Why Is Austrian Economics The Economics For Marketing?
Marketing focuses on designing, communicating, and delivering value to customers. Austrian economics provides a set of principles for value generation. There are three pillars.
Customer-first
Business management must be directed externally to customers, and not internally to processes, methods, and organizational structures. Business exists to identify potential customers, identify their unmet or not fully met needs, and to creatively devise and offer unique, different and better solutions for the customers’ consideration. Those who gain customer approval are successful, those that don’t must reassess, revise, and adapt.
The Austrian customer-first approach is more relevant to business than ever in the digital age where customer behavior determines the success of companies as never before. And it’s greatly superior to alternatives from business school such as shareholder value maximization, stakeholder value, and the various consultancy-approved strategies such as competitive advantage analysis, the resource-based view, and many more.
Subjective Value
Austrian economics utilizes a different value logic than any other approach to business and value generation. Value is in the mind of the customer. It’s an experienced benefit, a feeling, an emotion. That’s why it’s called subjective. If value is in the customer’s mind, then firms can’t ‘create value’ (business school lingo) and there is no such thing as ‘shareholder value’. Firms can create customers, and they do so by facilitating the customer’s value experience. Meeting the needs of customers lies entirely in the customer domain.
Subjective value is the only reliable guide for business.
Entrepreneurship
The method for customer-first generation of subjective value is entrepreneurship. Study of the entrepreneurial method is a special focus of Austrian economics. Its components are empathy (the toolset for understanding customers and diagnosing their needs), design (the toolset for developing effective value propositions), assembly (the right resources in the right combinations) and business model deployment (engagement, presentation, pricing, costing, delivery, and monitoring of the value proposition). The value focus of Austrian economics guides Austrian entrepreneurs to strike the right balance across all these elements.
What does Austrian economics specifically bring to marketing?
The subjective value focus of Austrian economics brings new tools and capabilities to marketing.
Understanding motivation
Marketing is a removal activity – specifically, removing unease. The deep insight of Austrian economics is that customers are motivated to reduce dissatisfaction and unease rather than the traditional view that they seek better product features and attributes. They wish to remove frictions and barriers from their lives, not necessarily to accumulate more benefits. They want to do less work to experience more value.
Identifying potential customers
Traditional methods for identifying customers, including demographics, attitudinal surveys, and web habits, can’t deliver the information or insights required for effective marketing. An emotional profile is required.
Marketing logic: the deductive method
Customers can’t accurately or effectively describe their own emotional profile. Marketers must use deduction. The input data is observed behavior. Then the deductive method applied to what they say and what they do will enable the Austrian marketer to accurately define the profile.
Value proposition
Value is co-created in collaborative engagement with customers. Austrian marketers use the value proposition tool to initiate mutuality.
The power of brand
A deep understanding of subjective value gives Austrian marketers a special capacity for bonding brands to users via emotional pathways mapped in well-constructed and unique value propositions.
The value learning cycle
In the value learning cycle, customers are always learning what benefits to want, and entrepreneurs are teaching them about new and better benefits they can want.
Value adaptation
Change is continuous. Customers are always finding new benefits to want. They never rest. The journey has no end. Adaptive entrepreneurs continuously re-model value propositions so that customers stay with the brand even as the brand benefits evolve and change.
The tools
A sampling of the many marketing tools available at thevaluecreators.com
The Austrian School Of Marketing provides the fundamental end-to-end process tool for marketers.
https://thevaluecreators.com/wp-content/uploads/2022/04/The-Austrian-School-of-Marketing.pdf
Empathy is a sub-process that can be mapped and mastered.
- The empathic mental model.
https://hunterhastings.com/wp-content/uploads/2020/12/Empathy-As-A-Process.pdf
- Empathy interviews with customers.
https://thevaluecreators.com/wp-content/uploads/2022/01/entrepreneurial-empathy-1.pdf
Generating insights from empathy interviews.
Designing a value proposition.
Building a brand using the E4B Brand Uniqueness Blueprint.
https://thevaluecreators.com/wp-content/uploads/2022/01/Brand-Uniqueness-Blueprint.pdf
Economics For Business empowers marketers.
Whatever business you are in, you need to be a master marketer. Marketing plays the role of bringing the understanding of customer preferences inside the firm, transmits customer needs and wants to everyone and every business function that takes part in responding, from development to implementation, and communicates the value proposition that’s collaboratively constructed by those functions back to the customer in the form of both a persuasive promise and convincing promise-keeping.
Marketing is comprehensive and complex, responsive, and adaptive. There are marketing tools at every stage of the entrepreneurial journey, marked by the E4B entrepreneurial GPS pins:
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