To Increase Value, Create an Experience with Joe Pine – 099

Creating an experience means that work becomes a performance for which you charge an admission fee. What would you have to revise to sell a ticket to engage with your business? The answer to this question can launch your business beyond the first three stages of economic value–commodity, goods and services–to the fourth stage, the experience.

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The Progression of Economic Value

• What is the most important thing you can share about pricing?
  • You are what you charge for.
    • If you charge for undifferentiated stuff, you are a commodity.
    • If you charge for tangible things, you are in the goods business.
    • If you charge for the activities you and your people perform, then you are in the services business.
    • If you charge for the time your customers spend with you, you are in the experience business (staging a memorable and engaging experience).
    • If you charge for the demonstrated outcome your customers achieve, you are in the transformation business.
  • There is no more economic value you can provide than to help someone achieve his aspirations.
  • Goods and services are no longer enough, as consumers only care about price.

• What do you mean by “What would we have to do different if we charged an admission fee”?
  • An admission fee is charging for time.
  • Companies give away their next level of value to better sell what they have today.
  • IBM means service, which meant that they gave away whatever service you wanted, as long as you bought the product.
    • Eventually, they realized that the people only cared about the services and the equation flipped.
  • Think about how you charge for time to align what customers value with what you charge.
  • Assume you are charging an admission fee and you will acquire the wherewithal to create a great experience.
  • We increasingly pay people for our experiences.
  • When you made a birthday cake from raw ingredients, it was less expensive than the value created in a cake mix.
    • Then you would order a cake at a bakery, and it is more expensive than the mix.
    • Now you outsource the whole party to Chuck E. Cheese, and it is even more expensive.
  • You create more value as you step up the progression of economic value.

• What would it take for a hotel, doctor or bank to create an experience?
  • Some hotels now charge for 24-hour periods, realizing that they are charging for time, not just activities.
  • In the healthcare industry, the better the patient experience, the better the outcome.
    • Waiting rooms are one of the worst parts of the healthcare experience.
    • What if you could immediately get into the flow of care, even if it started through technology?
  • Most banks made the lions share of their profits off fees when you make a mistake.
    • One bank started charging for people to talk to a teller vs. use the ATM.
  • What if you “charged admission” and made it worth it to visit with the live person?
  • ING wanted physical touch points for its virtual banking services and created cafés across the country.
    • They charged for the coffee, but not for admission, to signal there was a real business.
    • The barista then engaged you, talking about your financial needs.
    • Many banks have a café bar because it engages all 5 senses and it's where people want to spend time.
  • Banks have an untapped resource, knowing what people are spending and for what they are spending it.
  • Money is a means to an end, so the key is what is the end?
  • If you can ascertain what a customer's aspiration is, and focus on helping them achieve it, you will create much more economic value.

Creating An Experience in Business

• How can a small business create an experience for the customer?
  • Recognize that when you are in the business of staging experiences, then your work is theater.
  • Whenever you and your employees are in front of customers, you are on stage, and you need to figure out how to engage the audience.
  • The original Geek Squad was costumed and drove around in Geek Mobiles, providing a computer repair experience.
  • The goal was that the experience was so great that consumers would look forward to having their computers repaired.
  • Today the experience is the marketing.

• What are the four types of theater?
  • The one people recognize the most is improv, making it up as you go along.
    • Second City and Whose Line Is It Anyway are good examples of improv.
  • Platform theater is like a Shakespearean play, without making anything up.
    • It is good if customers are watching you work, but are not interacting with you.
    • For example, FedEx employees are always supposed to walk quickly to give the impression of speed.
  • Matching theater is like film or TV, where you film different performances, and they are matched together.
    • All of the potential interaction points with the customer have to match.
  • Street theater seems like improv, but the performers change routines, mixing and matching them to create the right performance at the right time.
    • They need to have a great ending and are able to work the audience.
  • The big idea is the same whether it is a big business or small business. There is a tremendous opportunity.
  • If you do not create theater (experience), you will become commoditized.
  • What is your organizing principle for your experience?
  • Once you have that, you can create a cohesive experience that everyone can be engaged by.

• What is ING-ing?
  • Any word that ends in “ing” is a gerund, which makes a thing into an activity.
  • Start playing around with “ing” words and how you might change them, like the door opening experience, the waiting room experience, or even making up words.
  • TST Engineering in Ft. Collins, Colorado, developed a theme that they are dream makers for their customers.
    • When they built their offices, they put in a slide. At the signature moment, they take the customer to the second floor and they slide down to the first floor.

• Could creating an experience help rescue the medical industry?
  
  • Yes, this could help them overcome the regulation and insurance mess by creating an experience.
  • Vance Thompson Vision designs its buildings like an eye, such that it is listed as a tourist attraction.
  • Most professional services need to think about why their customers are coming to them.
  • In medicine, you want to go from sick to well.
  • With accounting, you want to take home the most money and not go to jail.
  • Think about “from to” – how do you take the customer from where they are to where they want to go.
  • Go beyond just the project into thinking about the relationship with the customer. It takes a series of experiences to affect the transformation you want.
  • Starizon was created because of page 193 of The Experience Economy. It created an experience design place to get customers to come to their location.
  • They have a 25% Transformation Guarantee–25% of the price is completely at the customer's discretion to pay all or none of it.
  • The art of value is aligning what you charge for with what the customer values, which is either the experience or the transformation, not the activity.

Discover the Customer's Sacrifice

• What is “customer sacrifice”?
  • Mass customization is about efficiently serving customers at a low cost.
  • Customizing a product turns it into a service; customizing a service turns it into an experience; customizing an experience turns it into a transformation.
  • A key measure is customer sacrifice vs. customer satisfaction.
  • Customer satisfaction is about meeting expectations, which might not be the best measure.
  • Customer sacrifice is the ideal offering the customer needs and what they have to sacrifice when they settle for only what they can get.
  • To uncover where the customer is sacrificing, do ethnographic research – observe your customers when they interact with you.
    • If you can uncover this area, you have found gold.
  • When you find a sacrifice with one customer, others are likely going to sacrifice similarly.
  • Look for a common uniqueness to customize your service.

• Is there a cable TV provider that is creating a true experience?
  • Roku and Apple TV might be close to allowing a consumer to choose their channels and put them in the order they would like.
    • No one is doing this well yet.
  • What you really want is one channel, which will show you what you want to watch next, based on your viewing habits.
  • Dumb products are becoming smart and smart products need to become genius products.

• What is one of your best stories about creating value for a customer?
  • One of the greatest impacts was with a European company who wanted him to do a workshop on mass customization.
  • They found a brief window to do a workshop.
  • Through that workshop, they created a mass customization experience, which is running still.
  • He met the needs of what they had at that time to jump-start their endeavor.
  • It is not about the time you spend, but how much you impact them.

About Joe Pine

Joe is the co-founder of Strategic Horizons. He is the author of 6 books, including The Experience Economy. He's written for the Harvard Business Review and Wall Street Journal. He has taught and spoke at MIT, Harvard University, Penn State, and UCLA. His personally stated mission is to help improve the economic value of your business.

• Joe's Website: StrategicHorizons.com
• Joe on LinkedIn: linkedin.com/in/joepine
• Joe on Twitter: @joepine