are sub-national, mostly local. In particular, marketing is increasingly all about cities.

For one thing, local city economies matter more than national economies. A recent paper by Brigham Young University economist Todd Mitton found that the economic performance of sub-national regions within the 101 countries studied is influenced more by natural factors than by institutions, except when these regions function autonomously. Which is to say, when not dominated by far-away national institutions, everything comes together, natural and institutional, to enable key sub-national regions to excel and outperform the rest of the country. The takeaway is that national economies as a whole fare better when local economies are unleashed and untethered.

What is true for macroeconomic policymakers is true for brand marketers, too. Local is where the action is, cities in particular. Not the least reason is that cities are where people are. Excluding urban “clusters,” which often include small towns, the 2010 Census found that 71.2 percent of the U.S. population lives in 468 “urbanized areas” of 50,000 or more people. But the concentration within cities is even more pronounced – the top 48 urbanized areas account for more than half of the U.S. urban population. It is estimated that 60 million of the additional 100 million people projected by 2043 will live in one of nearly two dozen “megapolitan” areas.

It’s no surprise, then, that cities are also the engines of economic growth. A Brookings Institution analysis of 2009 economic data found that in 47 of 50 states, metro areas accounted for the majority of a state’s economic output. Even more, in 15 states, just one metro area accounted for the bulk of output. Cities produce a disproportionate share of exports. Cities attract the most talented, best educated people (whom Richard Florida famously described as the “creative class”). And cities possess the most valuable assets for future growth.

What’s true for the U.S. is true globally as well, particularly in emerging economies. From 2010 to 2050, the urban population of the developed world is projected to grow 0.6 percent per year. In contrast, the urban population of the developing world is projected to grow 2.4 percent per year, or a total of 2.6 billion people. In 2007, a mere 600 cities (out of 4,000 or so worldwide with populations of 100,000 or more) accounted for 60 percent of global GDP.  Between now and 2025, the top 600 cities will account for 65 percent of GDP growth in the global economy. The mix of the top 600 cities will change, with 136 new cities, all from the developing world, 100 of them from China.

In fact, it’s cities, or more precisely, urban vectors, that open up national markets to the world. The keystone of globalization since the 1980s has been a core set of urban vectors that provided an opening for business expansion. The most important of these has been the New York-Washington-London vector, with New York providing financial heft, Washington providing political influence and London providing a gateway to the world. The urban vector of rising importance is Shanghai-Beijing-Hong Kong, with Shanghai as the financial leader, Beijing as the political leader and Hong Kong as the global gateway. These sorts of relational dynamics will define and channel the growing impact of urban centers, and thus the opportunities for brand marketers.

Cities provide other advantages as well. They offer a critical mass of resources for corporate innovation centers, which explains why U.S. companies locate their R&D centers in just a few urban areas located on either coast. They bring together an exchange of cultures, such that cities around the world are shifting from a mono-ethnic past to a multi-ethnic future that is often envisioned as an inter-ethnic interchange. And cities boost the quality of life. As Harvard economist Edward Glaeser has noted, countries in which cities account for more than half of the population have five times higher incomes and three times lower infant mortality rates.

The downturn of 2007-2009 was significantly less severe in many cities, and many cities bounced back faster, too. This is not to suggest that cities escaped financial damage or that all cities are back to pre-recession peaks. It is only to note that, increasingly, a priority on cities is the focus of choice for brand marketing strategy. This means three things for planning and brand management.

First, there will be a resurgence of regional and local cultural leadership. This is happening already. Craft beer is one example – a regional culture phenomenon that is forcing national brewers to adapt. It’s seen as well in retail, snacks and more. But it’s more than localized consumer tastes; it’s about a shift in brand marketing services and tactics, with new firms popping up that specialize in “localizing” national brands.

Second, the appeal of the “exotic” will make a comeback. When a single cultural preference predominates, nothing from anywhere else is exotic because the product is the same everywhere. But with local tastes in ascendance, brands from other areas will have unique identities. This will give imports from other regions and localities fresh appeal. As one food critic noted in her 2013 outlook, look for “unexpected flavors arriving from distant locales…These aren’t new foods, in fact they’re typically traditional foods but exported far enough away that the commonplace transforms into the exotic.”

Finally, economies of scale will need to be refigured on a local basis. In particular, the logistics of supply and distribution will be driven by the local centers of gravity defined by marketing. While this won’t spread costs across large geographies, it will spread costs across a concentration of consumers, thus ensuring that brand marketing is as profitable for marketers as it is appealing to consumers.

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