Austrian foundations for marketing
Austrian foundations for marketing
Hello E4B community,
so I‘m currently working on a conceptual framework for the systematization of marketing functions based on Austrian economics and would appreciate any feedback.
The basic idea is to combine contemporary approaches to subjective value (Bylund and Packard 2022; Hastings, D’Andrea and Bylund 2019) and the conditions for goods identified by Carl Menger (1871) to derive the necessary conditions for the emergence of subjective value, which in turn serve as the orientation for all marketing activities.
The elaborations below are based on the premises that predicted and actual value are conceptually distinct and that value is uncertain (Bylund and Packard 2022; Hastings, D’Andrea and Bylund 2019).
If we define value as the passing from a state of need to a state in which the need is satisfied (Bylund and Packard 2022), or put differently as the subjectively experienced improvement of living conditions, we can identify the first necessary condition for value, which is a change of one state against another state. This implies the change of either external or mental conditions. We can also say that this implies opportunity costs, which must be perceived as lower than the expected value. The voluntary change of states also implies the use of means or goods, respectively.
Menger identified four necessary conditions for a means to achieve goods-character:
- Recognition of a need
- The means must have properties which make it suitable to be put in causal relationship with the satisfaction of the need
- The acting person must be aware of this causal connection
- One must actually be able to command the means so that it can be used to satisfy needs.
If we combine these conditions with the distinction between predicted and experienced value and take into account additional implications, we can derive the following necessary conditions for subjective value:
- Means-ends relationship of good and intended state.
- Imagination about the possible value of the state on the one hand and about the suitability of the means on the other hand.
- Possibility of appropriation, use, or transfer (i.e., units of exchange) and availability in time and space.
- This additionally implies the awareness of the existence of the need, the good, and the possibility of command.
If we visualize the results, we get the following figure, which I call the ‚value mix‘ (note that all conditions must be present at once; this does not depict a chronological order like psychological hierarchy-of-effects models): https://imgur.com/UZQnzI3.
The value mix is intended as both a conceptual basis for further marketing applications (for example, I’m also working on a branding framework) and as a managerial tool. Although the separate parts of the framework should be known to most marketers and much of it is basically a reformulation of Austrian insights, in contrast to organizational frameworks like the marketing mix or psychological and financial frameworks, the value-mix is actually based on the interrelated economic causes of successful marketing activities and can serve as a heuristic tool to derive marketing objectives, even if statistical/financial prognosis is not possible.
It can also be used to reveal effects and interdependencies of different marketing activities for better resource allocation. For example, pricing decisions can affect opportunity costs, but also the value experience (e.g., status signaling) and the imagined value (price heuristics). Predicted value is also influenced by communication policy, for example, so different marketing activities must be viewed holistically.
Please let me know what you think and if you can spot any mistakes in the framework.
Bylund, P. L., & Packard, M. D. (2022). Subjective value in entrepreneurship. Small Business Economics, 58(3), 1243-1260.
Hastings, H., D’Andrea, F.A.M.C., & Bylund, P. (2019). Towards a value-dominant logic of marketing. MISES: Interdisciplinary Journal of Philosophy, Law and Economics, 7(3).
Menger, C. (1872). Grundsätze der Volkswirthschaftslehre. [Principles of Economics]
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