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Adding Value to Experiences

By CIOinsight  |  Posted 07-19-2002 Print

Adding Value to Experiences

There's always been an advantage in convincing your customers that what you can sell them is better than what they can get elsewhere. Does this new thirst for data-rich consumer experiences up the ante?

I think that as more and more products become commodities, margins become very thin. So to increase your bottom line, you're going to have to start wrapping stuff around that product that has a higher margin. So you need to put the educational component around it. You need to put into the transaction what I call "effective in use" elements—in other words, here's how you can take what you're buying from us and improve the quality of your life or get something done you need to get done. Are people willing to pay for that?

I think clever businesses at first see it as a cost because we've got to start the process, but over time they can build the business model that generates revenue on the back end of that. I think that's where we are now, trying to figure out what that revenue model is. You need to offer more of the service and educational component up front. That's how you raise prices today, or justify your decisions to keep prices right where they are.

Don't just sell the widget and the knowledge about how to apply the widget. Sell the experience, the context in which to use the widget. Charge more, or, at least don't lose too much money by refusing to lower your prices to match a competitor. Gym shoes are gym shoes, but Nike, by giving you lifestyle stores complete with a mini-basketball court inside, gives you an experience—and a way to make you feel better about shelling out $100 for a pair of gym shoes. Starbucks figured out a way to sell you a $4 cup of coffee by turning a counter into an urban salon or lounge, and a simple cup of java into an elite treat. There are many examples. Companies can pay for these experiences out of increased profits per cup, per shoe—and the really successful ones can still make more profit than before.


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