Craft Beer Consumers Seek Enchantment
By Sam Holloway, Ph.D. and Guest Expert Ian Parkman, Ph.D., April 7, 2015
Does Your Business Facilitate This?
In business schools, generally and marketing classes, specifically we don’t spend a lot of time thinking about the core philosophical underpinnings of the organizations we study and discuss. The idea of ‘mission’ or a ‘mission statement’ is included somewhere along the way, but usually with an off-hand, dismissive tone. Mission Statements are the vegetables of business and market planning; we make them only because we think we should, not because we like them. This is changing, however. Driven by the erosion of the traditional brand-consumer relationship paradigm, an increasing number of scholars are looking at the philosophy of organizations as a point of strategic emphasis. Put more plainly, what leads businesses from asking, “How do I improve my margins or market share?” to “What do we offer that delights our customers?” Elsewhere on CRAFTINGASTRATEGY.COM, we take a deep dive into the craft beer industry to study Enchantment. Click here and watch the narrated PowerPoint “Enchantment Slides” to discover how and why craft beer enchants and delights consumers. For this paper, we will dig deeper into the strategy behind enchantment, and what marketing tactics you should employ to enchant your customers.
What is the Purpose of a Business?
To begin at the beginning, let’s employ Peter Drucker’s famous quote on why businesses exist: “Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.”
We like Drucker’s definition because it gets to the core of the issue: Businesses are about creating a customer. Classical economics makes no distinction between making profits from running a giant casino, designing an amazing motorcycle, or crafting an exceptional sour beer; the only relevant question is what is the rate of return on capital (assuming comparable levels of risk)? We feel that a pressure to meet the numbers blurs the ability for companies to create customers. Here’s a brief example about how this happens.
The casino only creates a customer as long as people see value in the experience of gambling. A walk down the strip in Las Vegas demonstrates that there is plenty of profit to be made doing this, but also how bloody and difficult this competitive environment must be. Casinos are in a constant, brutal, daily, hourly struggle to create customers through pirate themes, buffets, celebrity shows, resort packages, and caged zoo animals… Why? Because casino customers are notoriously fickle and disloyal; there is always a new and exciting experience to be had next door or across the street. For most consumers, casinos are disposable, indistinguishable, and interchangeable. The firms have to work hard (and spend a lot of money) manufacturing artificial differentiation from rivals because consumers don’t see any attachment to them. Very few customers feel that the casino where they gamble says something about them, and thus, most consumers are quick to reward this disregard with their disloyalty.
An anecdotal example that I find revealing is how few outward expressions of enchantment you see from casino customers. The next time you are in Las Vegas (or Macau), sit on any street corner near a casino and count the number of casino branded t-shirts you see (despite the astronomical marketing promotions budgets of those brands) versus Harley Davidson t-shirts (or brewery t-shirts). In the spirit of Las Vegas, I’d be happy to wager that Harley Davidson merchandise will outnumber all casinos’ merchandise combined by a ratio of 5:1.
So, what is Harley Davidson doing right? The Harley Davidson brand is a byword for an opposing force: Authenticity. A Harley branded t-shirt says something about the wearer. The Harley-Davidson brand is a marker for the wearer based on a constellation of internal and external social meanings. The value that the brand creates for the customer is powerful, enduring, and true because the organization, whether fully-consciously or not, has tapped into a deeply held need for its customer— we call this enchantment. The decision to buy a t-shirt with a motorcycle company’s logo on it doesn't really have anything to do with horsepower of that motorcycle or of how the company manages an efficient supply-chain. The reason that person is wearing that T-shirt is to make a statement that they see value in the values of the company. Harley-Davidson just accomplished Drucker’s primary goal – they made a customer.
Companies that get enchantment right rely on broad definitions of their customer’s needs, and how they might satisfy them. Alternatively, struggling organizations are often unsure about their customer’s true wants and desires. They maybe get the physical properties of the product or service right, but stumble to create a lasting connection between their brand and their customers. An example of this from the craft beer industry may be Budweiser’s last two attempts to combat consumer’s switching to craft beer. Elsewhere on CAS, we wrote about truthfulness in advertising and centered on Bud’s Super Bowl advertisement: “Brewing The Hard Way”. More recently, BUD released an advertisement showing craft beer fans and their delight of the Budweiser product. Rather than focusing on the technical features of Budweiser as had their past advertisements – Crisp, Clean, Beech wood Aged, etc. – This advertisement focuses on the brand community and the experience of consuming the drink with others.
Why has Budweiser tried to enchant its customers the way that craft breweries do? We think it’s good strategy and derived from a need to create a customer. Enchantment supports a perspective that a company’s products or services are only the instrumental manifestation of their ability to connect with their customers—profit is the reward for delighting and fulfilling them, rather than evidence of competitive advantage or differentiation. Marketing’s role in this process could be the basic function of making sure a customer’s needs are being correctly understood by an organization at more than the level of price. Enchanted product offerings are aligned with the interests and demands of real human beings, rather than the detached strategies of the company. Now, more than ever, the success or failure of companies and organizations may be tied to managers thinking deeply about the nature of their customer’s needs, and what they may be able to offer to provide fulfillment of those needs. However, the good news is that all the evidence suggests that far from an altruistic pursuit, delighting customers is an excellent way to make some money.
For more information, see philosopher Alain de Botton’s excellent opinion piece from the Financial Times, “The Case for Putting Philosophers into Company Boardrooms”