Lecture #2

Commodity Goods Service Experience Very low profit margins (Barrels of oil) Moderate profit margins (Self-service gas pump) Good profit margins (Full service gas station) Great profit margins (Nascar pit stop with Earnhardt & crew)

Commodity Goods Service Experience Very low profit margins (low- cost running shoes) Moderate profit margins (Nike Running Shoes) Good profit margins (Max Sports WearAsk a podiatrist to fit you with the best for you) Great profit margins (Running Camp)

Commodities are fungible materials (traditionally thought of as being extracted from the physical world) Traditional Examples: Iron ore, Corn, Coffee beans, Beef (cattle), etc. Modern Examples: Milk, Nails, PCs?

The market is constantly pushing your offerings toward the commodity end of the economic offerings scale. Example: Early 1980s: PCs were an experience Late 1980s: Getting a PC was a service (smart guys had to help you) 1990s: PCs were a good (still differentiable, but you didnt need help) Now: PCs are a commodity (low price decisions)

When you customize a good, you turn it into a service How would you customize vitamin pills?

Commodity Goods Service Experience Very low profit margins (Vitamin Pills) Moderate profit margins (GNC Organic Vitamins) Good profit margins (GNC Customized Packs) Great profit margins (Health Fare with different stations/exhibits to encourage and customize health care for you)

When you engage a customer in a memorable way, you turn a service into an experience Memorable way means: The memory becomes the PRIMARY reason the customer buys.

Commodity Goods Service Experience Very low profit margins (Silicon & copper) Moderate profit margins (Integrated Circuit Chips) Good profit margins (EE Design Services) Great profit margins (Science Fiction World)

Four types: Improv, Platform, Matching & Street Heres the key: Staging experiences is not about entertaining customers; Its about engaging them What does it mean to engage a customer? See Figure 2-1 in your book

One dimension: Guest participation Passive: do not affect performance. Example: Symphony audience Active: Affect performance. Example: LAN Arena Another dimension: Kind of Connection/ Environmental Relationship Absorption: Full mental focus. Example: watching TV Immersion: Physical involvement. Example: playing a game of soccer, virtual reality game, … Is it true that the more the customer is engaged, the more money s/he will pay for what you offer?

The richest experiences will: Will be passive: Engaging the persons mind Also, they will be active: They will be affecting the outcome of the experience. Also, they will be absorbing: Occupying the full mental focus of the customer Also, they will be immersion experiences: Involving the person physically Is this starting to sound challenging? How do you do this with your companys products/services?

You start by envisioning a theme. Theme for selling nails? Theme for selling paint? Theme for selling IT services? The theme will give a framework for inging the thing. Its not paint, its getting you and the customer to focus on the painting experience. Its not IT services, its getting the customer to focus on ???

the business experience!!! Now, how do you do that? (hint: see: IT Alignment & IT Governance)

Packaging (customizing it for an individual consumer) a commodity automatically turns it into a good. Customizing a good automatically turns it into a service. Customizing a service automatically turns it into an experience.

Customers dont want choice, they just want exactly what they want.

Less customer sacrifice turns an ordinary service into a memorable event. In what ways are your customers having to sacrifice when they buy your services? Network installations New application rollouts Restaurant experience?