A podcast based on the winning principle that entrepreneurs need only know the laws of economics plus the minds of customers. After that, apply your imagination.

100. Jeff Deist: Animating Economics to Serve Real People and Real Businesses

Economics is treated by many as an arid field of mathematical modeling. Human beings are treated as data in the model, almost the way physics regards atoms and molecules. This approach to economics doesn’t help people much; it doesn’t help us understand the world, and isn’t helping us build a better future.

Economics is an animating science. Austrian economics is humanistic; it treats humans as people, pursuing their hopes and dreams, frequently changing, seldom predictable, and never acting like data in a model.

That’s why we see our brand of economics as animating: helping people to understand better how to identify the best means for their chosen ends. For businesspeople, that translates into knowledge, processes and tools to help businesses grow and thrive.

Download The Episode Resource Entrepreneurial GPS – Download

Key Takeaways & Actionable Insights

The role of the entrepreneur

Entrepreneurship is the animation of business. It’s action; the exciting process of turning business knowledge and market signals into commercial solutions with the application of imagination, insight, creativity, resource assembly, and agile adjustment.

A big part of what makes Austrian economics different and better for business application is the understanding of the role of the entrepreneur and the entrepreneurial function in the economy. Jeff Deist articulated this role as a nexus between capital and markets, and the entrepreneur as the individual taking risk, employing their own property and having skin in the game. It’s an exciting role.

Entrepreneurship and value

Entrepreneurial business is the intentional pursuit of new economic value. The pursuit requires a deep understanding of the concept of value, an understanding that Austrian economics provides. Ever since Carl Menger established the concept of subjective value, Austrian economists have been deepening their understanding still further. Today, we recognize more than ever the role of the customer in value creation; since value is their experience, they are active collaborators. Entrepreneurs harness this collaboration. Think of an iPhone. Apple designs and assembles it, and then a large part of the value experience comes from the user adding apps, composing and sending and receiving messages and e-mails, choosing videos to watch and podcasts to listen to, eagerly contributing to the value experience that they themselves enjoy.

Value is what users make it.

Individualism and diversity

Entrepreneurial economics recognizes the role of the individual. It respects and honors the individual choice. Each individual, in the role of both consumer and producer, exhibits different preferences, personality, and psychology; we live in different places and in different contexts; we each have different needs and wants.

There are many favorable outcomes from individualism. One is the vast global diversity of the marketplace, whether exhibited on amazon or Alibaba or Grainger.com for industrial supplies. Another is economics as an engine of humanity and peace, which is the context for entrepreneurs providing goods and services globally to customers.

Specialization, achievement and satisfaction

Economics For Business aims to help all businesses and all entrepreneurs to find their specialization in this global ecosystem. We apply the economic principles of the specialized division of knowledge and division of labor. We all have knowledge that is unique to us, and we can all find an application of that knowledge in business.

Bob Luddy, who has been a guest on our podcast, founded CaptiveAire, a company that specializes in restaurant ventilation systems, providing benefits of safety, comfort, clean air and regulatory compliance to a broad range of foodservice customers. Bob stresses the value of specialization to become the leader in a category – a share leader and a knowledge leader and an innovation leader. And he’ll tell you that the non-material rewards of economic specialization are delightful, including satisfaction, achievement, earned respect.

CaptiveAire is a great example of considered specialization – it’s not in a high tech category (although there is a lot of tech incorporated in CaptiveAire’s product and service bundle), or an internet business or a software business. Find your customers, find a need that is not being filled, and build from there.

Big data versus big empathy and big insights

We live in an era where more and more data is being collected, compiled, processed and analyzed by producers (as well as non-economic actors such as governments, of course). As the sources of data, many of us have concerns about this trend. The economic principle that is more important for businesses, however, is that, no matter how “big” the data sets are, they do not have value (they are not causal data) until they provide or reveal some qualitative understanding of customer feelings, motivations or attitudes. These are the data that are genuinely useful to businesses. The Economics For Business method to develop this understanding is empathy, and we have a full toolset to help entrepreneurs apply it.

MBA-ization versus products, people and active learning

Jeff quoted Elon Musk on the subject of MBA-ization of business: too much focus on financial modeling and spreadsheets, and not enough on deploying engineers on the factory floor to develop, introduce and continuously improve great products that provide the customer with a delightful experience. Jeff concurred that MBA programs and business schools have become bogged down with a lot of dead weight, and have obscured some of their market-facing functions. They don’t provide the value they ought to provide for the tuition charged.

Economics For Business can provide the 20% of business school knowledge that’s actually valuable, and add new content – informed with Austrian insight – that’s even more relevant, plus the methodology and tools to apply the knowledge in business practice.

This approach is based on the educational science of active learning. In this view, learning is not achieved via books and lectures (which are necessarily backward-looking) but via the receipt of tools and methods and techniques, applying them oneself in real-life situations, and learning from the feedback received from people and markets and business results.

Building experience and sharing experience.

Active learning is the accumulation of experience. It is the unique experience of entrepreneurs and their teams gained from the operation of their businesses that constitutes the division of knowledge flywheel that continuously reinforces their advantaged position in the marketplace.

There is a time value to experience; it takes time to accumulate. On the Economics For Business platform, we’ll aim to identify ways to share experience to speed up the experience-gathering timeline. Q&A and discussion within our entrepreneurial community is one way. Another is mentoring, whereby experienced business people can share what they’ve learned over time.

Economics as a route to work and life satisfaction.

In his book Dynamism, Economic Nobel prizewinner Edmund Phelps tells us that, according to individually reported life satisfaction scores (e.g. Pew Research Center surveys and other similar surveys), the greater part of life satisfaction results from production activities rather than consumer activities. The purpose and meaning of taking on challenges, achieving results, making discoveries, self-reliance, and success in meeting goals are found in participation in the production side of the economic system. We hope to play our part in the stimulus of those satisfactions via the Mises Institute’s Economics For Business project.

Free Downloads & Extras From The Episode

Economics For Business utilizes a journey metaphor for the entrepreneurial process. Take a look at our visual summary: Download the PDF

“The Austrian Business Model” (video): https://e4epod.com/model

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99. Scott Livengood Reframes Entrepreneurship for New Audiences

Why isn’t everyone an entrepreneur? Perhaps we don’t explain it well enough or in language that lets everyone in on the wonders and the thrills of the pursuit of new economic value.

Scott Livengood chooses reframing — thinking in new and different ways about an established concept — to widen the audience for entrepreneurship.

Key Takeaways & Actionable Insights

Reframing entrepreneurship in the context of popular culture.

Scott recently published a multimedia e-book called The Startup of Seinfeld. In the book he articulates a comprehensive survey of concepts and principles of entrepreneurship, including the entrepreneurial mindset, risk and uncertainty, intellectual property, business models, planning, finance, and many more.

The cultural frame Scott selected is everyday city life as illustrated by the characters and situations and market interactions in 180 episodes of Seinfeld. In Scott’s hands, this is not a show about nothing, but about entrepreneurship.

The multimedia approach is facilitated by a series of links in the e-book to YouTube video clips of short scenes from multiple Seinfeld episodes that are illustrative of entrepreneurial concepts and principles. You’ll find the concepts of economic calculation, opportunity, product design, arbitrage, intellectual property, judgment, planning, uncertainty, and several more. The text accompanying the videos is an exposition of economic principles underlying these concepts.

There’s a lot to learn, and it’s fun! A major point to take away is that entrepreneurship is everyday life: people imagining new ways to serve others and meet their needs, and employing design and economic calculation, judgment under uncertainty and marketing and communications to facilitate a valuable exchange.

Reframing the teaching of entrepreneurship and strategy.

The philosophy underpinning the teaching method in the e-book has been forged in the university classes and seminars that Scott teaches, and for which he prepares meticulously and conducts comparative research into learning and teaching effectiveness.

He has found that embedding the principles of entrepreneurial economics and business strategy in cultural iconography illustrated via multimedia technology results in a significant increase in student engagement, participation, learning, and understanding. Humor, for example, is a language and a style that can draw students in, engage them at a deeper level of curiosity, and help to deliver the serious economic message.

This kind of approach helps students think of entrepreneurship as more of a normal life choice for themselves — a life of creative problem-solving. Students can think about their ends and the means open to them in a different way. If they are inclined to “social entrepreneurship”, they can learn that that simply means a distinctive identification of ends, without any attempt to operate outside the profit-and-loss system of sound entrepreneurial practice.

Reframing entrepreneurship for the disadvantaged.

Scott’s ultimate test for reframing entrepreneurship for a different audience in a different culture has been presented by his teaching for Education for Humanity. This is group associated with his university, Arizona State, and dedicated to helping displaced refugees. These students who are displaced from their homelands by war and conflict and find themselves in refugee camps in countries that are alien to them, like Uganda and Lebanon. Their prospects for further education are narrow. What are the pathways out of the poverty and restrictions of refugee camp life?

Scott’s chosen task is to teach them entrepreneurship. Where to start? The basis is empathy — digging deep to understand their situation, circumstances, and context, and understanding them as individuals and identifying their needs and wants. Language becomes critical — using concepts and examples they can relate to.

It’s contextually impractical to teach entrepreneurial finance in terms of bank loans and venture capital. But Scott can teach individual and family budgeting: how to calculate and manage income and expenditures, how to save, how to build up sufficient savings to make a capital purchase, and how to generate an income stream from that capital. The particular capital artifact may be a second cow for a head of household that uses the first one for feeding the family. The family has knowledge and skills in milking and animal husbandry that can be put to use in their new entrepreneurial business of selling milk and dairy products to other families, or bartering for other kinds of nourishment.

Eventually, the family may advance to the use of micro-loans or other forms of micro-finance and expand their entrepreneurial holdings. Scott can now teach about the trust nexus of paying interest and paying back loans, and about return on investment and capital accumulation. Progress comes quickly as a result of starting in the right place.

Entrepreneurial communities.

One of Scott’s realizations has been the power of entrepreneurial communities. In the refugee camps, family entrepreneurs collaborate, learn together, assist each other, and seek to raise the prospects of the entire community. Failure to pay back a loan, for example, would be a setback for the group, and group norms and institutions arise to guard against such a loss of trust.

Scott sees direct application of this learning about normative entrepreneurial community action in other parts of the world, including rural communities here in North and Central America, and in the inner city initiative of Entrepreneur Zones in the US.

By embedding entrepreneurship in culture, the collaborative service ethic emerges more clearly and emphatically.

Free Downloads & Extras From The Episode

Enjoy Scott Livengood’s book about the culture, concepts, and principles of entrepreneurship: The Startup Of Seinfeld: A Multimedia Approach to Learning Entrepreneurship: Get It Here

Read the work of Nobel prize-winner Edmund Phelps, mentioned in the podcast introduction, on Mass Flourishing and economic Dynamism.

“The Austrian Business Model” (video): https://e4epod.com/model

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98. Mark Packard’s Empathic Mental Model for Predicting Future Customer Value

Empathy, properly employed, is a robust business tool that smart entrepreneurs use to design winning value propositions.

Download The Episode Resource Empathy As A Process Tool – Download

Key Takeaways & Actionable Insights

Here’s why empathy matters for entrepreneurs.

Entrepreneurs’ success depends on what others do — those others being customers. The entrepreneur has the goal of customers buying, as a result of listening to their preferences and meeting them.

But there’s a little more work to do than just listening. As we discovered in Dr. Mark Packard’s previous podcast episodes, the customer is engaged in a continuous, dynamic, and ever-changing value learning process: learning what they, subjectively, really want. So they can’t tell you what they prefer when they are still engaged in the learning process. So listening, while useful in gathering factual knowledge, isn’t quite enough for the entrepreneur to embark upon designing a solution.

The entrepreneur must develop a special kind of “needs understanding” for their chosen customer group.

As Dr. Packard stresses — and as is foundational to the application of Austrian economics to business — the customer determines value, and that value takes the form of an experience: how customers feel about the experienced benefit of an economic exchange like buying a car, driving it, getting it serviced, and sensing the esteem of others for the choice they made.

There are two kinds of knowledge, factual and tacit. Your customers can communicate factual knowledge to you. They can’t communicate tacit knowledge, because it is derived from experiences that only they can feel.

So entrepreneurs must find a tool to represent the tacit knowledge that’s locked in the customer’s mind — a tool for “needs understanding”. The tool Dr. Packard proposes is a mental model the entrepreneur can use in the empathic process.

Importantly, empathy is not emotional mirroring — feeling what another person feels. It’s an active implementation of the entrepreneurial imagination, a cognitive act that the entrepreneur can plan and perform.

The process of modeling “needs understanding” starts with factual knowledge, purposely gathered and organized.

What entrepreneurs must pursue is deep learning about why customers feel the way they do about their experiences The goal is to gain insight in order to be able to improve consumers’ future experience. This requires knowledge-based inference from your empathic imagination about the causes of the current experience.

To do that, entrepreneurs need substantial background information—especially the personal and situational context surrounding the experience: the specifics of who, what, when, why and how. It’s not about imagining the experience of random people; it’s about learning a lot about a specific person in order to be able to successfully empathize with them.

Factual knowledge can be run through the entrepreneur’s mental model.

Once factual knowledge of the customer, their context and their current experience is gathered, the entrepreneur makes two runs of this information through their mental model. Think of it as running a simulation — a mental simulation.

  • The first run of the mental model is based on the entrepreneur’s own experience. Pick an experience that you’ve had and can self-analyze, so that you have a model of what that experience feels like. Now run the information you’ve gathered about the customer through that model — what does it suggest that they might feel? For example, think of an experience that you’ve had where you bought a product you expected to enjoy, and it disappointed. What did that feel like?
  • The second run of the mental model is the empathic mental model based on the entrepreneur’s understanding of the customer’s current or recent experience as told during knowledge gathering. You can understand what you felt like when a product disappointed. Now you imagine what the customer feels like or felt like as a consequence of a comparable experience.

The final step is to project the empathic mental model into the future.

The ultimate goal is to imagine what the customer’s feeling would be like in the future, following an experience with a new product or service value proposition offered by the entrepreneur. This is a projection — one that can be carefully constructed from the two previous runs of the mental model.

  • Create a mental model from your own experiences.
  • Run that mental model for an experience that a customer has reported to you that they have felt in the past.
  • Then run a projection of that model for the new experience you are planning to offer.

The more developed this skill becomes, the more confidence you can develop in your empathic projection, and the better you will be able to evaluate the business opportunity you are imagining you will design and create, and the value the customer will experience.

Just as the customer learns what to value, the entrepreneur can learn to project future value.

Dr. Packard emphasizes that the customer is continuously engaged in a learning process — assessing value propositions, making decisions as to what to buy and what to try, then evaluating the resulting experience — was it better or worse than expected?

The entrepreneur must keep up with this learning process, monitoring the customer’s dynamic subjectivism, their ever-changing preferences amidst an ever-changing context.

By keeping up via continuous monitoring, the entrepreneur will be able to make multiple runs of the empathic mental model, and test the model results for increasing predicted value.

Free Downloads & Extras From The Episode

Empathy As A Process (PDF): Get It Here

“The Austrian Business Model” (video): https://e4epod.com/model

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97. John Boles: How Austrian Is Your Business? Continuous Value Perception Monitoring is One Measure.

With the development of the Austrian Business Paradigm and the Austrian Business Model, and tools such as the “Value Learning Process,” businesses of all kinds can utilize the deep insights of Austrian economics to further enhance how they facilitate value for their customers.

John Boles — an avid listener of the Economics for Entrepreneurs Podcast — provides an example of how he applies these insights at his accounting firm.

Download The Episode Resource Continuous Value Perception Monitoring Tool – Download

Key Takeaways & Actionable Insights

1) Improved customer understanding.

The Austrian business paradigm places the customer in first position. This contrasts with traditional business thinking that puts the firm or the product or service in first position and searches for ways (“strategies”) to sell or market that offering to a set of customers who are to be identified during the selling process.

The way to put the customer in first position is to make your top priority a deep and intimate understanding of the customer, demographically (who they are), functionally (what they do and how they do it) and emotionally (how they feel — about key issues and challenges, about vendors and service providers, about competition and every aspect of business).

The first question Austrian business practitioners ask themselves is: how deep and intimate is my customer knowledge, and can it be improved?

2) Calibrating the customer’s perception of value.

Value is a feeling that exists only in the mind of the customer. The entrepreneur’s task is to facilitate that feeling of value — ease the way for the customer to arrive at that happy state of mind. It’s imperative for entrepreneurs to try to feel what the customer feels — to sympathize with their perception of value, rather than to focus only what the firm is delivering. We must know what the customer is buying, not just what we are selling.

The tools to use are monitoring of customer behavior (what they do — for example, shopping around for alternatives — is more important than what they say); making sure you understand their rankings of features, attributes and benefits, that is, what’s most important to them; and conducting interviews about the value experience. Ask the question: is the customer’s perception of value experienced aligned with the firm’s perception of value delivered?

3) Are value adjustments indicated?

The Austrian view of the market as a process helps us think about continuous change. Customers are continuously interacting with other customers, competitors, ideas, new value propositions, environmental conditions, regulations and a plethora of marketplace changes. Consequently, their perceptions of value are in constant flux. It should not be a surprise that entrepreneurs need to make value adjustments. It may be necessary to change perceptions of absolute value (via an adjustment in the value proposition), of relative value (via an adjustment in comparison with alternative propositions), or of exchange value (via adjustment in pricing, bling terms, or discounts / rebates).

4) Communicating adjustments.

It’s easy to overlook a critical component of value adjustments: communication. The Austrian business model advocates frequent in-depth conversations with customers at every level. These conversations, while always two-way of course, can be primarily designed for outbound communication, describing the adjustments made, and why they were made and ensuring the customer understands the responsiveness of the firm; or for inbound data gathering, primarily listening in order to further increase understanding of the customer and their preferences.

Customer communication is a component of perceived value.

5) Ongoing evaluation.

The customer is always evaluating the service provider / vendor and their value proposition, through the lens of experience: did the value experience match the anticipated experience; and, if not, in what ways was it deficient? The service provider / vendor must also undertake continuous evaluation. Did the value adjustments succeed? Are more called for? What are the indicators of change?

Free Downloads & Extras From The Episode

Continuous Value Perception Monitoring + Adjustment (PDF): Get It Here

“The Austrian Business Model” (video): https://e4epod.com/model

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96. Vishal Gupta and the Nobel Prize For Entrepreneurship Research

Researchers into entrepreneurship have a powerful incentive to identify new insights about how businesses grow and thrive.

Download The Episode Resource What Entrepreneurship Is (and Isn’t) – Download

Key Takeaways & Actionable Insights

Happily for everyone involved in business and innovation, entrepreneurial research is thriving, blossoming, and flourishing.

Professor Vishal Gupta’s book, Great Minds In Entrepreneurship Research, surveys thirty or more years of research papers that were awarded what is colloquially known as the Nobel Prize in Entrepreneurship Research (formally known as the Global Award for Entrepreneurship Research: GAER). The research field is deep, rich, dynamic and expanding.

Research identifies and examines entrepreneurship in every business size and type as a fundamental economic activity.

In its earliest days, entrepreneurship research focused a lot on small business but, today, business size and stage are not the constraints. The research identifies entrepreneurship in corporations, non-profits, and many more business sectors.

Much of the research focus is on entrepreneurial contribution — to growth, to job creation, to innovation, to progress.

Entrepreneurship is identified as the great economic contributor to betterment and well-being, measured via GDP growth in countries large and small, the creation of new and better jobs for people worldwide, new innovations and new business directions, and individual progress in general. As Mises stated, entrepreneurship is the driving force of the market system.

New entry, properly understood, is one way to characterize entrepreneurship.

The search for a single characteristic of entrepreneurship risks missing critical insights. However, one that garners broad support is “new entry” — entering new markets, entering existing markets with new value propositions, entering established product fields with new innovations, or entering into existing customer mindsets with new ideas.

Economic productivity is another.

A rich vein of entrepreneurship research has measured the efficiency that entrepreneurs bring to the use of resources — producing more with less. For example, research has measured innovation efficiency as the number of innovations per employee, and has found that smaller, more nimble firms are far more efficient on this metric than big corporations, even if the latter launch more new products in total (and generate more PR).

The research has uncovered a new type of firm and business model, and new business ratios that result.

NTBF is the acronym for New Technology Based Firms, those that innovate with new business models and new ways to facilitate service experience via dematerialized delivery. One of the results of these new models is new sets of business ratios — for example, revenue per employees which, with software based companies on the internet, can now reach never-before realized levels. This evolution has forced researchers to re-think some of their models. For example, the biologically-derived product life cycle (PLC) model of business maturity — birth, life and death — has to be revised because dematerialized companies can easily be re-born, even after near-death experiences. Think Apple — the founder died and, at one time, it was thought that the company might, but it was reborn.

Research opens up entirely new ways to think about business.

New research fields such as complex adaptive systems (or complex creative systems as Professor Todd Chiles prefers to call them) represent a new way to think about business — focusing less on individual firms and more on the value networks and service systems of which they are a part.

New ways of evaluating business potential are also emerging from research.

Professor Gupta discussed characteristics of firms such as knowledge absorption and absorptive capacity. Extending the Hayekian concept of distributed specialized knowledge, researchers have identified the ability to quickly absorb and apply new knowledge as a critical capacity of successful adaptive firms, and have shed light on many of the internal constraints this absorptive capacity.

Research recognizes the role of entrepreneurial imagination and subjectivity, although it doesn’t always get it right.

Austrian economics highlights subjectivity and views entrepreneurial opportunity as a subjective phenomenon, based in the imagination of the entrepreneur. Not all entrepreneurship researchers have been able to become comfortable with this idea, continuing to see opportunity as objectively identifiable. Austrians seem to be in the ascendancy on this controversy.

Importantly, entrepreneurship research is becoming interdisciplinary.

Systems thinking requires an interdisciplinary approach. Researchers in sociology, psychology, finance and even anthropology are examining entrepreneurship via their own research lenses. This development can only help the advance of entrepreneurship across a broad front of society and culture, as well as economics.

Free Downloads & Extras From The Episode

“What Entrepreneurship Is (and Isn’t)” (PDF): Get It Here

“The Austrian Business Model” (video): https://e4epod.com/model

Start Your Own Entrepreneurial Journey

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95. Martin Lünendonk: How To Make The Customer Your Boss

Consumer sovereignty is a principle of Austrian economics. Here’s how entrepreneurs apply the principle in business, as told by Martin Lünendonk, co-founder of FounderJar.com, as well as Finance Club and Cleverism.com.

Download The Episode Resource How To Make The Customer Your Boss – Download

Key Takeaways & Actionable Insights

“There is only one boss. The customer. And he can fire everybody in the company, from the chairman on down, simply by spending his money somewhere else.” —Sam Walton

Though they are several decades old, these words by Walmart founder Sam Walton are still very relevant, especially in today’s highly competitive world.

This is particularly true for those trying to make money online. You are already in competition with hundreds, perhaps thousands of other businesses, and if you do not put your customers first, they can easily move to the competition. It’s as easy as tapping a few buttons on their smartphone.

Great business leaders understand that businesses exist for one sole purpose — to serve the needs of their customers. If you want your business to not only survive, but to thrive in this hyper-competitive world, it’s time you started treating your customers like the boss.

Below, let’s take a look at the steps you need to take to place your customers in their rightful seat — the boss’s seat.

1. Identify the Key Problems Customers Want To Get Solved

To effectively serve your customers, you need to first identify what key problems the customer is trying to solve.

Very often, entrepreneurs set out to solve problems they think the customer has, without trying to look at things from the customers’ point of view and confirm whether the customer has this problem, and whether it is a problem they are trying to solve.

For instance, Blackberry assumed that what its customers wanted was a laptop that could fit on the palm, so they focused on improving the physical keyboard.

Apple, on the other hand, realized that what customers actually wanted was a device that was amazingly easy to use, and when they introduced a device with a touch screen and no physical buttons, they took Blackberry out of business.

So, how do you identify the problems that customers are trying to solve? There are two ways to do this:

Listen To Your Customers

The easiest way to identify the problems your customers are trying to solve is to actually listen to them. They know what they are struggling with and why they need this problem solved.

If you listen to your customers, you are unlikely to find yourself in a situation where you are solving a problem no one cares about.

There are two main approaches you can take to listen to your customers and identify the problems they are trying to solve. Here are a few…

  • Interview your customers: Your first option is to get proactive and ask the customers directly. You can do this using surveys on your website, by getting on the phone and talking to customers, through focus groups, and so on.
  • Look at customer reviews: Your customer reviews present another great opportunity for you to learn about the problems your customers are trying to solve. Here, you should place more focus on the negative comments, since these are the ones that highlight customer needs that are not being met. However, even positive comments can give insights into customer problems that you’re solving effectively.

Listen To Your Salespeople

The second approach to identifying the problems customers are trying to solve is to listen to your salespeople.

Your salespeople are in direct contact with your customers, and they, therefore, have better insights into your customers’ thought processes.

They know the pain points that drive customers to purchase your products and services, they know the things that customers like or dislike about your products, they know the reasons that keep some customers from purchasing, and so on.

By administering surveys to your sales teams, you can gain insights that will help you figure out your customers’ key problems, which will in turn help you to serve them better.

When trying to gain insights about customer problems, either from the customers themselves or from your salespeople, it’s good to try to get to the root cause of the problem. Sometimes, what you think is the problem might not actually be the problem.

For instance, at one point, Disney was experiencing lots of criticism because visitors felt the queues for the rides were too long. At first glance, the problem seems obvious – visitors spending too much time waiting for their rides.

The solutions to this problem are obvious as well. To shorten the queues, Disney would either have to invest in more rides, or reduce the number of visitors getting into their parks. Both of these solutions would cost Disney millions.

Disney hired a group of designers to help them solve this problem. After interviews with Disney visitors, the designers realized that the problem wasn’t the long queues. The problem was that visitors were getting bored because they had nothing to do while waiting in the queue.

To solve the problem, they had Disney add themed music and videos that visitors could listen to and watch while waiting for their rides. By getting to the root cause of the problem, they were able to come up with an effective solution that saved Disney millions.

Similarly, do not take your customers’ feedback at face value. Try to identify what the root problem is before you start developing a solution.

2. Make Sure Your Offering Solves Those Customer Problems

Now that you have identified the problems that your customers are trying to solve, it’s time to come up with solutions to solve those problems.

The best way to ensure that the solution you are developing solves the actual problems your customers are struggling with is to involve your customers in the development process.

One approach is to develop a minimum viable product (MVP) of your solution and show it to a group of customers with the problem you are trying to solve. You then collect their feedback, and use insights to improve your next iteration and ensure that your final solution solves the customer problem in the most effective way.

Minimum Viable Product

SOURCE: Clevertap.com/blog/minimum-viable-product

For instance, when creating DropBox, founder Drew Houston didn’t want to spend months, perhaps years, working on a product that no one was interested in, so he started with an MVP.

Drew’s MVP was a simple 3-minute video demonstrating how his product was meant to work. He shared the video on Digg, an online community of technology early adopters.

After sharing his video, over 70,000 people joined the DropBox beta waiting list within a single night, which was enough validation that his product was solving the right problem.

Another way to involve customers in the development of your solution is to form a small community of beta testers and give them access to your solution during the development process.

This works even if you are developing a service-based product. For instance, if you are a digital marketing consultant, you could create a package — say a content marketing package — and test it among a small group of customers before you launch it in full scale.

The aim here is to have a group of actual customers continually testing the solution you are developing to make sure that it addresses their key concerns in the best possible manner for them.

This way, you don’t have to worry about spending months or years coming up with a solution to your customers’ problems, only to discover that it is not the kind of solution they were looking for.

Another way to ensure that what you are offering solves your customers’ actual problems is to conduct A/B tests. This basically involves creating two versions of your offering, giving two small groups of customers access to each version, and then tracking the results to identify the version that solves customers’ most effectively.

3. Track Customer Satisfaction

Ultimately, what matters is keeping your customers satisfied. If your boss is unsatisfied with your work, you can bet that you will be out of work soon.

Similarly, if your customers are unsatisfied with your business, they will fire you – by spending their money on your competitors.

Actually, while 96% of unhappy customers will not voice their dissatisfaction, 91% of them will never make another purchase from you. This is definitely something you don’t want.

To know whether your customers are happy, you need a way to track and measure customer satisfaction. Here are five of the most effective ways of measuring customer satisfaction:

Customer Satisfaction Surveys

This is one of the easiest ways of tracking customer satisfaction. With this approach, you simply need to put up a survey asking your customers how satisfied they are with your services.

Depending on the medium you are using to administer the survey, you can add one to three open-ended questions to learn more about what they think of your services.

Customer satisfaction surveys can be served through email, through your website, or through your app.

Customer Satisfaction Score (CSAT)

The CSAT is the standard metric for measuring customer satisfaction. Here, you ask customers to rate how satisfied they are with your products or services on a scale. The scale could be 1 – 3, 1 – 5, or 1 – 10.

After receiving responses from various customers, you then find the average rating to determine your customer satisfaction score. The higher the score, the more satisfied customers are with your services.

Net Promoter Score (NPS)

This is another popular metric for measuring how happy customers are with your business and your services.

Unlike the other metrics covered here, however, NPS does not measure how satisfied customers are with your business. Instead, it measures how likely they are to refer someone to your business. This is especially useful for those in the freelance business, which depends heavily on referrals.

The NPS will ask a customer to rate on a scale of 1 – 10, how likely they are to recommend your business to their friends and acquaintances.

NPS Score Graphic

Source: Business2Community.com/strategy/using-customer-satisfaction-metrics-nps-best-practices-02261983

The NPS categorizes your customers into 3 groups:

  • Promoters: These are customers who give you a rating of 9 – 10. They are willing to spread the word about your business and recommend your products and services. These customers are already satisfied with your business.
  • Neutral/Passives: These are customers who give you a rating of 7 – 8. They are indifferent to your business. They aren’t disappointed with your business, but they aren’t satisfied either. They are unlikely to talk about your business to others.
  • Detractors: These are customers who give your business a rating of 6 and below. They are unhappy with your business, and will spread negative word about your business in a bid to discourage others from doing business with you.

The Net Promoter Score is a very useful metric. If someone is willing to recommend your business to others, then this means that your products or services are good enough that they would stake their reputation on them.

Customer Effort Score (CES)

This metric measures customer experience, particularly how hard it is for your customers to get what they want from your business. Customers are typically asked to rate their effort from 1 (very little effort) to 7 (very high effort).

A high score means that customers have to work very hard to get what they need from your business, which translates to poor customer experience.

Social Media Mentions

Keeping track of what people are saying about your business on social media can also help you figure out how satisfied your customers are with your business.

Satisfied customers will take to social media to praise your business, while unhappy customers will share their dissatisfaction with their social media followers.

Monitoring the conversations about your business happening on social media will allow you to step in and respond to comments in time and control your brand perception, especially when people are sharing negative comments.

Here are three tools that you can use to track social media mentions:

4. Put Customer Value First, Profits Will Follow

A lot of entrepreneurs believe that the core purpose of a business is to make profits.

Smart entrepreneurs, those with the right entrepreneurial mindset, on the other hand, know that the core purpose of a business is to serve its customers. Therefore, their core focus is on delivering customer value.

Of course, this does not mean that businesses that put customer value first don’t think about profits. They do. What differs is their approach.

These businesses understand that when you keep your customers happy (by delivering great value), these customers will bring more business, and spread positive word about your business, leading to more business, and ultimately, greater profits.

Actually, the findings of research by Deloitte and Touche show that companies that put customers first are 60% more profitable compared to those that don’t.

So, what exactly does it mean to put customer value first?

Putting customer value first means that every single business decision made within your organization should have a positive impact on customer experience.

For instance, when upgrading its systems, a customer-centric company will choose systems that allow it to deliver the best customer experience.

Similarly, when hiring, customer-centric companies go for employees who show a knack for putting customers first. Basically, every decision is evaluated based on its impact on customer experience.

Here are some tips on how to make your company customer-centric and put customer value first:

  • Understand your customers deeply. It is impossible to put customers first when you don’t even know who they are. To get a good understanding of who your customers are, you need to develop highly detailed buyer personas. Actually, gaining a good understanding of the customer segments you’re targeting is a key component of the business model canvas.
  • Make sure that all your team members are engaged and have a good idea of the impact of their work on customer experience.
  • Make it a habit to collect customer feedback, and then use this feedback to gain insights on how to improve the customer experience.
  • Don’t just focus on getting customers to make the purchase. Focus on building relationships that will turn them into loyal customers and brand ambassadors.
  • Be easily accessible. Make it easy for customers to get in touch with your business when they have an issue, or when they need any sort of help.

Ready To Put Your Customers In The Boss’s Seat?

As an entrepreneur, you are in business to serve your customers, which means that your customers are your boss. If you want your business to thrive, you need to start treating them as such, by putting their needs first.

In this article, we have gone over 4 key points on how to make the customer your boss. Here’s a recap:

  1. Identify the key problems customers want to get solved
  2. Make sure your offering solves those customer problems
  3. Track and measure customer satisfaction
  4. Put customer value first and profits will follow

Free Downloads & Extras From The Episode

“How To Make The Customer Your Boss” (PDF): Get It Here

“The Austrian Business Model” (video): https://e4epod.com/model

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