Friday, August 03, 2007

Empathy, Utility, Profits

I had the chance to sit in on a talk given by Jeneanne Rae, and, as always, greatly enjoyed her talk. One of the key messages of her talk was about empathy for the customer, which is a topic we've been working on as well. This is an important subject for innovators, because customer empathy can create entirely new opportunities.

What Jeneanne calls empathy we call "meaning" or experience. It does not mean feeling sorry for the customer, rather it means creating products and services that have an even higher value proposition based on the values of the product, the company or the brand. We live in an era of unbelievable overabundance. Very few of us have "needs", and really very few of us have "wants". What many consumers increasingly seek is a product or service that has more than just utility - it has experience or meaning along with it.

Examples abound. One I like is the Body Shop, which practices environmentalism and tries to prevent cruelty to animals. By using their health and beauty aids, a person also aligns themselves to the values of the company. Body Shop understood that doing "good" within their business would help them identify loyal customers. Increasingly, you can buy any lotion - so why not buy one with some important value beyond the mere utility of the product?

This is what many innovators miss. They identify the "need" and create a product or service to fill the need - and neglect the meaning or experience. After all, there are thousands of MP-3 players, but only one iPod. That's the genius behind Apple - they've created an entirely new cool tribe to belong to. In some ways I think Starbucks is the same. I am not a coffee drinker so watching people order and consume Starbucks coffee is interesting. There is an entire language and culture building around Starbucks - which they are reinforcing with music and other cultural accoutrements.

Rather than focus solely on the utility of a new idea, start thinking about the value, meaning or experience that is encapsulated with the product or service. What does your brand say or mean? What additional value or experience does your client receive by using your new idea or service over another one? Daniel Pink, in his book A Whole New Mind, got this one exactly right - in an age of overabundance, people start looking to satisfy more than just the utility requirement.

So, what's this got to do with profits? Well, there are two schools of thought, but companies that create a meaningful experience can charge more, and generate more profits, than those that view their products and services as utilities. Need proof? Look closely at the costs of food in Whole Foods versus another grocery store. Sure, some of the products at Whole Foods are organic or differentiated, but not all of them are. And even if they are all differentiated, is the utility of the food that different? No. There's a reason we jokingly refer to Whole Foods as Whole Paycheck, and why it's the most profitable grocery chain - they have higher margins for their food, because they create an experience.

The challenge with this proposition is that many innovators are very convinced of the value of their new ideas, but often don't consider the larger question of meaning or experience. Anyone can eventually copy an idea, but it is much more difficult to copy the meaning or experience as well. Truly differentiated ideas - disruptive ideas - will combine utility and experience.
AddThis Social Bookmark Button
posted by Jeffrey Phillips at 5:19 AM


Blogger Unknown said...

I agree, adding more value than just the utility of the product is very powerful. In a web 2.0 world, it seams belonging to an experience is proving to be a strong appeal to many people. Soon, all companies will need to leverage the web 2.0 technologies to create similar experiences in their stores. Today everyone is joining facebook, tomorrow everyone might be joining Whole Foods. Today they are adding content to Wikipedia, tomorrow they will be adding content to Whole Foods inventory and store layouts. When customers feel they helped create the experience, their experience will have more meaning. Customers will be will to pay higher premiums for greater meaningful experiences.

6:43 AM  
Blogger Katie Konrath said...

Another additional advantage is that creating an experience also creates an emotional connection with buyers. For them, the product is no longer the sum of its parts--it means a lot more.

And since customers are buying the experience and the feeling instead of the physical product, they're less likely to change to a competitor.

Plus, if the company expands it's offerings, current customers are frequently interested in their new product and need less convincing of its value. Take Apple's recent experience: they enchanted many people with their iPod, and then when the iPhone came out, many of those same customers were interested because they believe in the Apple experience.

Thanks for the push to start thinking about this again!

7:34 AM  
Anonymous Inversiones en petroleo said...

Hello, i would like to know more about this topic because i think that could help me in personal projects.

12:14 PM  
Anonymous Invertir en oro said...

I think that this post is very good, i would like to read more information about this topic.

2:49 PM  

Post a Comment

<< Home