Bad Assumptions for Creating Value
Chapter 1: What is Experience Strategy?
In my last post, I introduced Jason, who works for a tremendous brand. He’s proud to work for one of the best-run companies in the world. Jason is based on a number of individuals that I’ve interviewed over the years. They work for great companies but they struggle to affect change. Part of the reason why they struggle is because the companies have been working with bad paradigms for value creation. In this section of Chapter 1 I am going to call out some key assumptions that I think we all made about how value was created from experiences.
I know I did. In fact there are YouTube videos out there from 15 years ago where I made arguments that I no longer believe.
But let’s get back to Jason.
Shaking Up How Businesses Realize Value
Jason had way too much data; but no insights about the near future needs of customers. That’s the reality of most company leaders and strategists today. A large part of why Jason can’t see the opportunities is because he’s working within a paradigm that includes bad assumptions.
Bad Assumption 1: Customers are a Group of Like-Minded Individuals
Jason assumes that he can organize his dashboard based on company segmentation. He does so because he’s been taught that markets are a group of like-minded individuals. As we will see, markets, especially today, are not segments, not mass, not even numbers of customers. They are situations that people find themselves in, like buying a home or dealing with a migraine.
Bad Assumption 2: Loyalty is the Aim of Experience Strategy
No, no, no, no, no, Jason! It’s not his fault. Both marketing and the CX movement have proclaimed that value creation is derived from customer loyalty. So, Jason is looking closely for any indication of loyalty in his numbers. But 25 years of studying experiences has proven that the real growth engine for companies is in the value that people assign to the time they spend with a company’s solutions. Think about the value of the time that the child spent with her father on their walks to the store. Or value of the time that the woman gained from teaching herself how to buy a home. She is not loyal to the companies that helped her buy the home. She is changed because she now knows how to buy a home.
Here's a short list of some of the outdated and wrong assumptions companies make about value creation. And next to it are the new concepts that I will introduce. These concepts apply to all value creation from experiences, and especially to the types of experiences people will expect in the future.
Let’s go further.
Since at least the 1960s, marketers have taught business strategists to see people as ‘the target audience,’ but the experience strategist takes a different approach: the strategist sees people as unique individuals in common situations. In the 1960s, the only data that was available to aggregate was demographic data. Today, we have far more data. Thus, the focus moves from trying to aggregate people to aggregating situations that people find themselves in.
Keep looking at that table. The way experience strategy sees the customer journey is dramatically different from the old model, which imagines a series of phases progressing from awareness to repurchase. This is the loyalty paradigm. If you can create a positive experience then people will be loyal to the brand, experts say.
Unfortunately it doesn’t work that way when people have an abundance of choice.
Value creation today and tomorrow is about companies creating value for customers, not customers becoming loyal to companies.
And what’s more precious to customers than time? Experience strategy focuses on the time value that is created for the customer. The ‘journey’ should maximize the quality of time spent. For a father and a daughter who can walk to the store, the quality of the time spent walking far outweighs the value of home delivery. On the other hand, if they don’t have time to go for a walk with the dog, to the store, home delivery might very well be the right solution.
(Jason doesn’t have a dashboard for quality of time spent. But there are likely data sources that could help him within his company. He just doesn’t know to look for them.)
Going forward, the very definition of ‘engagement’ will be different. Companies talk about reach, loyalty, brand, and likelihood to recommend or repurchase. All good things. But, for the future experience strategist, the key attributes of engagement are how individualized the experience is, how memorable or meaningful, the impact on customer performance, and whether people value the time they spend with the company. When we at Stone Mantel observe people, we always find that they find ways to create more value in the situation—that is what ‘engagement’ meant to them. They realized it through getting into a mode, learning a new skill, understanding their environment, or strengthening a relationship.
Consider some of the companies with high market caps today. Tesla, Apple, Samsung, LVMH, and Costco. They are all tremendously successful in their category. But they would mean nothing to customers if they didn’t create value through holistic, meaningful time value creation with their customers. Tesla revolutionized the driving experience. Apple showed Elon Musk, founder of Tesla, the way to create high-value, intelligent experiences. Samsung has devoted fans not because of their ability to segment customers but because they innovate and imagine the future of device experiences. LVMH, the parent company of luxury brands like Bulgari, Fendi, Dior, and Tiffany & Company, has incredible brand assets. Those assets only exist if people value the quality of the time they spend with the company’s products. From the design of the goods to the placement of the stores, every element of a luxury brand is focused on making the moments with the company priceless. Branding today is all about the experience. Therefore it is all about time value.
Costco flips the traditional loyalty model on its head. It can stack Banana Republic t-shirts high on tables just around the corner from freezers full of oversized salmon fillets because the entire experience of shopping at a Costco store feels to customers like time well spent.
Perhaps the most radical thing on the table above is the new paradigm for how to see the people companies serve. As I will show in a chapter on situational markets, the biggest bad assumption that most companies make is about how they see customers. As long as companies see customers as part of demographic or psychographic segments, they cannot realize the full value of Experience Strategy.
True, sometimes marketers need to see customers as traditional segments for the purposes of messaging. But this book is not about marketing. And the points I will make about situational markets will actually make marketers more successful at attracting and retaining.
Stay tuned.
Thank you Tim. I do plan to break down all of the concepts. Take a look at the end of the first section of Chapter 1 and you will see the table of contents. More to come!
Loved reading this first chapter Dave very thought provoking and in my view ground breaking.. Do you plan to break down your thoughts on the component parts of time well spent in future chapters? I ask that as for me it has many dimensions above and beyond the obvious one.