The old adage “you get what you pay for” has been a way to shrug off poor product or service quality for as long as most of us can remember. For consumers who are cheap—or price sensitive—there was some understanding that quality would have to be sacrificed for price. Quality or innovation could be the core of a brand, a competitive differentiator, and an excuse to charge a substantial premium. But technological, cultural, and market forces have conspired to make quality into table stakes, no longer optional.
As it becomes easier for consumers to share information about products, and comparison shop on both features and price, businesses are competing and being measured on new considerations. Everything from cars to smart washing machines is reaching feature parity, profit margins are narrowing, and something has to give. To paraphrase another adage: your consumers might forget what you sell, but they will never forget how you made them feel. It’s time to get into the experience business.
A Confluence of Disruptive Forces
There are many factors eating into business margins. The internet and social media have empowered consumers in unprecedented ways. They can find out everything they need to know about a product or restaurant before any direct contact with the business. They can read reviews on Yelp or Amazon from hundreds of strangers, or defer to the opinion of a trusted blogger. They can use the social media megaphone to voice their displeasure with a poorly made product or unpleasant service interaction—reaching an audience far beyond just their friends and family, and potentially doing real damage to a brand. They have the tools to seek the highest quality for the lowest price to get the most value—no longer content to trade one for the other.
Innovations in supply chain management, just-in-time production, lean manufacturing, and agile product development have made it easier and faster than ever to test and deliver products without overproducing something that’s likely to fail, while ensuring quality. Most frustrating is the ease with which competitors can replicate what another business has been doing with speed and gusto. When Apple’s iPhone set new expectations for the form and functions of a smartphone, Samsung was not far behind, leading to a glut of new touch-screen phones on the market, and a series of lawsuits. Uber remains dominant but competitors like Lyft, and regional challengers like Fasten or Gett, continue to poach their drivers and customers.
Quality and capabilities are now expected from every option. Uniqueness and innovation won’t keep a company in the lead for long as features get easier to replicate. Furthermore, as any type of service or technology matures, innovation in that space becomes inevitably more incremental, and therefore less compelling as a reason to upgrade, at least until someone makes the next big leap.
Get Profitable by Getting Emotional
Maintaining healthy margins is the key to maximizing profitability in any business, but margins and operational efficiency aren’t enough to drive revenue growth. However, one consistent indicator, if not predictor, of future profitability is customer satisfaction. When it comes to making your customers happy, their experiences with your brand can have a powerful and lasting effect, and—unlike product features—are a lot harder to copy.
Marketers and branding experts have long understood the power of an emotional connection to a brand or product. Consumers can have strong and opposing feelings about two ostensibly identical brands (think Coke and Pepsi), and spend billions of dollars more each year buying the branded item over a generic store brand just because they feel they’re getting something better, true or not.
Even seemingly objective considerations like quality, innovation and uniqueness, and price carry emotional weight. Consider this reasoning that happens unconsciously for most consumers, regardless of why they think they’re buying:
- Quality – I found the highest quality option; I am an intelligent, rational, discerning individual; and I will be rewarded with respect or recognition for making the best choice.
- Innovation – I am an early adopter who recognizes cool new trends; I have a level of insight about the future that other people lack; and this makes me worth following, more interesting, and a valuable employee.
- Price – I am frugal, sensible, and objective; I extracted the most value for this purchase by paying the lowest price while still meeting the essential criteria and looking past the marketing and sales mumbo jumbo to understand what’s most important.
Humans are wired to survive based on snap judgments they later match with reverse engineered logic to support the validity of their decision. And your customers are still only human after all. Does this mean quality and innovation are irrelevant and will force you to compete on price alone? Not necessarily. But even if you don’t know exactly how much more likely someone is to recall an emotional state than the details of a specific situation, you already know it’s expensive—if not near impossible—to win back an unhappy customer. And the lessons learned from United Airlines and Chipotle repeatedly failing their customers will not be soon forgotten.
Why Service Providers Have the Ultimate Edge
So being the best at what you do is not enough, and consumers are not just fickle but also irrational. What can a business do to survive and thrive in these conditions? Focus on customer experience as a competitive differentiator that provides added value and strengthens the emotional bond with your brand.
Apple is a product company, but their rise to dominance in the MP3 player market was not a result of the iPod being the first nor the best nor the most attractively priced option on the market. Apple also offered customers a marketplace for purchasing music, software, and later apps, to better organize and access the media and music they would listen to on the iPod. They understood the customer’s experience with the product would be key to its success.
Service-centric organizations have a tremendous advantage in this new landscape. Unlike product-first businesses, they don’t have to unlearn decades of old thinking. Many are already in the field, accustomed to dealing with customer needs, collecting their feedback, and looking for ways to improve their experiences. In fact, even highly regulated non-competitive industries like utilities are increasingly focused on customer satisfaction.
Field service organizations in particular benefit from a mobile workforce of agents interacting with customers each day, creating countless opportunities for collecting feedback, and also testing new approaches to service delivery.
By focusing on service and experience as the greatest source of not just added value but delight for customers, businesses face a tremendous opportunity to leapfrog their competition without having to out-innovate on products or engage in an endless feature arms race.
The secret to doing this well is simple, if not always easy to implement: understand what customers want; design your policies, processes, and business objectives in a way that aligns to customer experience; and invest in the tech tools, infrastructure, and organizational knowhow that can help you deliver on rising consumer expectations. Adapting to an experience-first mindset will be a major shift for some, but it’s a change you can feel good about.