Lecture #2
• Commodity
• Very low profit margins
(Barrels of oil)
• Goods
• Moderate profit margins
(Self-service gas pump)
• Service
• Good profit margins (Full
service gas station)
• Experience
• Great profit margins (Nascar
pit stop with Earnhardt &
crew)
• Commodity
• Very low profit margins (lowcost running shoes)
• Goods
• Moderate profit margins
(Nike Running Shoes)
• Service
• Experience
• Good profit margins (Max
Sports Wear—Ask a
podiatrist to fit you with the
best for you)
• Great profit margins
(Running Camp)
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Commodities are fungible materials
(traditionally thought of as being extracted from
the physical world)
Traditional Examples:
◦ Iron ore, Corn, Coffee beans, Beef (cattle), etc.
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Modern Examples:
◦ Milk, Nails, PCs?
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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 didn’t need help)
Now: PCs are a commodity (low price decisions)
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When you customize a good, you turn it into a
service
How would you customize vitamin pills?
• Commodity
• Very low profit margins
(Vitamin Pills)
• Goods
• Moderate profit margins
(GNC Organic Vitamins)
• Service
• Good profit margins (GNC
Customized Packs)
• Experience
• Great profit margins (Health
Fare with different
stations/exhibits to
encourage and customize
health care for you)
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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
• Very low profit margins
(Silicon & copper)
• Goods
• Moderate profit margins
(Integrated Circuit Chips)
• Service
• Experience
• Good profit margins (EE
Design Services)
• Great profit margins
(Science Fiction World)
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Four types: Improv, Platform, Matching &
Street
Here’s the key: “Staging experiences is not
about entertaining customers;
It’s about engaging them”
What does it mean to engage a customer?
See Figure 2-1 in your book
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One dimension: Guest participation
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Another dimension: Kind of Connection/
Environmental Relationship
◦ Passive: do not affect performance. Example:
Symphony audience
◦ Active: Affect performance. Example: LAN Arena
◦ Absorption: Full mental focus. Example: watching
TV
◦ Immersion: Physical involvement. Example: playing
a game of soccer, virtual reality game, …
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Is it true that the more the customer is
engaged, the more money s/he will pay for
what you offer?
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The richest experiences will:
◦ Will be passive: Engaging the person’s 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
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Is this starting to sound challenging?
How do you do this with your company’s
products/services?
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You start by envisioning a theme.
◦ Theme for selling nails?
◦ Theme for selling paint?
◦ Theme for selling IT services?
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The theme will give a framework for “inging”
the thing.
◦ It’s not paint, it’s getting you and the customer to
focus on the painting experience.
◦ It’s not IT services, it’s getting the customer to focus
on ???
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It’s not IT services, it’s getting the customer to
focus on ???
the business experience!!!
Now, how do you do that?
(hint: see: IT Alignment & IT Governance)
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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
don’t
want choice, they
just want exactly
what they want.”
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“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?