Episode #170: Customer Transformations

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In The Experience Economy, B. Joseph II and James H. Gilmore, (2011, 1999) lay out the Progression of economic value:

  • If you charge for stuff, you are in the commodity business (fungible)
  • If you charge for tangible things, you are in the goods business (tangible)
  • If you charge for the activities you execute, you are in the service business (intangible)
  • If you charge for the time customers spend with you, you are in the experience business (memorable)
  • If you charge for outcomes the customer achieves, then you are in the transformation business (effectual)

Buying experiences makes people happier than just buying products—the best things in life are not things! A common mistake is thinking experiences are mere entertainment. It’s really about engaging customers.

Any shift up to a new, higher-value offering entails giving away the old, lower-value offering. The authors give the example of a birthday cake:

  • Mom makes it from scratch in the 1920-30s: .10¢
  • Betty Crocker cake mix in the 40-60s, $2
  • Bakery slate cake in the 70s and 80s, $10-20
  • Chuck E. Cheese, $100-$250 party, the cake is free

 The Easiest way to turn service into an experience: provide poor service! Go from: “How’d we do,” to “What do you remember.” For instance, 90% of car buyers say they are satisfied, yet, only 40% buy next car from same manufacture.

Transformations

Three industries are ripe: Those that focus on making us healthy, wealthy, and wise.

The customer is the product. When you customize an experience you get a Transformation. While Experiences are personal, Transformations are Individual.

Examples: Fitness coaches, psychiatrists, plastic surgeons, CPAs, lawyers, religious excursions, Promise Keepers, GSK Committed Quitters program (50% greater likelihood you’ll quit smoking).

The London Business School: we’re not in education business. We’re in the transformation business. All other economic offerings have no lasting consequence beyond their consumption.

We want to transform ourselves to become different (A New You), which is why Pine and Gilmore call such buyers ASPIRANTS.

There are three separate phases in offering transformations:

  1. Diagnosing aspirations (from-to statements—flabby to fit, sick to well, single to married, grief to normal living)
  2. Staging transforming experiences
  3. Following through (AA)

At end of day: You are what you charge for.

What do you want to be?

What is beyond transformations? Here’s how Pine and Gilmore answer:

“According to our own worldview, there can be no sixth economic offering because perfecting people falls not in the domain of human business but under the province of God.”

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Ed Kless

Ed Kless joined Sage in July of 2003 and is currently the senior director of partner development and strategy. He develops and delivers curriculum for Sage business partners on the art and practice of small business consulting. Courses include: Sage Consulting Academy, Business Strategy and Customer Experience Workshops. Ed is the author of The Soul of Enterprise: Dialogues on Business in the Knowledge Economy, a compendium of a few of the episodes of his VoiceAmerica talk-show The Soul of Enterprise: Business in the Knowledge Economy with Ron Baker, founder of the VeraSage Institute where Ed is also a senior fellow.