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204. Mark Schaefer: Belonging To The Brand — The Business Case For Building a Community Around Your Business

In economics, production and marketing are not separate concepts. Production responds to customers’ needs and marketing is the expression of those needs inside the firm. The entire customer-facing activity of the firm is marketing. Like any other business activity, there is constant flux brought to bear by changing customer preferences, competitive innovation and market evolution. Marketing must be adaptive to change, and a major shift is occurring right now. Mark Schaefer writes about it in Belonging To The Brand: Why Community Is The Last Great Marketing Strategy.
Knowledge Capsule
Established strategies and tactics of marketing are no longer effective.
Marketing thought-leader Mark Schaefer puts it this way: marketing doesn’t work like it used to. The established techniques were biased towards outbound communication, such as advertising, PR and events. Mark classifies these techniques as “interrupt and annoy” to try to get customers to give their attention to feature and benefit of the company’s offerings. The communications environment shifted from analog to digital and from outbound to interactive, but interrupt and annoy remained the primary technique.
Finally, there’s an alternative marketing strategy.
The new strategy goes by the term “community” or “community building”. As economics advises, it’s a product of customer sovereignty. People want to belong to communities that share values and interests. And in the digital age, where work-from-home and glued-to-a-screen are life conditions that can lead to profound loneliness, the need for belonging is amplified. The covid lockdown experience exacerbated the problem.
Community is an experience that is highly valued by customer, distinguished via three features:
Connection with each other. There’s a group feeling of difference that’s not shared with others who don’t belong to the community.Purpose: community members gather because they have a shared reason to do so, whether it is software development or wine appreciation or the development of technical skills. There are shared rituals and traditions and common behaviors that generate a sense of group identity and bonding through common values.Relevance: A thriving community adapt and adjusts as times and members’ needs change. Adaptability strengthens group cohesion and assures continuity and resilience.
There’s a business case for community building.
Community-building may replace brand-building as a primary pathway to facilitating value for customers and thereby generating strong cash flows. The technique has a viable business model.
Differentiation: when customers bond in community, they’re differentiating themselves and the brand(s) they prefer and support. It’s a lasting advantage.Market monitoring: a community is a continuing conversation, a source of insight and signals of change.High speed information: the flow of information from customers and markets to firms is another source of advantage. The behaviors and preferences of community members can be continuously polled, with the opportunity for fast response.Trust. Businesses are recognizing the importance of trust in relationships with ever-greater clarity. Brand communities are trusted by their members; trust is inherent.Advocacy. Community members become the marketer. They communicate benefits and positive experiences. User-generated content both reduces marketing costs and adds authenticity and belief.Loyalty: The most profitable customers are the most loyal customers. Community members are loyal, and, in fact, go beyond loyalty to “attachment”.Co-creation. Value is created by customers in their own experience, or it can be viewed as co-created through interactions with the firm and its products and services. In brand communities, there is community co-creation, such as in LEGO Ideas groups and the IKEA user community.Membership as a product: Some communities become the business modem as members pay both to join and maintain membership and purchase the products and services of the community.Cultural alignment: community is a trend, especially for younger people experiencing social and digital isolation.Customer data: when members freely express their values and preferences, they create a rich new first-hand data source.
Purpose is the critical driver.
There’s a case to be made that a brand is its purpose. A clear and compelling purpose provides inner direction for the entrepreneur and the management team throughout the entrepreneurial journey. Shared purpose can bind customers to the brand. The same is true for a brand community; Mark Schaefer talks of bold, piercing purpose that aligns every resource of the company towards the community goal. Harley-Davidson is one (well-used) example: fulfilling dreams through the experience of motorcycling. The purpose is a customer experience, aligned with their values and open to their expansive and creative interpretation.
Corporate purpose, when genuinely felt and well-expressed, Mark writes, can be existential (this is why we exist?), differentiating (how do we make a difference?), values-based (how are our founding values relevant to the world?), distinctive (what headlines will be written about us), adaptive (how is the world changing in a way that unites us with our community?) and fulfilling (how can we fulfill customers’ dreams?)
Additional Resources
Mark’s Books:
Belonging To The Brand: Why Community Is The Last Great Marketing Strategy: Mises.org/E4B_204_Book1
Marketing Rebellion: The Most Human Company Wins: Mises.org/E4B_204_Book2
The Marketing Companion podcast: Mises.org/E4B_204_Pod
Mark Schaefer website: BusinessesGrow.com

203. Angie Morgan Witkowski: How To Win With Risk

The concept of risk provides us with an excellent opportunity to bridge between formal economic theory and personal business experience. Economics provides us with rigorous understanding of risk and uncertainty and the distinctions between them and their various types. But risk — the word that we use in everyday conversation — bring with it subjective feelings that affect how we approach it.
Knowledge Capsule
It’s appropriate for entrepreneurs to reframe the concept of risk so that they can embrace it wholeheartedly.
Risk has traditionally been framed as the downside of a choice. It’s the potential negative outcome for anything we try. But we just have to look at our own lives to see that a lot of risks we’ve taken have generated upside, whether that’s choosing a college, getting married, or taking a particular job. If we feel good about the outcome, then risk is a path to reward.
Part of the reframing of risk is to see it as a process rather than a single choice.
Risk can sound like it comes at us as a single choice, or an event, or a once-and-for-all decision. It’s much better to think of risk as a process — a behavioral process rather than a decision-making threshold. The risk process is one of experimentation —taking small steps, trying different things, getting feedback from the market, making adjustments, then trying some more things.
Instead of “starting a business”, we can think of setting out on the pathway to entrepreneurship. Instead of “committing to a future new product launch”, we can think initiating an exploration with low resource commitment until we have better feedback knowledge in order to take the next step and commit more resources. We can think of a new initiative as an experience gap that we look to fill with knowledge from experts and experience from mentors or advisors who’ve done something similar.
The key to this reframed risk process is a courageous commitment to perpetual learning.
Through learning, we can all redefine our understanding of risk and re-establish our relationship with it. A part of risk is the ego-bruising realization that we don’t know everything and can therefore make mistakes, or take actions that have unintended consequences.
By embracing learning, we establish a social reward for not knowing — learning is viewed positively, as a reward. Developing new knowledge is one of the primary roles of the entrepreneur. While it may take intellectual courage to own up to not knowing, the courage is rewarded with new understanding and new advantages. There’s always opportunity to learn more.
Imagination is an antidote to risk.
Imagination can overcome risk. We all have the capability of imagining future achievements — “future wins”, as Angie Morgan Witkowski put it. Imagination can be an exercise in creativity, and it’s OK to let it run wild, releasing our minds from the restraints that risk can impose. Taking the time for free-thinking can be very beneficial.
The pathway to the imagined future is to marry possibility with probability. In our exercise in imagination, it’s easy to eliminate the impossible. But we shouldn’t limit the possible. We can start from the imagined possible future and then work back through probabilities about whether we can accomplish it. Angie stimulated her business imagination vi a sidewalk margarita bar in Florida and ultimately opened a successful coffee shop in Traverse City, Michigan. It was a process of working backwards from what was possible to what was more probably, given her circumstances.
Similarly, her consulting business started by imagining writing a book about a better style of leadership than is taught in business school. She contacted literary agents, who encouraged her not only to write the book but to also start a speaking business. The audience for her speaking engagements sought consulting help, and she developed a series of workshops as part of the delivery system. Her consulting business is now cross-industry, from startups to the oil-and-gas majors, and worldwide. It started with imagination.
Imagination is complemented by hard work and realistic capacity assessment.
It would be wrong to think that the reframing of risk to action and perpetual learning comes additional without costs. Angie mentioned two. One is hard work. All learning pathways must be undertaken with the commitment to working as hard as it takes to advance. It requires time, effort, and continuous review. The intellectual courage that Angie highlighted is hard work in itself — the cognitive work of thinking about how to think, exercising cognitive discipline, exploring flexible options such as design thinking, that require the effort of looking at problems from many different perspectives.
The second cost Angie mentioned is the honest assessment of our capacity. We can imagine future wins and assess the probability of achieving them, but we must be honest about our capacity. Do we have the resources, do we have the skills, can we assemble the right team, are we willing to undertake the hard work?
Putting hard work and capacity together means we don’t risk an inadequate attempt to solve the target problem. As Angie put it, using Marines language, don’t be “half-assed”.
Action is more important than planning.
Angie’s prescription in her book, Bet On You, is for one-third of time to be allocated to planning and two-thirds making things happen. The make-things-happen part is what generates the feedback loop and learning that is so important. Here are Economics For Business, we’d probably relegate planning to 10% or less of resource allocation, but the point is the same. Action is the more important.
There is one aspect of planning that can deliver extra value, and that’s planning for failure, or contingency planning. Our imagination should be partially applied to imagining what could go wrong. How would the contingency transpire? What would we do next if it did? We should prepare for resilience in the aftermath of a setback.
A plan, in Angie’s words (which, in turn, come from the Marines), is a reference point for change.
Ultimately, risk must feel good.
If the antidote to the downside of risk is imagining future wins, then we can also benefit from a focus on the wins we experience every day. Choose the path that feels good both tomorrow and today, and that makes all efforts worthwhile.
Additional Resources
Bet On You: How To Win With Risk by Angie Morgan and Courtney Lynch: Mises.org/E4B_203_Book
Bet On You Podcast: Mises.org/E4B_203_Podcast
Angie Morgan Witkowski on LinkedIn: Mises.org/E4B_203_LinkedIn

202. Murray Sabrin: Financing Health Care

Entrepreneurial business solutions can lead to better outcomes in every economic endeavor. In the field of medical care, entrepreneurship has been hampered by non-market arrangements. There’s some sense of an emerging trend towards better choices for users, a trend that we discuss with economist Dr. Murray Sabrin.
Knowledge Capsule
All systems evolve. The current system of medical care uncoupled from private markets evolved in ways that result in higher costs and poorer outcomes.
Our economy — and the economic experience of all of us as individuals — would be improved (i.e., greater customer value would be experienced) if we could lighten the burdensome weight of government regulation and its consequent effects on the system of medical care and medical insurance.
Our homeowners insurance, our automobile insurance and our life insurance are market products that give us the experience of seeking information and making informed choices based on pricing and perceived benefits. Medical insurance has evolved differently — it’s tied to work and puts us in a medical system where prices and choices are opaque and highly constrained. The associated costs are a great burden on the economy, and they result in diversions of productive investment from better uses.
The evolution of employment-linked healthcare began in dangerous industries like forestry logging, when employers introduced on—site medical care to treat on-the-job accidents — employers understood the mutual benefit of a healthy workforce. During and after World War II, the incentives for employers shifted: wage controls prevented them from attracting workers with higher pay, and so they introduced the benefit of tax-free healthcare benefits. An industry linking employment and medical care grew by leaps and bounds.
Today, both employers and employees are beginning to understand the drawbacks of the evolved system.
In the evolved medical care system today, employees feel constrained because they can’t freely choose their doctors and service providers, and healthcare treatments they might want are often made unavailable to them. They’re not made aware of pricing, and therefore unable to make informed choices.
Employers are beginning to understand the high costs for traditional indemnity insurance, and many of them are seeking alternatives. Dr. Sabrin listed a number of these emerging innovations.
1. Employer self-insurance.
Instead of incurring the heavy cost of insuring via the conglomerates like Blue Cross Blue Shield, Humana, Aetna, United Healthcare and others, many employers are shifting to self-insurance, hiring an independent third-party administrator to set premiums for normal expenses, and utilizing re-insurance against the cost of catastrophic medical events.
2. Medical savings accounts.
Financial innovation has opened the possibility of utilizing current savings for future medical expenses, ideally deposited tax free, appreciating tax free and withdrawn tax free (although, inevitably, there are government restrictions). It’s another component in the free-market medicine revolution.
3. Medical cost sharing.
Some affinity groups take the route of medical cost sharing — groups pooling funds to pay individual medical costs. Some of these groups may create membership lifestyle qualifications — non-drinkers, non-smokers, etc. — to link healthy behaviors to lower medical care costs.
5. Wellness rather than healthcare.
The realization is dawning that medical care costs are inflated by unhealthy lifestyles. Employers and employees share a mutual interest in a healthier workplace and healthier workforce. Better alignment of incentives could encourage healthier eating and drinking habits, greater levels of exercise, and generally more health-conscious behavior. The feeling of entitlement to healthcare that can result in a lowered drive to stay healthy is a moral hazard that has been induced by the current medical care system. Reducing medical care costs via a healthier workforce is a win-win for employee and employer alike.
Restoring the doctor-patient relationship via Direct Primary Care.
The primary care doctor who has a knowing and caring relationship with individual patients, and who knows their ailments and their lifestyle, and their family and economic circumstances, is a historical tradition in American life, a part of the American dream. The corporate medical care system took this relationship away in many ways, replacing it with an impersonal system of “in-network” availability of physicians with no personal relationship component.
Direct Primary Care is restoring the doctor-patient relationship following principles of entrepreneurial business design. A doctor contracts with a small number of patients — few enough to ensure availability and access — who pay a subscription fee, sufficient to provide cash flow for the doctor’s office and immediate support functions. The doctor constructs a personally curated set of network connections to specialists, such as cardiologists or urologists, and to services such as imaging and lab analysis, so that patients can be directly connected with pre-selected and approved providers for specialist needs.
Direct Primary Care can eliminate or circumnavigate much of the bureaucracy, paperwork, and creativity-stifling sclerosis of current day corporate medical care systems.
6. Pricing transparency.
A parallel innovation to DPC is demonstrated in transparent pricing clinics and surgeries, the clearest example being provided by Surgery Center Of Oklahoma (SCOO) which famously provides an open price list for commonplace surgeries, with no surprise surcharges or hidden fees. These prices are often much, much lower than would be charged for the same service by corporate hospitals; the quality is often higher; the speed of getting an appointment is faster; and the most important trait is that the pricing is transparent to the end-user. Patients become consumers in the traditional sense of the word — able to make a free choice based on open pricing information.
7. Better self-monitoring.
How’s your health? You may not have sufficient information for a good answer – the medical care system often makes information hard to access. One improvement is the self-monitoring that is technologically enabled today. Your Apple watch, for example, can tell you a lot about your vital signs, as can apps+devices like Kardia or a simple scale.
Consumers may also be able to find a local DPC doctor or naturopath with whom to share the data for recommendations on natural solutions for any signals they might detect. This is a decentralized approach to healthcare that’s consistent with the general trend away from restrictive top-down centralized structures and processes.
Additional Resources
The Finance of Health Care: Wellness and Innovative Approaches to Employee Medical Insurance by Murray Sabrin: Mises.org/E4B_202_Book1
From Immigrant to Public Intellectual: An American Story by Murray Sabrin: Mises.org/E4B_202_Book2
MurraySabrin.com
MurraySabrin.Substack.com

201. Trini Amador: How Gracianna Became The Most Awarded Winery

It’s the ambition of every entrepreneurial business to advance from a standing start to customer—recognized leadership in its chosen field. It’s achievable, even without breakthrough technology and venture capital financing. Trini Amador’s Gracianna Winery is one of our Economics For Business entrepreneurial businesses of the year for 2022 for precisely such a journey story. Trini joins us to review the principles, processes and programs that are driving success.
Knowledge Capsule
Gracianna is the most awarded winery.
Metrics of success can vary across categories and industries. In the wine industry, awards presented in tastings conducted by prestigious panels and arbiters are important signals to customers. In a recent period, Gracianna winery, a small craft producer in the highly competitive Russian River wine area of Sonoma County, California, has become the most awarded in its class. And since that class is, by the owner’s choice, world-class — the best-of-the-best — the achievement is elevated to the highest possible level. Examples of the awards won include gold medals at the Sommeliers Choice Awards and the Sunset International Wine Competition, and double gold at the Los Angeles International Wine Competition. More awards are listed at Gracianna.com/Awards
Gracianna winery has also won hospitality awards for its tours and wine tastings, including a #1 position on TripAdvisor for Things To Do In Healdsburg, CA (out of 117 competing alternatives).
Everything begins with a commitment to understanding customer needs.
Trini and his family set themselves a goal of making a mark as a world class winery. They’ve certainly done that. How? Trini Amador is an entrepreneur in the Austrian tradition: the entire journey starts with deep understanding of customers and their needs. Who are the people who enjoy world class wines and associated experiences, and why do they choose to participate in this industry as consumers? What kind of experiences do they seek? How do they want to feel about those experiences?
Why do they undertake travel to visit different wineries? Why do they choose California, and Sonoma County and the Westside Highway in the Russian River Valley? How do they like to buy online? Why do they join wine clubs? All of these choices are emotionally driven — the answers lie in the heart and not the data.
Becoming a world class winery is a direction of travel, and the destination becomes clear with more and more learning about customers and their needs, wants and preferences. Brand vision is integrated with customer understanding and empathy.
Focus and feedback can take a brand to the top.
Trini describes his company and his team as obsessively focused on customers. As they collect more and more customer knowledge via more and more interactions, the better they get at serving customer needs.
There are really only two I techniques: listen and observe. Since the Gracianna experience includes onsite tastings and tours, the Gracianna team can meet customers face to face and listen for their responses, preferences and hopes. And since all Gracianna wine is sold direct via the internet, butting activity can be observed directly. The requisite business skill is always to pay attention for signals, and always attend to the feedback that results from interaction. All guests are self—selecting themselves to be part of the Gracianna story. They’ve chosen the relationship. Gleaning the motivation behind their doing so is the goal of the marketing team.
Consistent, precise execution is more important than strategy.
Once the brand’s direction is set, and an initial understand of customers is established, then execution takes over. Execution is a daily discipline, and the power tool is consistency: establishing a high standard and maintaining it in every action.
It’s perfectly possible to build a brand this way. Trini likened his approach to building a bird’s next — one twig at a time. Every act of execution, every customer service interaction, every e—mail and every tasting service is another twig added to a perfectly shaped, ultra—strong construction. Small brands can claim ownership of an equity this way (such as “best tasting room experience” on TripAdvisor) without expensive investment in communications; just execute, execute, execute. Let employees on the team exercise both their responsibility and their creativity in precision execution. Always aim for effectiveness (the best possible execution) rather than efficiency (the lowest cost or least—resource execution).
The best kind of planning is contingency planning to establish a prepared adaptiveness.
Wine is, at its fundamental level, an agricultural business. Trini calls it rhythmic — grow, harvest, make wine, store wine, release a vintage. No two growing seasons are ever alike. In addition, there can be crises — excess rain, floods, unusual growing temperatures, fires, pests. The best way to deal with these variations is contingency planning, i.e., imagining all the things that could go wrong and having a set of actions in mind if they do.
Adaptiveness is a core attribute for all entrepreneurs, and is especially applicable in wine. Explore and expand is an orientation that fully applies — once the curves that nature throws have been negotiated.
The greatest entrepreneurial attribute is courage.
In face of all the challenges and amidst all the uncertainty of an entrepreneurial business, Trini maintains that the key to a successful outcome is not so much strategy as courage. Make the best decisions you possibly can based on understanding customer needs, and then have the courage to act on the decision. The action generates interaction, which results in feedback, which provides the knowledge and energy for the next decision and next action.
Courage is the entrepreneur’s best business tool.
Additional Resources
“Gracianna: Award Winning Winemaking and Entrepreneurship” (video): Mises.org/E4B_201_Video
Gracianna.com
Lisa Amador’s Cookbook, Comfort! A Gracianna Member-Inspired Cookbook: Mises.org/E4B_201_Cookbook
Trini Amador’s “Brand Uniqueness Blueprint” (PDF): Mises.org/E4B_201_PDF