Wednesday, May 09, 2007

Customer Experience, Starbucks, Krispy, Kreme and Korea



Once again, I'm drawn to a topic I watch carefully...Korean Consumerism...along with that I'm a fan of Seth Godin, Starbucks, and Krispy Kreme.

Consumerism in Korea is changing...much due to strong competition, globalization, and the introduction of new thinking--like the customer experience. Starbucks and Krispy Kreme are huge in Korea, I attribute this to their strong customer experience. For example, one only has to visit Krispy Kreme in Myongdong on a Sunday or their location in the Lotte Downtown Department store. (BTW Lottte has the master franchise for KK in Korea, it's rival Shinsegae operates Starbucks Korea).

This article in Korea Herald highlights Customer Experience...

The writer, Hwang Hye-jeong notes,
In his book "Purple Cow," marketing expert Seth Godin says that there are two kinds of people in the world: Those who think that they are familiar with the legend of "Krispy Kreme Donuts" and those living in a neighborhood not exposed to the donuts yet.

What is the big deal about the donuts? One important thing is that the company sells more than just its products. Customers have a unique experience, along with the atmosphere of warm friendliness, while paying visits to one of its stores to buy two paper boxes of donuts. With the light illuminated on the "Hot Donuts Now" sign, they know their donuts are being freshly made. While waiting in line for their donuts, they can enjoy the sight of syrups dropping on fried doughs like waterfalls. One oven-fresh donut is offered to each customer free.


New factors of differentiation


According to the Experience Economy, businesses once sought differentiation from others by addition of the concept of service to products becoming generalized, and now we live in the era in which service is also becoming generalized. Also, living in an era of material affluence, customers show a stronger tendency to pursue mental satisfaction from goods and services purchased, in addition to their functions and convenience. In connection with such a trend, customers' collective experience emerges as a new factor in the effort for differentiation.


Then, how is a customer's experience defined? The February 2007 issue of the Harvard Business Review defines it as "the inner, subject response that customers come to have in direct and indirect contact with businesses." Direct contact is made by a customer's actual purchase of goods, and indirect contact with goods, services or brands through recommendation, advertisement and news.


Thus, such an experience is made by customers collectively rather than individually. On the importance of the management of collective experience, Harvard Business School professor Gerald Zaltman says, "The sensible and sentimental attributes that belong to unconsciousness stemming from collective experience exert a much higher influence on consumers' preference than the tangible attributes of goods or services." Thus, businesses cannot afford to ignore the management of collective experience.


New means of creating new values


In many cases, a customer's experience was regarded as only an ancillary factor by businesses. Now, it is different. It has emerged as a means of creating new values, as customers willingly spend money to buy certain goods, making judgment based on their experience.


The Starbucks success story is a good example. The core factor of its success was a "complete coffee experience." Starbucks Chairman Howard Schultz had an amazing experience at an Espresso Bar on his trip to Italy. There, Italians were having a good time over a cup of coffee. To him, they were like orchestra members playing a symphony, touching people's heartstrings. The gracious movements of grinding a fresh coffee for customers and the sweet smell of freshly brewed coffee, it was a far cry from his coffee store on the pier in Seattle. Under his stewardship, Starbucks adopted customers' collective experiences as a means of creating new values, taking even their sentiments into account. Thus, it eventually succeeded in having customers willing to pay three dollars for a cup of coffee whose unit cost stood at only 3 cents. They were willing to pay the price of allowing them to enjoy small luxury.


Peering into customers' experience


In the reality faced by a business engaged in fierce competition, it appears to be very difficult to create customer values by letting them have a special experience. However, it is not impossible. The thing is, customers are in a continuous experience session.


To let customers have special experience, it is necessary to know what kind of experience customers want. Then, how can a business analyze their customer's world of experiences accurately?


First, they need to define target customers, i.e. what they do for living and how frequently they use the item.


Second, they need to categorize their customer's world of experience, including their sociocultural background and business environment instead of confining it to things related to their brand.


Third, they need to track their experiences along all their contact points, i.e. ranging from the time they recognize and purchase an item until they throw it away after use. This is the most important process that enables them to understand their experience.


Nowadays, there is a flood of goods and services. Technologies are developed at an unprecedentedly rapid rate. Levels of expectations among customers continues to rise. In many cases, the levels of the quality of goods and services fall short of expectations. To increase the number of customers loyal to them, businesses need to make efforts to have them maintain a sense of affiliation toward them, in addition to satisfaction with goods and services.


In choosing a fancy restaurant for dinner, what we really want may be mental satisfaction. In such a case, a restaurant that can help us pleasantly break from the stress or humdrum of everyday life may suit our needs better than one known for its exquisite foods. This is why businesses should carry out their marketing activities based on the fact humans are sensible animals.

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