Another insightful article

I started out looking to share thoughts on service marketing. However, service marketing isn't just my thoughts, but a focus on the service. In my effort to best spread the word as it were, I will share not only my thoughts, but some of the insights and articles that I am reading in my ever changing focus on service.

I hope you enjoy this one.

"It's All About Experience

Companies that try to create holistic experiences by emotionally engaging their consumers are flourishing

by Sohrab Vossoughi

Innovation & Design

Advances in manufacturing technology and the global reach of the Internet have leveled the playing field in the product marketplace. It wasn't long ago that time-to-market was two years, then 18 months, and then 12 months. Now, a competitor can knock off your "innovation" in six months or less. Many businesses understand that being "new" or "different" is no longer a differentiator. Countless companies are elbowing their way to the top with designs that are also "feature-rich" or "patent pending." Innovation in product design has lost its meaning and, therefore, its value.

There is still one frontier that remains wide open: experience innovation. This is the only type of business innovation that is not imitable, nor can it be commoditized, because it is born from the specific needs and desires of your customers and is a unique expression of your company's DNA. Yet the design of an experience is often overlooked in the rush to market.

Creating a Complete Experience

Companies intending to be relevant today must learn the art of creating experiences that genuinely engage their customers. Choice-fatigued consumers are not looking for another product that hasn't taken their true needs and desires into consideration. They are looking for companies in which to believe and give their allegiance. They are looking for experiences that cater to their deep-seated desires. This type of engagement requires much more than the latest technological breakthrough: It requires emotional engagement.

This has the highest value to customers because it has meaning. And it even allows companies to reimagine an old idea: The product or service itself does not have value, but the way in which it is experienced makes it fresh. That means you can even charge a premium for it. At over $100 a pair, Lululemon Athletica's (LULU) yoga pants aren't popular simply because of an advance in athletic apparel design. The brand's promise of well-being and its promotion of conscious living permeate every aspect of its business, creating an experience that customers are willing to pay top dollar for. Lululemon's sales at its retail stores doubled in the fourth quarter of 2007.

Creating a meaningful experience requires thoughtful attention to your customers at every point of contact—what I call the 360-degree experience. There are four components to consider when designing the 360-degree experience:

Know where you are in the innovation cycle. There are three areas of innovation: technology, product, and experience. Companies such as Intel (INTC) or Texas Instruments (TXN) offer technology products, such as a semiconductor or wireless data transmission, which can be broadly adapted for many uses. A company such as Sony (SNE), meanwhile, has commercialized a technology and created physical products. Then there are companies that create an experience for customers; engage them and tell a story. Starbucks (SBUX), for instance, took a simple product—coffee—and turned it into a complete experience that satisfied the previously unmet need for café culture in the U.S. Understand where your mindset lies in this innovation cycle, and know what it takes to participate and perform in the other spaces. Migrating to a different area is possible but extremely difficult, and one which requires an alteration of thinking, measurement systems and, eventually, a company's DNA.

Know your DNA. The only way to attract your true tribe is to authentically be yourself. Take a stand. Do what is natural to you and you won't have to fake it. Understanding your company's DNA is central to experience design.

The athletic apparel company Nau is a great example (BusinessWeek.com, 1/31/07) of a company that knows what it stands for and what it is good at. With roots in the outdoor apparel industry, executives creating the company didn't just produce another label to compete in a glutted market. Instead, they established a mission based on their personal values for conscientious business practice and built a business that reflects these values. That ranges from a product line based on sustainable product innovation to a "partnership for change" program whereby 5% of every sale is donated to an environmental, social, or humanitarian organization.

Make emotional connections. Understand your customer well enough to know the difference between what they need and what they desire. In the Western world, businesses meet customers' functional needs with ease, but often seem to have forgotten how to connect with them emotionally the way, say, the corner grocer in a small neighborhood knows what products each of his customers loves. While it may not be possible to know each customer individually, we can delve much deeper than customer research statistics usually allow to create highly contextual experiences that reflect values, behavior, attitudes, and motivations. Ferrari is a wonderfully innovative brand in this regard—not only has it designed a thrilling racecar, but it tapped into the desires of those people who secretly dream of being a racecar driver. From the sound of the engine to the design of the fire extinguisher that is affixed to every interior, Ferrari found a way to put the racing car experience in the hands of a layman.

Design for the complete experience. There is no experience killer worse than a story being told in only one place. You may have a great product, but if customer service or your Web site don't reflect the story you are telling, the experience is invalidated and you run the high risk of losing the relationship with your customer. Every aspect of your business must reflect your company's DNA—and what you have learned about the desires of your customer. American Express (AXP) is a good example here—from the breadth of its product offering to the detailed level of service, its thorough approach provides customers with a feeling of security, empowerment, and being well-cared for—a feeling for which customers will pay a premium.

Competing in the market today demands innovative, emotional engagements. Creating complete, 360-degree experiences is the only way to be relevant in a glutted marketplace.

Sohrab Vossoughi is Founder and President of ZIBA Design, the company he started in 1984. The recipient of more than 30 patents and over 200 design awards, Vossoughi was named BusinessWeek's Entrepreneur of the Year in 1992. He continues to direct projects for clients including Nike, Microsoft, Xerox and Hewlett-Packard."

Self-Service....What it is, and isn't...

I couldn't resist sharing this excellent article by Karen Aho, off of the MSN site. When you read it, pay special attention to why people are using self service. In most cases, it's not so much what it is cheaper, or that they like it, but that the sub-par service has driven them to it. So, if you are looking to differentiate your product and add to your bottom line, what better place to start than with service.

"Where has all the help gone?

You never asked to pump your own gas or bag your own groceries, but you probably do -- or will. Here's why you might as well get used to working for free.

By Karen Aho

Remember when customer service meant service provided for you? By someone else?

More and more, customer service means you get to serve yourself.

Technically, that makes it self-service. But in marketing parlance, self-service is actually a form of customer service, wherein the store -- or the airline or the hotel -- installs a cool gadget that lets you do the work once entrusted to others.

"What better customer service is there than self-service?" ask the marketers. "It's fast!" "It's accurate!" "It's convenient!" "It's confidential!" (No more bystanders overhearing that triple-cheese, extra-mayo order.)

Already, kiosks allow you to mail packages, order food, pick up dry cleaning or prescription medication (including some in California for marijuana), check out library books, rent DVDs, check into hotels, pay water bills or parking tickets, do some banking or, if you're incarcerated, see how many good-behavior points you've racked up.

It's now possible to begin a trip, feed and entertain yourself, and even mail gifts home without interacting with a single person save airport security (and there a simple nod will do).

All this and no fear of rejection

U.S. consumers scanned $137 billion of merchandise at self-checkout lanes in 2006, a 24% jump over the previous year, according to research from IHL Group. Consumers spent an additional $300 billion at self-service kiosks, with the combined dollar volume expected to surpass $1 trillion by 2011.

The industry is growing at such a clip that it's almost impossible to track the numbers, said Patrick Avery, the editor of SelfServiceWorld, launched in 2005 to meet the demand for information.

"The price is coming down," he said. "And nine times out of 10 those (self-service) units are going to pay for themselves in six months."

In Pennsylvania, Giant Food Stores designed a new supermarket around the concept of self-service, with mobile scanners that let shoppers tally and bag groceries as they go, and kiosks that print directions to canned yams, search for recipes, put in deli orders and display photos of the managers. ("Shopping is a very personal experience," spokeswoman Tracy Pawelski said, "so we get to know our customers.")

"It's just one of those exponential type occurrences," said Bruce Steinhardt, the founder of OTech Group. "It's just going to continue to grow at an increasing rate for quite some time."

He should know. Several years ago, Steinhardt, a medical administrator, was using a self-service checkout at Home Depot when an idea hit. He had just used a kiosk for a flight, too, and thought, "Why not do the same at doctors' offices?"

In 2004, Steinhardt founded OTech, which now has kiosks in 40 clinics for patient check-in, with clinics paying $5,000 per year per kiosk. The kiosks verify insurance, take payments and direct patients to the appropriate waiting areas, all without a person asking questions.

"You would rather do it yourself than stand in line and -- I hate to say this -- talk to people," Steinhardt said.

But I never asked to do all this

We've been adding jobs to our daily repertoire ever since self-serve gas pumps took the service out of the service station.

Almost all of us check ourselves in for flights, either online or at a kiosk (86% of leisure travelers in 2006, according to Forrester Research). About 40% of us do our banking online, Online Banking Report says. We don't even flinch before rolling up our sleeves to make copies, print photos, book travel or research that new stereo.

But did we really ask to do all this work?

Why poor service matters
Howard Davidowitz of Davidowitz and Associates, Candace Corlett of WSL Strategic Retail and Michelle Caruso Cabrera of CNBC discuss the impact of poor customer service.

It turns out most of us would rather not, according to researchers. But we value our time and money more, and companies know this.

Though it may be difficult to believe now, people were hesitant to use ATMs when the units debuted in the mid-1970s. But how irresistible is a cash dispenser freed from bankers' hours? All those minutes used to rush downtown before 4 p.m. were gloriously restored.

Gas stations, meanwhile, persuaded us to drive away with our hands reeking of gasoline in exchange for a discount of a few pennies per gallon.

Now we think of it as paying extra for service at the pump. And banks are starting to charge for in-person teller services that were previously free.

"It used to be, 'We'll give you something extra for doing self-service.' Now it's, 'If you don't do self-service, we'll charge you something extra for having a person help you,'" said Linda Musthaler, an analyst at Essential Solutions.

Sit; roll over; goooood customer

Even today, most people don't like grocery self-checkouts, and only 5% have deigned to try a hotel check-in, Forrester Research reported. "Given the choice, consumers prefer not to use kiosks."

Still, 91% of shoppers surveyed said they'd use the self-checkouts anyway, IHL found. And after six uses they gave the machines a near-unanimous positive review. That's where incentives -- or disincentives -- come in, to get customers "past this hump."

It's common behavioral training, the same method used to train dogs.

"Shaping a behavior means rewarding one baby step after another baby step until you have achieved the final behavior you want." Oops, that's from the pet-training manual "The Dog Whisperer." But it's the same idea. Some strategies include:

• Rewards. Southwest Airlines began selling tickets online in 1996. Less than a year later, with online sales at just 5%, it offered double miles. When online sales hit 53% in 2003, Southwest dropped the incentive to 50% more miles. When sales hit 65% in early 2005, Southwest dropped all bonus miles. Online sales continued to rise and are now at 74%. "We did that to establish the booking habit," said Chris Mainz, a Southwest spokesman. "It worked."

• Punishments. Some airlines charge fees for tickets not booked online.

• Specials. Airlines offer some low fares available only online.

• Speed. Though two-thirds of Americans now use airline check-in kiosks, Forrester found, 63% do so just to save time; only 12% don't want to talk to a person. Overall, the kiosks got a low positive response, under 25%, yet were still heavily used to avoid waiting in line.

• The illusion of speed. Shoppers say they use stores' self-checkouts for the speed and convenience. Actually, cashiers do the job faster, said Lee Holman, the lead retail analyst for IHL. But shoppers are under the illusion of speed because they are busy working, not waiting. And there's often a shorter line.

• Discounts. In Boston, transit riders were charged $1.70 instead of $2 if they bought a magnetic card from a kiosk. Transit officials saw the number of complaints about the new system drop by half within six months as riders adjusted.

How companies profit

"The best place you can save money is by cutting jobs," said Mark Damron, the general secretary/treasurer of the Industrial Workers of the World.

Retail stores typically use one cashier for four self-serve checkout lanes and say they "redeploy the labor" to other areas. "But I've seen one for six lanes," Damron said. "Soon it will be one for eight.

"Maybe they don't fire people, but what they don't do is hire replacements," he said. "So, through attrition they cut down on jobs."

This isn't new ground. Self-service has decimated employment in many industries for decades.

In 1988, 308,000 gas-station attendants worked in this country. By 2000 there were just 140,000 (New Jersey and Oregon require them), said Peter Honebein, a co-author of "Creating Do-It-Yourself Customers." Travel agents have dropped, too, from 124,000 agents in 2000 to 87,600 in 2006.

Howard Davidowitz of Davidowitz and Associates, Candace Corlett of WSL Strategic Retail and Michelle Caruso Cabrera of CNBC discuss the impact of poor customer service.

When United Airlines adopted automated check-in, the airline reduced its front staff by 36% and saved $35 million, Honebein said. On average, it costs major airlines $3.02 to check you in with an agent and just 14 to 32 cents if you do it yourself at a kiosk, Forrester Research found. Online check-in costs even less.

And consider this: When you resolve an issue yourself online, you save that company $7 to $12 for a simple call or $45 to $90 for complicated one, said Zachary McGeary of JupiterResearch.

"If they can get you to work for free, they'll do it, and in this case they're getting you to do the work for them as the customer," Damron said.

But wait, there's more. Companies not only save with self-service, they also earn more. Wrap your overworked mind around that one. Here's how:

• People buy more. Customers spend 39% more per order at fast-food kiosks and are twice as likely to upsize than if a person takes their orders. (Machines are programmed to ask every time, and no one can overhear.) Customers also buy more at deli kiosks in supermarkets.

• More people buy. Good Web self-service allows for far more customers to be adequately served.

• People remain loyal. "You mean I'm going to have to upload all my data into a new bank? And learn a new system? No way."

• People give the company high marks for customer service. Yes, funny but true. It's hard to complain about a food order that you placed yourself, a transaction that you scripted or the way you pumped your own gas. When customer service is self-service, you have only yourself to blame."

Service Marketing Introduction

We all talk and hear about service every day. We hear about good service, and more often we hear about bad service. However, service is a vague term that is different for each and every person. What are the expectations of each customer has? The customer expectations truly define their opinion of the quality of service that they are receiving in any given situation. For years, we have heard about service initiatives, service goals, customer service standards and so much more. But most of these initiatives are actually just systems that have been created to approximate true service. In listening to Horst Schulze (former CEO of Ritz Carlton speak last year), he repeatedly hammered home the point that if our staff is giving poor service, then we are the ones to blame….

Northern Illinois University has just approved a new degree program called Service Marketing. The basic concept behind Service Marketing is that in order to have fully capable leadership (as opposed to management) they must be able to balance the needs of operations, human resources, and marketing. Many of the different aspects of service marketing are focused on coordinating and improving the performance of all three areas.

Traditional marketing encompasses the four P’s (product, promotion, price, and place). The internet, improvements in shipping and much more has leveled the playing field in each of these four areas, bringing a much more competitive market for all of us. Looking into the evolution of the marketplace has become one of the focuses of Service Marketing. Three additional P’s of marketing are people, physical evidence and process. The most important of these in my opinion is People.

The People aspect of Service Marketing focuses on both the customer and the internal staff member. In other words the service that differentiates us and how that service is perceived by the customer. One of the basic tools is the Service Profit Chain which investigates the relationship from the employee to the customer and back to the employee. Think of it in the following aspects, if we hire the right employee’s and train them properly, while treating them well, they will be happy. As a happy employee, they will be more apt to provide good service. Because they provide good service, the customer will enjoy their experience at your establishment. Not only will they return more frequently, but they will share their experience with others who in turn will visit your establishment. This will increase your revenues and in turn yield more profit to you the owner.

As you approach the coming year, ask yourself; how well does the Service Profit Chain work in my establishment? How does my staff perceive their position on the Service Profit Chain? How are they in front of the customers? Does this represent your goals? What do you customers experience in your establishment? And the final question you then should ask yourself is; what am I doing to make it better?