Wednesday, September 1, 2010

Create the experience: the profits will follow

The ability to create great memories for your customers can be a really defining competitive advantage. Ikea, Disney, and, to a certain extent, McDonald’s with its “Happy Meals” are all companies that do a good job at creating great memorable experiences for their customers.
Many aspiring entrepreneurs talk about creating a good experience for their customers, but seem to fall short most of the time. In this article, I will talk about some of the ways how creating unique memories for customers can benefit the bottom line.
Loyal customers or loyal generations of customers
When we were kids, my brother and I would always look forward to Friday, as that was the day my mum would take us out for McDonald’s. I didn’t ask for a happy meal (the burgers in there were too small for me), but would instead get my mum to buy me a double cheese burger and whatever toy they had for that week.
It is these memories that make me put McDonald’s at the top of the list when deciding which fast food restaurant I want to eat at. It is also these memories that will make me want to bring my kids in the future to McDonald’s to let them experience what I experienced and enjoyed when I was a kid, and if they enjoy it as much as I did, I think they too will become loyal customers of McDonald’s.
So, companies that can create happy, unique memories for customers will have more loyal customers and maybe even generations of loyal customers. Fun business fact: According to the article “Zero Defections: Quality Comes to Services” in the Harvard Business Review, companies are able to increase their earnings by up to almost 100% by retaining 5% more customers.
Increased sales at a company’s other business divisions
Customers that had a good experience with a particular company through contact with one of its business divisions will be more likely to buy products from that company’s other divisions. Take Disney for example, kids that enjoyed one of its movies might persuade their parents to take them to Disneyland or buy Disney merchandise related to the movie.
More sales as a by-product of the experience
Some companies are really known for the experience they create that people just go their outlets just to go there. For example: You’ve people tagging along with their friends to Ikea just to walk around checking out cool furniture and living spaces and eat Swedish meatballs. These customers might have no intention of buying anything, but there’s still always the possibility that while walking around, these customers spot a piece of furniture or two that they might like and decide to make a purchase.
So, by creating a great experience, companies get the opportunity of making sales to customers that might not originally have any intentions to buy. The extra sales these companies generate will have an impact on their bottom lines.    
Premium pricing
A great experience or a great memory is a distinguishing factor that really sets a company and its products apart. By being differentiated and having products that are differentiated, companies are able to command higher prices which will translate to higher margins and profits.

In conclusion, the ability to create a great experience and memory for the customers should be taken into account by investors when evaluating the competitive advantage and investment appeal of companies, and aspiring entrepreneurs should try and build their businesses to be able to provide value to customers in the form of a unique and good experience.If you have any questions or have anything to add, please don't hesitate to comment.

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