Ideas in Action: Learn about the Experience Economy

June 2009

An Interview with Jim Gilmore

A Trip Down LASIK’s Memory Lane

 

An Interview with Jim Gilmore

In writing a regular column on marketing over the years, what I’ve come to appreciate is that great marketing typically boils down to how well you serve the needs of your customer. Two years ago I hit upon a motherlode while reading The Experience Economy, by Jim Gilmore and Joe Pine. These two economists described how companies and individuals are creating greater value in our economy and helping sustain its growth.

The book’s message is highly durable, and the authors have emerged as leading thinkers in the business world. This issue features an interview with co-author Jim Gilmore. For those of you who are seeking ways to differentiate your services or offering, read on!

An Interview with Jim Gilmore

Shareef: Thanks for speaking with me, Jim. A lot of our readers have either read your book or have seen me reference The Experience Economy in the column. Clearly, the models and frameworks you describe are helpful in understanding where our economy is headed and why we all need to be thinking differently about our businesses.

How did you first “discover” the Experience Economy?

Jim: I’m glad you used the word “discover” because my co-author Joe Pine and I do like to say that we didn’t “invent” the Experience Economy but merely discovered what many businesses were already doing — and gave it a name. One of the most satisfying aspects of having written The Experience Economy is how many folks tell us that we gave them a vocabulary for the work of staging experiences. Why, saying “stage an experience” — versus the dreadfully constructed “deliver an experience” — is part of that very lexicon that has taken root in many organizations! I remember a meeting that we had, soon after our Harvard Business Review article, “Welcome to the Experience Economy,” with Craig Hanna, now of Thinkwell Design, when he was with Universal Studios and part of their $1 billion development effort for Islands of Adventure. When Craig met us the first thing he asked was, “Where are you two from? Why haven’t I heard of you before?” And he went on to explain how useful he found our terminology to be in describing the work they do. We took that as quite a compliment, given the source.

The origins of our thinking about experiences can be read about in the Credits section of The Experience Economy. In a nutshell: Joe, who wrote the book Mass Customization, has for years been fond of saying “If you customize a good, you automatically turn it into a service.” Think Dell; it exhibits all of the characteristics of a computer-making service, not a computer goods manufacturer. And of course, Joe and I have both long encouraged companies to also customize services. Well, one day when Joe was teaching an executive education session at IBM, a hand shot up and a person asked, “What happens when you customize a service? What do you automatically turn it into?” And Joe responded, viscerally, “an experience.” I’ll never forget it: Joe called me that night and said, “Guess what I said today. Let’s go figure out what it means.” And that’s exactly what we then did.

Shareef: It seems like lots of companies are talking about their “experience” these days. What do you think of that?

Jim: Oh, yes, experiences are front and center in the thinking of business people today. And no wonder, for there has been an explosion of new experiences in the ten years since the idea first appeared in our Manager’s Journal piece in The Wall Street Journal. (That column, by the way, was entitled “How to Profit From Experience” and appeared in the Journal on August 4, 1997).

One can hardly keep up with the pace of experiences innovation. Experiences at their very infancy ten years ago have grown into large-scale enterprises — Starbucks, Geek Squad, Build-a-Bear, ESPN Zone, Cirque du Soleil, boutique hotels — can you say “W” — and even events like Burning Man. Or my goodness, ringtones. That’s for-fee experience today: ringtones! New experiences are emerging all the time: Netflix and XM Satellite Radio, chocolate lounges like Ethel’s and cereal bars like Cereality. Go google: zorbing; canyoning; cross golf, guerilla golf, and Top Golf; home staging; MetroNaps; medical tourism; or Maxine Clark’s latest offering, Ridemakerz. I can’t keep up. It’s so much easier to bring a new experience into the world than a new good or service.

At the same time, many businesses have merely grabbed the term “experience” and affixed it to their current offerings, without actually staging anything new. An iconic felon here: the Grand Canyon Experience in Las Vegas. It’s not grand; nor is it an experience. I like to remind folks: it’s better to actually be an experience than to just say you’re an experience.

Shareef: How is what you’re describing different from “experiential marketing”?

Jim: Very good question, Shareef, for many folks throw around various terms unthinkingly. And note that we never used that term in our work.

There have been three major directions where experience thinking has gone since the publication of our book. One is Customer Experience Management, or CEM — making operations more experiential. Think here of the work of John diJulius or Lou Carbone. The second is experiential marketing, or making marketing more experiential. Bernd Schmitt’s work, for example, serves as a marker here, but also the efforts of untold agencies and other marketers. It’s all useful, but our emphasis has always been on experiences as a distinct form of economic output, on experience offerings that command a fee or a premium price. While experiential marketing is usually far more effective than traditional means of
advertising and marketing, it is still largely about selling more goods and services. It’s about the promise of an experience, rather than staging the experience itself.

Peter Drucker once wrote, “the purpose of marketing is to make selling superfluous.” Amen. To which we add, the purpose of experiences is to make marketing superfluous. The experience is the marketing!

Shareef: Where are you seeing the Experience Economy currently growing the fastest?

Four areas stand out to me. One: experiences enabled by new technology — from online gaming like Everquest and Second Life, to at-home experiences like Guitar Hero, to life-commemorating experiences like Fetal Fotos, which uses ultrasounds for nonmedical reasons to create artifacts and artwork celebrating the development and birth of a child. Two: experience tourism. Everything is quickly becoming tourism — retail tourism, culinary tourism, film tourism, vocation tourism, medical tourism, and so forth. Three: financial services are morphing into what I call “wealthcare” experiences. And finally, lifetending, of which life coaches are a first-order form.

Shareef: How did theatre emerge as a model for work?

Jim: Well, one delivers a service but stages an experience. And that word “stage” first suggested to us that work is theatre. Whether acknowledged or not, whether done well or not, every time work is performed before the watching eyes of a customer, it is a performance, an act, an act of theatre. We have three whole chapters in The Experience Economy devoted to theatre as a model for work. There are many implications here — from the design on environments, or sets, to costuming, to acting with intention. Take a simple application: too few businesses think intentionally about their opening lines, be they face-to-face or over the phone. I love how W Hotels answers the phone, “Whatever, whenever” — based on the letter-as-theme, W. I once told some folks at YMCA that they should similarly answer the phone, “Y are you calling? Y do you want to talk to her? Transfer you…Y not?”

Shareef: What happens when everybody’s staging experiences and it’s more the norm than the exception?

Jim: Well, the experience-staging has to be done well. Nothing is automatic. Some experiences will be more engaging than others, just as some services are more beneficial than others, and some goods have better features than others. But beyond that, transformations — charging for demonstrated outcomes — offers value beyond experiences — or charging for time — and certainly beyond services — or charging for activities performed. These may seem like subtle differences, and to a certain extent they are, but especially in health care these subtle differences can have huge implications on the mindset and the practices that go beyond the norm, and truly differentiate one’s offerings.

Shareef: What’s next on your horizon?

Jim: We have a new book coming out at the end of September 2007, Authenticity: What Consumers Really Want, by Harvard Business School Press.

Shareef: Why is authenticity becoming more important in commerce?

Jim: It’s what we’re calling a the new consumer sensibility. With the rise of the Industrial Economy, cost emerged as the dominant reason to buy, as mass production brought down the cost of goods so that nearly everyone could afford to buy one of nearly every category of goods desired. With the Service Economy, quality emerged as a sensibility, as the performance of goods and services became critically important when one no longer changed one’s own oil, mowed one’s own lawn, or prepared one’s own food. And now with the emergence of the Experience Economy, an increasingly unreal world of mediated experiences, people want real — the genuine from the sincere, not the fake from some phony. In the new book, we identify the emergence of the Experience Economy as but one of five drivers behind the consumer desire for authenticity.

Shareef: And I suppose we’ll all have to get the new book to learn the other four.

Jim: You said it, not me! Actually I can quickly rattle of the other four: the automation of services — such as just trying to reach a “real person” today, the prevalence of postmodern thought — and its influence on consumption, the rise of baby boomers — and their influence on all consumer behavior, and the failure of our social institutions to fulfill their purpose.

Shareef: Thanks, Jim, for spending time with me. Many of our readers will be taking note, especially those who are providing services that are “wants” like elective medicine.

Jim: You’re welcome!

 

A Trip Down LASIK’s Memory Lane

Those of you who are part of the LASIK community will enjoy this brief show of winners from the Logo-a-Gogo contest held in the summer of ’99. Over 125 surgeons’ practices showed how they were using the VISX logo to promote LASIK and the One Millionth VISX laser procedure performed in the United States. From Nashville to the Hollywood Hills, click here to have a look (hint: have your sound turned on, too).

 

Shareef Mahdavi
President, SM2 Consulting

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Progression Of Economic Value (POEV)

Progression Of Economic Value (POEV) | Shareef Mahdavi

 

With the rise of the industrial age in the early 20th century also came automation and factories, whereby manufacturing was the predominant occupation. As farming became increasingly automated, workers migrated from the farm to the factory. At the peak of the industrial economy, 50% of the labor force worked making goods (ie, tangible things) in factories. Although the manufacturing-based economy flourished, it too became subject to increased productivity through automation. Where did those workers go? By the 1950s, the majority of the workforce was involved in a service-based economy, performing intangible activities on demand. With increases in productivity (for which we can thank the computer, among other things) came parallel increases in standards of living. As was the case for the transition from farming to the factory, people were again in a position of paying for services they once did for themselves, including lawn mowing, oil changing, house cleaning, and wedding planning. These few examples illustrate how entire industries emerged to provide services to consumers who were willing to pay for them.

Today, according to Pine and Gilmore, only 3% of the US workforce is involved in farming and just 12% in manufacturing. That means the rest of the United States—85% of the workforce—is part of the service economy. Just as with farming and manufacturing, the service economy is also becoming increasingly automated. How often do you visit a bank teller? Most of our banking is done by an automated teller machine. Voicemail now largely replaces secretaries who once took phone messages. Airplane tickets are purchased over the Internet rather than at travel agencies….

Refractive surgery is already a popular elective procedure; yet, it has more potential for growth. The key for surgeons is to recognize that they need to do a better job in the nonclinical aspects of offering the procedures. The framework and perspective of the Experience Economy brings to light what other retail industries are doing to more effectively compete and earn the consumer’s income. Rather than focus on advertising, refractive surgeons should shift their focus internally, improving their practices so that the experience becomes the marketing.

Date: November 2011  – Length | 9:06 minutes


Book Shareef Mahdavi To Speak

A Tale of Two Electronics Stores

A Tale of Two Electronics Stores

For years, consumers have been bombarded with advertising from big box electronics stores that tempt us to come in and buy the latest in TV and stereo equipment. You know the chains well: Best Buy, Circuit City and (the now defunct) Good Guys are probably the biggest in this category. For the longest time, I viewed them all the same way; annoying but necessary to get a good deal when I needed something new for the house or the car…

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What if Marketing Were Run Like a Clinical Study?

 

What if Marketing Were Run Like a Clinical Study?Surgeons’ frustration with marketing is understandable. They spend more than$100 million annually on paid advertising to draw new patients into their refractive surgery centers, yet the market’s grow this stagnant. Despite these efforts, the volume of refractive procedures has remained stable at 1. 3 to 1. 4 million eyes per year…

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Ideas In Action: Pianos, Ice Cream and You

April 2007

Pianos, Ice Cream and You

The big “E”

The Fine Print

 

You might not have put this together, but Steinway (the legendary piano maker) and Cold Stone (the fast growing ice cream chain) have a lot more in common than many realize. Both have some unique approaches to satisfying customers and building their business brands. Both have built their reputations without advertising (one over the past 150 years, the during the past 5).

 

Pianos, Ice Cream and You

When you buy a Steinway, one of the benefits is that the company arranges a concert by a pianist in your home. You pick the date, give them the guest list, and they take care of the rest. You enjoy a neat experience and get to impress your guests. And you know who ends up becoming a future Steinway customer? The guests! Now, that’s clever marketing!

When you go to Cold Stone, an ice cream cone easily runs five bucks or more. Flavor sampling is encouraged, and you get to customize your order with goodies that get mixed in before your eyes on a cold slab of granite. The teenage scoopers sing for tips. It’s a brief performance dubbed “eatertainment” that has people standing in long lines on hot nights. Again, very clever marketing.

What these two examples have in common is something we should all pay attention to, namely the customer experience. Whether we’re dealing in high-end pianos or passion fruit sorbet, the path to differentiating our offering and commanding premium prices is through the delivery of over-the-top experiences to our customers.

 

The big “E”

Welcome to debut of Ideas in Action, a newsletter designed to stimulate your thinking and help you continuously improve the experience you offer your customers. The inspiration for doing this comes from 20 years of marketing and sales experience with medical technology, specifically ones that are so good that customers (meaning the doctor’s patients) are willing to pay for them with their own money rather than wait for somebody else (meaning insurance) to pick up the tab.

My firm, SM2 Consulting, works with leading manufacturers and providers in ophthalmic, dental, and cosmetic/aesthetic specialties. During the past 5 years, we have published numerous articles and reports (available in the Library of our just-launched website), most of which apply across the board to the effort involved the business and marketing of elective procedures. What I’ve learned while doing the research and writing is that when it comes to the marketing of services, the ultimate form of marketing occurs when the service you deliver exceeds the expectations in such a way that your customer feels compelled to tell everyone they know about it and continue doing so for a long time. We have passed by the era in marketing when you could create the right “mix” of traditional concepts – positioning, promotion, pricing, packaging, and all the other “P”s – in order to be successful.Those “P”s are still around, but they are taking a back seat to the big “E” of marketing called experience.

My goal is to discover and highlight for you great role models of products, services and companies that know how to deliver an enhanced customer experience.

We’ve got some good things planned going forward, so stay tuned. I’ll be discussing pricing (you won’t believe how much a buttocks lift actually costs!), a whole new approach to the sales of cell phones, and an interview with The Experience Economy author Jim Gilmore. In the meantime, I have finally published the long- awaited Top Ten Marketing Mistakes made by refractive surgeons, which is now available for you to download at the SM2 website. It should be a good conversation starter at your next staff meeting. For those of you who got this “magically”, I was the magician who added you from my rolodex. I hope you will let your friends and colleagues know about the newsletter and the site.

Summer starts today. That means swimming, BBQ, and, of course, Cold Stone. Enjoy!

 

The Fine Print

I call this a “newsletter” but it’s really more of a “fire starter,” intended to spark thoughts and ideas for readers to more creatively solve their own marketing challenges. It is intended to be more raw and “straight from the gut” (thank you Jack Welch) than what happens in my monthly column in CRSToday. I’ll do my best to issue this newsletter when I have something to say which I think adds value to your efforts to improve the level of customer experience in your practice or business.

We won’t sell or rent your e-mail address or name. If you are bored and don’t want to receive this, you check out at anytime. I hope the opposite happens and that this is good enough stuff that you will forward to your friends and colleagues so they can join in. Feedback is good! If you want to comment on something here, send a note to me at the address below.

 

Shareef Mahdavi
President, SM2 Consulting

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