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The Principal-Agent Problem in Marketing

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The cost of college textbooks has risen 812 percent since 1978. That’s more than triple the inflation rate over the same period of time, according to The Atlantic.

So what gives?

Textbook costs are a perfect example of an economic theory known as the principal-agent problem. Professors (the agent) choose the textbooks and the students (the principal) pay for them.

As Planet Money said, it’s the “the somebody else’s money problem.”

Marketing has a problem of its own that can partially be attributed to the principal-agent problem. Content, email and SEO have all reached critical mass. Everyone is doing it. And that has created a real issue: mediocrity.

Nearly all marketing looks and feels the same. Hardly anything stands out. Every blog churns out general, obvious information. Email marketers send cookie-cutter templates on Tuesdays at 10am. And SEO’s have title generating tools to create headlines that “speak to Google and the reader.”

Marketing has a “somebody else’s money problem.”

Marketers (the agents) are working for managers and clients while the customers (the principals) are left without sources of good information. The marketers should be working for the customers in the same way professors should be working for their students. Self-interest gets in the way and principals are left out to dry.

Look around at businesses doing the best marketing. They are doing things that don’t scale. They share information that’s actually interesting and educational. They treat people with kindness and respect.

And they always remember that the customer comes first.

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