Customer Experience: The New Competitive Advantage

Have veal parmesan at a family restaurant in the North End of Boston. Now have the same dish at an Italian restaurant franchise. Which will be the more memorable experience? It's not about the food.

Why are so many customers loyal to companies such as Nordstrom, Cesna, Miele, Dyson, GEICO, LL Bean, Southwest Airlines, Virgin Airlines, Ritz Carlton, Starbucks, and Fidelity Investments, to name a few? These are companies that obsess over customer experience.

In the red ocean of competitive strategy, companies often looked to patents, trade secrets, and other corporate assets to create competitive barriers. I would trade a patent for a better customer experience any day. A great customer experience is easy for customers to enjoy but hard for competitors to copy. Companies that get it right can create a blue ocean of uncontested market space. For middle market companies looking to grow, getting it right is crucial for future prospects.

What do we really mean by customer experience? For starters, we're not talking about the features of the product or service itself. We're talking about the experience the customer has while solving a problem or addressing a need. How are they feeling about every stage of the process: shopping, purchasing, learning to use, and then actually using a product or service? What happens when there's a problem? Customers often describe their experiences using emotional language: "easy," "rewarding," "exciting," "enjoyable." To design great experiences, you have to understand these emotions.

There were many portable music players before Apple introduced the iPod. MP3 players were lightweight memory sticks with earphones that could store and play music on the go. The problem was that they were too hard to use. Very few people had the time to learn how to use them, leaving a very small market for the many MP3 players to fight over. When Apple introduced the iPod, most of us didn't know a lot about how it worked, we just knew that it worked effortlessly right out of box. We were buying and listening to music before we realized we wearing white earbuds wherever we went.

Marketing genius Ted Levitt would have called the MP3 player the core product - the widget or engine that delivers the product features. Levitt argued that customers want more than the core product - they want the whole product, the core product plus the complementary add-ons, the built-in applications, the intuitive features, the ease of use, and the attractive visual design that add up to a seamless "wow" experience.

Take Zappos, for instance. Zappos knows that a great experience for customers turns them into brand ambassadors. The company took the money it would otherwise have spent on marketing and invested it in a better customer experience. This is how your company should be thinking in order to maintain a competitive edge.

What does it take to design an experience that will bring customers back? There can be no guesswork. Midsize companies especially need to spend the time to really understand what matters for their customers - not just the problems customers need to solve, but the way they want to solve them. Design professionals understand this human-centered design process, often referred to as design thinking. They're good at listening to, observing, and understanding customers. They use problem-solving frameworks called "customer journey maps" and "customer empathy maps" to try to capture what it's like to be a customer.

Recognizing the growing importance of customer experience, many companies are hiring design professionals for their product teams. Some are creating new executive positions with titles such as chief innovation office, chief design officer, and creative director. As you are building your midsize company's team, consider how creating a position like this could give you an advantage in your market.

Start by designing the perfect experience for your customers and work your way back to your product or service. Let your competitors admire their patent portfolios while you deliver the results.

Dave Power, NCMM contributor and president of Power Strategy, has guided growth companies as an operating executive, board member, and advisor for over 25 years. Dave was CEO of Novera Software, SVP Marketing of RSA Security, and a venture capital investor with Fidelity Ventures. He is a Certified Gazelles International Coach and teaches at the Harvard Extension School. Dave earned an MBA at Stanford Business School. Follow Dave @wdavidpower. Circle him on Google+


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