The notion of the Experience Economy first appeared in The Harvard Business Review over two decades ago, written by Joseph Pine and James H. Gilmore in 1998. Their point, articulated in part through the graph below, was that in order to deliver additional value and remain competitive, businesses evolve over time in what they offer. First, it was a Commodities Economy, with companies offering basics such as flour and sugar for baking a cake. When competitors found ways to match those offerings, innovative companies found ways to provide additional value to differentiate their offerings from competitors, and so the Goods Economy arose, where they assembled commodities into products, such as cake mix. This pattern continued, spurred each time by companies looking to create a differentiated offering in order to escape the commoditization of the current economy...
… until reaching its present-day form as the Experience Economy, where start-ups and Fortune 500 alike stage experiences through the products and services they sell us. It’s fairly remarkable when stepping back to look at how quickly industries have evolved, since convincing executives on the importance of designing for the consumer experience was an uphill battle fought not that long ago. This is more impressive when realizing that Pine and Gilmore had to explain this idea in the decade of mobile pagers and their fantastic user experience.
The growing importance of shaping experiences isn’t stated to be revelatory - rather the opposite. We’ve all known the significance of CX for a great deal of time. The fact that “companies with increased investment in customer experience report higher customer referral rates and customer satisfaction and lower attrition rates” was realized by Strativity in 2009, and Bain’s development of the Net Promoter Score (NPS) well before that in 2003.
Boiling Down the Inputs
These discoveries on the importance of consumer experience quickly became universal truths, causing leaders to ask the question: “How do I create a better consumer experience for my business?” In the beginning leaders that saw the value of this question; asked it before their competitors, tied the question to KPIs of the business, and identified solutions that provided value to both the consumer and business, were rewarded with an edge over their competitors. Amazon’s one-click ordering and the call centers of Zappos became shining examples of tying consumer experience to business results, which companies across all categories pointed to in their own ambition to succeed within the Experience Economy.
However, that ‘beginning’ was some time ago, and the competitive edge that came from understanding the value of CX has faded. Today every company asks some version of this question. Questions so similar that the inputs used to answer it can - regardless of industry - be categorized in one of the three following inputs...
- Consumer insights: a rich understanding of who the experience is serving, including their pain points, emotional drivers, and culturally-relevant perspectives.
- Company value proposition: what the company offers to its customer and/or consumer in the way of its unique products and services.
- Operational realities: the limitations that constrain the company and the technical possibilities that can be taken advantage of, including the channels and functionality available.
… leaving us with this equation:
While it may be a simplification of the inputs used to design CX, the equation provides clarity to the trend that companies are heading towards creating better experiences that are no different from the ones their competitors are creating. Like any math equation, we know that the same inputs and the same formula always add up to the same sum.
Is Your CX Equation Special?
If a company were to run this equation for redesigning its CX, would these inputs really be any different from its direct competitors? Would Citi Bank not have the same consumer insights, company value prop, and operational realities to shape its CX as Bank of America would?
I admit that this is a harsh view, and some companies veer away from this difficult truth because it is indeed tough to face. They may claim that they are different from the pack, that their value proposition is unique, that they use different technology, have a unique insight into their consumers, or have a specialized team that can better synthesize all of these inputs and arrive at a superior CX. However, we must ask ourselves if that is in fact true. By taking a harsh look at two companies in direct competition, more often than not their products are indeed similar and sold at similar price points. The technologies they utilize to give them a perceived edge are likely not developed entirely by them, so their competitors could obtain them as well. As for the unique consumer insights they have uncovered and the way these three inputs have been synthesized to design a differentiated CX - the same rebuttal still applies. They do not possess any competitive advantage to the people they have uncovering consumer insights or synthesizing these inputs to design their CX. They have access to the same talent pool as their competitors, and the same consultancies at their disposal.
So it is no surprise that companies end up delivering experiences to their consumers that are very similar to that of their competitors; creating better experiences for their industry - albeit commoditized ones. We are increasingly faced with these better-but-commoditized-experiences across every industry. QSRs can deliver faster, friendlier service, but it all starts to seem the same. Notoriously bad experiences within TeleComs have improved, but unfortunately for them it’s across the board. The experience of buying and driving a car is much better than it was two decades ago, but the lines between luxury car manufacturer A & B now seem more blurry than ever.
Tomorrow’s CX Question
It would appear as though the once-effective question of “How do I create a better consumer experience for my business?” is starting to lead competitors to the same answer. By evolving the question while remaining true to the goal of creating competitive differentiation (the intent that drives the progression of economic value), company leaders can instead begin to ask “How do I create a differentiated consumer experience that gives my business an advantage?” Adding the need for a company’s CX to create a true advantage - as small as the evolution may be - is a critical one that shifts the basic equation of CX so that a business can focus on competitive differentiation. And as the experience economy hurdles towards commoditization, what could be more important than that?
With this CX equation, there is no singular way of addressing the additional input of competitive differentiation. Here are a few examples of potential assets that could be leveraged for the input to address the evolved CX question and its equation.
- Operations - Through existing logistics or new investments, can a company develop shorter delivery times that are impossible for competitors to match?
- Brand - By leveraging the brand’s unique voice, can it be injected into moments in the journey that if competitors copied would seem off-brand for them?
- Data - By utilizing the proprietary data a company has on its consumers, can it create a relationship customized to such an extent that it becomes impossible for competitors to offer a comparable experience if the consumer switches to them?
- Ecosystems - By identifying unique partners, can a company heighten its consumers’ experience while locking out its competitors from doing the same?
- Cultural - By tapping into a company’s unique culture - for instance, being highly iterative - can it create an always-in-beta process around the design and implementation of its experiences so that by the time competitors replicate its current experience, the company has already learned from it and improved upon it, leaving its competition continually one step behind?
These potential assets and questions only scratch the surface of how to utilize this additional input in order to unlock a differentiated experience. Each can be unpacked further. For example let’s look at Brand, which is possibly the most difficult to understand how to leverage due to its illusory nature as an asset.
Part of the role of Brand is to manifest differentiation, as it has historically come to life in communications where mediums (TV, radio, print, digital) were no different than that of its competitors. For this reason, most brands have already crafted a perspective, set of values, tone, and aesthetic that is somewhat unique while still resonating with consumers. Whatever these unique qualities happen to be, they can be injected into and throughout the experience - from the language used in an app update, to the way the call center is trained to have a conversation - all of this can be ways that the brand is lived. Companies that have injected the asset of their brand into their CX have found successful differentiation.
As a small example, most automotive companies’ CX might have their computer system perform software updates in the middle of the night because they’ve followed the typical CX equation and found that it’s the least likely time that the car is used, so it’s the best experience for the consumer. However, Tesla applied the input of its quirky brand (the same quirky brand that is using the nomenclature of its vehicle models to spell out “S3XY”) and voila! The car’s software updated at 4:20 am - the time that is synonymous with stoners. Did it inconvenience their consumer? No. Was it mildly funny to those in the know? Probably.
In the food and beverage space, a standard restaurant chain looking to design an “elevated” consumer experience at the intersection of the typical CX inputs would naturally lead to some basic decisions that would seem quite obvious, e.g., providing a single option for soap in the restroom. The decision is so fundamental that it seems almost silly to state it.
But when the sushi restaurant, Sugarfish, added its brand lens as an additional input to designing its CX, it arrived at a different conclusion. Though it is a chain establishment now, Sugarfish can be described as a restaurant that takes the art of sushi quite seriously; the process should be respected and that the act of consumption should be filled with appreciation. That is part of Sugarfish’s brand.
To preface, one sign of clean hands is the smell, so scented soap is a bit of a no-brainer. Some go into great detail to figure out the scent that best represents their brand, but Sugarfish has gone a step further. While they appreciate a beautiful smelling soap that aligns with the restaurant, they also recognize that the smell of scented hands can interfere with the aroma of the consumer’s food. So by adding the asset of their brand (which cares greatly about the appreciation of sushi) to their CX within the restroom, the result is two soaps. The soap to the left of the sink has a sign beneath it that reads “Unscented - before eating” and for the soap to right of the sink, its sign reads “Scented - after eating”. Even standing to wash their hands, consumers are confronted with an unusual experience that clearly demonstrates the care Sugarfish has for sushi.
Believe in 'Different'
If having a car that follows an update pattern of stoners or a restaurant with soap options sounds like it’s not for you - that’s completely fine. CX should be about creating an experience for a company’s target consumers, not every person with a pulse. In the words of Tibor Kalman, “When you make something no one hates, no one loves it.” And for those of you who are interested in these unique experiences of owning a car or dining at a sushi restaurant, feel free to purchase them - though thanks to their ability to differentiate themselves in their respective markets, both often have waiting lists.
If you want to not only build a better experience for your consumers but one that enables growth through differentiation, consider adding the input of competitive differentiation to your CX equation. I understand that it is hard to do what is different. It was also hard for people to see the value of investing in CX two decades ago - and look where we are today. Maybe put a better way, let me borrow a line from Logan Roy, the fictional billionaire in HBO’s Succession, who reflects upon his career by pointing out that doing things differently was seen by others in the moment as misguided until his success illuminated a new path that no one realized - and now the naysayers take it as a universal truth. He ends this reflection with the fabulous line "You make your own reality. And once you've done it, apparently, everybody's of the opinion it was all so fucking obvious.”