What do Starbucks, Disneyland and Apple Computer have in common? They are all successful businesses, and they are all in commoditized and highly competitive markets. Yet each commands a premium for its products and services. What makes these companies more successful than their competition?
The answer is experience. I am not talking about how long they have been in business, but rather the experience they have created for their customers. We have become a society of consumers and businesses that values experience and will pay extra for it. Experience is a differentiating factor to companies in competitive and commoditized markets.
When customizing a product or building a custom product, a service is provided. When a service is customized, an experience is provided. In case you haven’t realized it, you are in the service business. The business of providing manufacturing services has become a commodity service. Moving from providing services for customers to providing experiences to customers may be what separates one shop from the rest.
Experience matters. Coffee beans are a commodity; enough beans to make a cup of coffee would cost about 3 cents. Maxwell House converts those commodity beans into a good and charges 20 cents for enough grounds to make a cup of coffee. Your local café or convenience store provides the service of brewing the coffee, and they get $1 for a cup of coffee. Starbucks provides an experience and gets $4 for a cup of coffee. There are several places to buy a good cup of coffee for less than $1 within a few hundred feet of my local Starbucks, yet there is always a line to pay $4.
Disney theme parks are the ultimate experience businesses. Most every state has numerous theme parks and lots of great attractions, yet millions of people travel across the country every year to visit a Disney theme park. When calculating the vacation time, travel expenses and passes for the park (which cost much higher than other theme parks), we pay a huge premium for the Disney experience.
Apple Computer has defied the odds and survived because they changed the customer’s perception and experience with their computer. This is not the clunky, gray box that you stare at all day at work. They allowed their customers to experience a colorful machine that made them creative and showed them how to “think differently.” The iPod and all of its surrounding products strictly follow this lineage and commitment to experience.
In my travels I have come across several machine shops and at least one mold shop that have created phenomenal customer experiences. They are able to charge a premium for the “experience” of doing business with them, and they have phenomenal customer loyalty. It’s not possible for me to tell you how to turn your service business into an experience business. If I could, everyone would do it, and it would then be commoditized, right? It’s something you have to figure out on your own, and believe me, it’s worth the effort.
My favorite book on the subject of creating experiences is “The Experience Economy: Work Is Theatre & Every Business a Stage” by B. Joseph Pine II and James H. Gilmore (Harvard University Press; 254 pages; $19.77 at www.amazon.com).
Create an experience for your customers, or you will be competing in a commoditized market with thin margins and tough competition.
Mitch Free is president & CEO of MfgQuote.com, Atlanta, Georgia. He can be reached at (770) 444-9686, ext. 2946 or at email@example.com.