It’s easy to think you offer unique products and services, but in today’s world, you’re probably wrong. It doesn’t take much for a competitor to start offering the same products or services – and often that competitor can be somebody in China building the same product, or somebody in India offering the same service. Sometimes your competitor is even the customer themselves!
Travel agents are a perfect example. In the past, consumers used travel agents because they had access to special information – flights and fares, accommodation discounts, package deals, and the like. Now on-line travel agencies have equal or better access to those facilities; and consumers themselves often book their own travel.
To compete, the travel agent has to offer better experiences – for example, by organising customised tours, special packages and personal service.
Joseph Pine, author of The Experience Economy, describes different kinds of economies, and how they have developed over time. We started with an agrarian economy, which became an industrial economy, which became a service economy, and we’re now moving into an “experience economy”.
As the economy has changed, so has the value we place on products and services. Pine uses coffee as an example:
- As a commodity, the coffee beans required for a cup of coffee are worth about 2-3 cents.
- Grind them, roast them, package them and sell them as goods on a supermarket shelf; and those same beans are now worth about 10-15 cents.
- Brew them in a diner and offer this as a service: That’s worth about $1.
- Turn this into an experience at a café or restaurant, and now you can charge $4 (for what started out as 2-3 cents worth of coffee beans).
What changed? Clearly there are more raw ingredients in a cup of coffee than just the beans, but not $4 more (A friend of mine who owned a small café estimated a coffee cost her about 50 cents in total – including the ingredients, labour, and other overheads). The answer is that we’re paying for the experience surrounding the coffee, not just the coffee itself.
Clearly this applies to some other products and services as well:
- Apple users pay more for a supposedly better user experience.
- Dining at a five-star restaurant is as much about the experience as it is about the food.
- A day at Disneyland is all about the experience.
- The premium for flying first class far exceeds the airline’s cost of providing the additional services.
In these cases, it’s obvious the customer is paying extra for the experience, because the experience is part of the product.
What can you do to build – and sell – better experiences to your customers and clients? If you aren’t constantly looking for ways to improve your customer experience, you’ll be at the mercy of competitors, and you’ll be missing out on profitable opportunities.
