When I read a paragraph from B. Joseph Pine II and James H. Gilmore’s Welcome to the Experience Economy article in the Harvard Business Review I was thinking, are the authors suggesting that companies can charge for an experience? Here’s the section I was thinking of:
“To realize the full benefit of staging experiences, however, businesses must deliberately design engaging experiences that command a fee. This transition from selling services to selling experiences will be no easier for established companies to undertake and weather than the last great economic shift, from the industrial to the service economy.”
So, it’s not that a company charges for the experience directly, rather they charge for a product, and are able to charge extra for the associated services and experiences. For example, Starbucks charges a premium price for its coffee, yet you are not just buying the coffee, you are buying the service, the brand, and most importantly the experience.
A few years ago, Starbucks wasn’t doing so well financially; Howard Schultz talked about improving the quality Starbuck’s coffee, and he believed that improving the quality of the coffee was one of the strategies that what pull the company back on the right strategy for growth.
When I read Howard Schultz’s comments, I thought about how coffee for me, wasn’t the reason I went to Starbucks, really I continue to visit Starbucks because 1) coffee has never been my hot drink of choice, tea is more my tradition, having grown up in the UK, and 2) I think more of Starbucks as a destination, a place where I meet people, or a comfortable place to work. Starbucks is one of my choices because of the experience, and they sell food and drinks there as well.
Well Starbucks turned things around, in part because they did an excellent job of listening to the customer, and engaging with the community, the Starbucks ideas site is a great example of using social media and customer insights to improve the Starbucks experience.
Recently, in the last few months when I was working at my previous job, I’ve had to find a place to work late at night on a Sunday evening. I live in the South Shore of Massachusetts, and there aren’t too many choices for places to hang out with food and wifi. Living in Scituate, I don’t believe there are any late night alternatives, so I made my way to Panera Bread in Hanover, MA one evening, only to discover, I had my evening out of synch and the restaurant was just about to close, so looking around I remembered McDonalds has wifi and there was one nearby. So I spent several hours at the local McDonalds, working away, and I enjoyed the experience. In recent years, McDonalds has upgraded their experience, the seating, lighting has improved.
However, while I was sitting there with my laptop, drinking coffee, I did receive a few strange looks from one group of customers coming into the store and who made a few comments that I ignored, but caused me to consider. McDonalds wants to upgrade their experience, and make it acceptable for people to work there, but I’m not sure all McDonald’s customers are ready to associate McDonalds on the same par with Starbucks.
For McDonalds to sell the experience sufficiently, I think the company will have to make their restaurants a place to run business meetings, in the same way Starbucks has become the go to place for informal corporate meetings.
It appears that McDonalds has imported the European experience to the US…what’s interesting here is that in order to be successful in Europe McDonalds had to change its product, and facilities, its experience. Every restaurant and grocery store has to think about changing their menu, if you will, American’s are no longer buying into traditional American fast food, and they want healthier alternatives.
Here’s where I ended my post, then went off to conduct some research on McDonald’s brand strategy. I found a really interesting post by Sundar Ganapathy, critiquing the McDonalds brand in “McDonald's International Strategy: Squander Brand Equity,”where Sundar stated;
“In Europe, unfortunately, McDonalds is straying from its fast food roots. In an effort to compete with coffee shops like Starbucks, McDonald’s is turning the restaurant space more upscale and comfortable, while offering healthier and more locally palatable foods. They are also offering Wi-Fi and rental iPods. However, this strategy not only dilutes the brand equity by adapting to local tastes, but also moves McDonalds even further away from its core competency of fast food. With Wi-Fi and music, who needs their food served fast? Europeans no longer expect American food from McDonalds.”
I’m wondering if McDonalds discovered that the combination proved more profitable and as result changed their strategy when it comes to brand experience at least here in the US? So one benefit of being willing to offer local experiences to customers is that you may develop a brand experience that you eventually decide to transfer across the rest of your markets, looking back to my recent article on the customer talk test, what if in the 1960’s McDonald’s entered a new market where drive-in’s were already the norm, or alternatively providing drive-in’s wasn’t really an advantage because no one had cars! You have to develop a different experience to compete.
Take a look at the McDonalds mission:
Mission & Values - McDonald's brand mission is to be our customers' favorite place and way to eat. Our worldwide operations are aligned around a global strategy called the Plan to Win, which center on an exceptional customer experience – People, Products, Place, Price and Promotion. We are committed to continuously improving our operations and enhancing our customers' experience.
This mission is interesting… and leads me to ask who McDonalds is targeting? But also, how would McDonalds become your favorite place to and way to eat?