The Experience Portfolio: Thinking about Customer Experience Strategy
Posted by Bob Warfield on September 12, 2009
Recently I was talking with Paul Greenberg and he presented me with a particularly elegant concept that he called the “Experience Portfolio.” He was talking about the collection of factors that influence the overall customer reaction to the transaction they’re consumating with a vendor. The Experience Portfolio consists of products, services, experiences and tools. He talks about the balance between these components in a recent blog post and asks some interesting questions:
How do you think about this when you are developing your Social CRM strategy?
Do you break out the likely effect of the products, services, experiences and tools on the overall experience?
Do you weigh the likely impact of each “functional area” and look at how the ordinary is going to affect the overall experience.
Paul didn’t use the “Portfolio” concept in the post, which was a shame, because I found it to be very evocative of the kinds of tradeoffs that have to be made to optimize a strategy for balancing the components. Investment portfolios are designed to play off different investments to maximize the returns while minimizing the risks. Each investment is chosen not only for its strengths, but for its ability to offset the weaknesses of some of the other investments. Investments must be chosen wisely, because there is not infinite capital to allocate among the various choices. Putting too much capital in one place may work well for a time but ultimately fail spectacularly. This concept of the need to balance and allocate scarce resources to produce an optimal outcome comes up over and over again in business, so it should be no surprise that we have to deal with it in terms of our CRM strategies, Social or otherwise.
Let’s look again at the components of our Experience Portfolio. Think of each one as a place a business can invest in to maximize the likelihood of Customer Satisfaction (or whatever you’re trying to maximize for your customers):
Products: What you are literally selling. Zappo’s sells shoes, the hotels in Paul’s blog post sell rooms, and McDonald’s sells hamburgers. Service companies sell Services, BTW, and we should not confuse their “Service Product” with the ancillary Services in our second category.
Services: Something else that comes along in addition to the Product that the vendor made happen using People. Zappo’s is legendary for the Service that comes with their Shoe Products. The Ritz Carlton adds Service to their Room Product. A public accounting firm may make a practice of hiring accountants that are especially personable or perhaps more likely to resonate with a particular demographic as an illustration of Services on top of a “Service Product”.
Experiences: Experiences are the most intangible. Paul’s examples involve Hotels that have gone out of their way to convey a hip atmosphere. Clearly Apple conveys an Experience, and not just Products with Services. So does Starbucks. Many companies offer little or no Experience. Think of the most generic possible retail products and outlets.
Tools: Software and other tools used to help optimize, shape, or deliver the other three components.
To get back to Paul’s three questions, let me briefly answer and then expand.
1. You have to think about the Experience Portfolio when defining your Social CRM strategy, or any other CRM strategy for that matter. It has to inform how you think about your product, your brand, who you are selling to, and how you go about servicing, marketing, and selling.
2. You should be making conscious strategy decisions about each one of the four Experience Portfolio components. Otherwise you won’t have optimized you portfolio except by accident.
3. You have to weigh the impact of each component in making your decisions, and you should understand how to measure that impact in practice as well in or to determine whether the strategies and weightings you’ve chosen are working.
How should we go about using the Experience Portfolio to help inform our decisions? A full explanation would make for a nice Business Book and this is just a blog post, so let me borrow from Paul’s Hotel examples and from my earlier musings about Michael Porter’s Competitive Strategies. Let’s use 3 hotels as our examples. Each hotel has decided to optimize for one of Porter’s 3 successful competitive strategies. One, Motel 6, will compete on price. Another, the Ritz Carlton, will position itself as the very best hotel “product” that is available anywhere. The last, and I think I’ll use Paul’s Allegro hotel since he liked it. The Allegro is using the Porter strategy of positioning for a particular niche or demographic, in this case it is people who have an acute aesthetic sense and desire to be hip.
Now let’s go through the experience portfolio:
Product:
– Motel 6 has to deliver the absolute cheapest product bar none. It is entirely focused on good enough not to be a total turn off, but no better. Spending any more means not being able to pass on the savings to the customer.
– The Ritz Carlton needs the best possible rooms. It can’t afford to cut corners on the rooms at all. The bed, the bathroom, the storage, comfortable seating, and every other aspect of the “Room Product” have to be the best that there is.
– The Allegro needs to offer a room that is good enough for their niche audience, but no better. Moreover, if there are aspects of the room that are relevant to that niche, they should be dramatically better even than the Ritz Carlton. In this case, you get the très chic decor, but the room itself is pretty small. Paul’s other experience, at the Hudson, made the room so small that they went below “good enough for the niche audience” and created a problem. They didn’t balance their portfolio properly and underspent on the Product.
Services:
– Motel 6 will be good enough on Services as well. The rooms have to be clean, and check-in and check-out needs to be quick and easy. That’s it. No concierge. The service help concentrates on being invisible.
– The Ritz views Service as an essential part of the product, which is often the case if you’re going to deliver the Best of the Best. As such, this is a huge focus for them. They go to elaborate lengths. Even the people who are just there to clean the rooms are selected for the friendly outgoing personalities. Everyone you see greets you. The hotel will go out of its way to do anything you ask, and they’ll spend time thinking of new things to offer before you ask.
– The Allegro should be focusing on the service levels their niche expects, but without standing out. They should be thinking of Services that may be uniquely attractive to their demographic. Since all the decor is very contemporary, let’s assume for example they might benefit from the very best in-room Internet capabilities. Perhaps you should have Social Media access to their staff rather than having to call. Perhaps your reservation gets you a personalized web page “concierge” that let’s you get access to all the kinds of things this niche would care about.
Experiences:
– Motel 6: Free coffee and danish is a big deal if you’re at a really nice cheap hotel. Maybe a pool.
– Ritz Carlton: From the Old Wealth ambience to the High Tea (if you like tea, you’ll like the Ritz’s) to the locations chosen for Ritz Carlton hotels, you will not be disappointed.
– The Allegro: Sounded like they had their experience dialed in perfectly to appeal to their niche.
Tools:
– Motel 6: The purpose of any Tool is to let them deliver rooms cheaper. Self-service on the web would be one example.
– Ritz Carlton: Has to be very careful that Tools are not percieved as cheapening the experience. The Ritz would use tools behind the scenes to ensure the quality of the experience and to enable their people to deliver a better experience than they could without tools. They would be unlikely to ever force a customer to use these Tools unless customers specifically wanted to do so, but for those customers that want access they would ensure the experience with the Tools was the best possible.
– The Allegro: Good enough not to disappoint their niche, but perhaps quite innovative where that would appeal to the niche. With a contemporary motif, there is a lot of opportunity to do interesting differentiation with the tools.
Conclusion
This approach to allocating scarce resources to the Experience Portfolio is pretty compatible with the comments I saw on Paul’s post:
Natalie got into an ugly situation with the Westin because someone there pulled a clever marketing trick to appeal to demographics that wanted a bike with their room, but failed to follow through on the Experience Portfolio. The bike was a tactic, not a conscious strategy, and wound up making things worse for them. She was absolutely right to be annoyed about it.
I take Mitch Leiberman’s post to be that at some point, you may have maxed out the Experience Portfolio along one dimension without creating a differentiated offering. When that happens, try reducing the investment on one of the dimensions and refocusing it elsewhere to create a more optimal overall experience. Classified ads are the same every you look. Giving more font control or some such wasn’t really going to be worth the effort, so Craigslist broke the mold by investing in other portfolio categories than the “Product” specifically.
Wim does an excellent job of taking the tactical (just seek “engagement” for engagement’s sake) and casting it into a strategic frame: Either gain insight through feedback or create a more personalized experience using engagement. The nature of the personalization should be informed by your overall strategy for differentiating for your customers.
Esteban recognizes that customers make choices that are influenced by context, intent, expectations, and the subsconscious. Have you taken care with your Experience Portfolio investments to properly align those inputs (context, intent, etc.) so that what your customers perceive when forming their impression of you are what you want them to percieve? If not, you’d better hurry to achieve that alignment.
Wim Rampen said
Hi Bob,
Thx for referring to my comment on Paul’s post as an excellent job. I’m surely not worthy of the label, nevertheless I’m honored.
I also like your post. There are two components of Customer Experience Management or Experience Portfolio (like the term.. need to think more about it) I think are very important to mention here:
1. Even products provide a service, explained by the easy example: people do not want a drill, they want hole in the wall. Customers have a “job” (drill the hole) they need to do and they need something (the drill) to help them do it.
2. Every product or service is surrounded by experiences: the most simple can of tuna-fish needs to be bought (in a store full of experiences), needs to be stored at home (how easy is it to store multiple on top of eachother), need to be opened (damn.. never works easy) and needs to taste like tuna, have nutritional value etc etc.. All experiences, and I’m not even talking about the way the can looks, advertisements, promotions etc etc). Even the simplest of products have a complete world of experiences surrounding them.
As you say in you post, it will depend on the strategy of the company what kind of experiences they want to deliver and if you want to be best at delivering all of the experiences. In general the thought is: deliver those experiences that matter most (for Customers to get the job done) extremely well. Your examples are well chosen to outline that.
A few last remarks, with regard to your reference on my comment:
Engagement (through Social Media) indeed is worth very little if one is not using the opportunity to really understand what your Customer’s needs are. You also need to have a strategy (and maybe a tool or system) to collect the feedback, filter it and pass it on within your organization in order to use for optimizing the Customer Experience.
Secondly: I do see the value of engagement for creating personalized experiences, but there is more: If we really want to build a Social CRM strategy, we not only need to engage and capture feedback through Social Media, we also need to understand how we can use Social Media or other Web 2.0 solutions to improve the (Personalized) Customer Experience.
One hotel-example: How could a hotel improve the Customer Experience if they understood that a specific guest has been traveling all week and is probably tired of hotel rooms? Tapping into the Triplt-community stream (I’m not linked to Triplt in any way btw 😉 they could have known this and could have welcomed their guest with a hot bath prepared in his room.. Of course this could also be offered as a service (requiring extra charge).
That’s it for now. I’m surely returning to your blog to read more interesting insights.
Thx.
Wim Rampen
ajaydawar said
Bob
Thanks for another thought provoking post. This made me nostalgic as I recalled a marketing class that I took in business school, in 2000, around innovating by creating unique customer experiences. The idea being evangelized by the professors was that innovation happens by fanatically focusing on the customer’s experience. My team’s project was to re-think the mobile banking experience and at the end of the project what we imagined is now possible via a combination of iPhone applications. In 2000 it seemed like science fiction.
There is a lot being said, done and co-created in this area of marketing. The marketing professor who is a leading thinker in this area and C.K.Prahalad have formed a Experience Co-Creation partnership. Checkout http://francisgouillart.com/wordpress/?page_id=182
–Ajay D.