Creating the "Priceless" Product
by Manda Mahoney, HBS Working Knowledge

Mahoney: Customer-centered practices have become increasingly popular. Why is the concept of being priceless and the idea of the extraordinary customer experience the next logical step?

LaSalle: It's a matter of evolution. Just as people evolve as human beings, they also evolve as consumers. This happens for two reasons. The first occurs when something extraordinary becomes ordinary. For example when the VCR was first introduced very few people had one so it was highly valued. Now they are so common, that they have almost become a commodity. The second type of evolution occurs when the definition of value changes or expands. Convenience in 1910 was examplified by a vacuum cleaner; today convenience is having a housecleaning service to run the vacuum cleaner.

Over the past one hundred years we've experienced three periods where both types of evolution have occurred on a mass scale, effectively changing the way we do business. The first occurred at the turn of the century and was largely product-centric, the second, around the sixties, was service-centric and the third, which is happening right now, is focused on the complete customer experience. This focus on experience was inevitable because once people had products, they wanted service to go along with it. Now that service is expected, they want everything else surrounding products or services, all of the various experiences of consumption, to meet their expectations. Astute companies that understand that service is no longer the differentiator it once was have expanded their focus to the whole experience and they've prospered by their insight.

Q: How did this idea come about?

LaSalle: In our own work we could see that consumers have moved beyond functionality, quality, and even service, and are now looking at the entire consumption experience to determine the value of an offering. We were also frustrated with the increasingly impersonal and the often-thoughtless consumer experiences we have ourselves. So we were compelled from both sides, business and personal, to help companies make the leap into the next evolutionary phase.

Q: You talk about the "features and benefits" mentality that many companies have. What do you say to the business leader who thinks the experience is in the function? Are there some basic steps a product-centric company can take to turn its philosophy around?

Britton: In response to business leaders who think the experience is in the function, we would suggest they consider just a few of the examples in Priceless. Pepsi stole the cola crown from Coke in the late 1960s by focusing on packaging; not the contents of the can. Sales of OXO's line of Good Grips kitchen utensils have grown 50 percent a year by providing comfort and ease of use; not functionality greater than the competition. Bugs Burger Bug Killer, a national pest extermination company with thousands of hotel and restaurant clients, charges up to ten times more than the competition by providing peace of mind through an extraordinary service guarantee; not just better extermination services. In each case these companies not only achieved success by looking beyond core functionality to all the experiences that involve and surround their product, they did it at the competition's expense; competition that just might have thought the experience was in the functionality.

In regards to some first steps that a product-centric company might take, we would suggest reading Chapter One where we present the value model. It can be used to determine what the consumer values in an offering, and therefore why the customer will buy one product versus another and what they are willing to pay. The first step would be to identify what the product currently offers. For example a basic can opener might offer convenience. The next step is to identify what other values could be added to the product or service. In the case of OXO they focused on comfort, ease of use, and excellence. The more value you provide, the higher the price you can charge, the more products you'll sell, and the more loyal your customers will be.

Q: Where can companies look to discover the "priceless" attributes of their products and services? Are there products for which these attributes simply don't exist?

LaSalle: The simple answer is to look to the consumer. Only the consumer can determine value, therefore he is the only one who can help you discover your "priceless" attributes. How you gain this insight, however, is more complex.

Traditional data gathering methods such as surveys and focus groups are generally used to tell us who customers are in terms of patterns of behavior, preferences and so on, in other words the "who" and the "what." To take it to the value level however, we need to discover "why." One way to do this is to use a qualitative interviewing approach such as laddering. This structured interview methodology asks subjects to identify what is important to them about a product, service, or attribute. This often requires several steps of probing (thus the name laddering) but the eventual result is the uncovering of the personal value realized by the consumer.

For example, when someone is asked why he uses whitening toothpaste, he might say to have whiter teeth. If probed further to find out why this is important, the consumer may say it makes him look better, a typical feature/benefit response. When asked again, he may finally reveal that looking better gives him greater confidence and self-esteem. You can't really put a price on feeling better about yourself can you? So these then are the priceless attributes of the product.

Observation is also an effective tool in discovering value. When consultants for Kimberly-Clark visited customers to gauge the appeal of pull-on diapers for toddlers, they discovered that parents didn't consider these diapers a disposable product as the company thought, but an article of clothing. This gave the product a whole new dimension in terms of looks as well as pricing, but more importantly it uncovered hidden value. By observing and then talking to parents, the company learned that the adults saw pull-on diapers as a positive step towards more mature behavior and very useful in the potty training process. So in a way, the disposable diapers helped them teach their children as well as facilitate a bonding experience.

Every product or service has the potential to possess priceless attributes. If they can't be found in the offering itself (perhaps because of commoditization) they can be built into the surrounding experiences. It's important to remember that a product is only one part of the entire experience and it's the experience that has the potential to be priceless.

Q: How do you see these strategies being implemented? Who should be involved? Is this an overall company strategy, or does there need to be a dedicated "experience manager" overseeing company practices.

Britton: What has been appropriately called the experience economy will be a greater paradigm shift for business than the quality revolution of the 70s and 80s. Greater because, while the shift from quantity to quality still maintained an internal company focus, today we are asking businesses to change from an internal company focus to an external customer focus. This is a dramatic shift, and although the challenge is slightly different we can still look to companies like GE, Federal Express, and Toyota, actually all of the Japanese car manufacturers, that were extremely successful during that era for lessons that we can apply today.

The first lesson is that a singular customer focus must be part of the corporate DNA; it has to be systemic within the organization. So to answer your question, every employee is involved from top to bottom, and bottom to top. This is the second lesson we can learn from the quality champions; you have to work it from both ends. The role of upper management is a combination of preacher and cheerleader and the front-line employees must be allowed to participate, and contribute, through cross-functional teams. This is also important because it allows a company to achieve some quick results. The last lesson is that success requires a champion, someone with a singular focus that keeps employees from falling back into the old way of doing things and keeps the teams working together. Possibly, as you suggested, a customer experience manager.

Let's take one chapter of the book and look at a specific example of something a company can go out and do tomorrow, or today if it's still early. In Chapter Four we present a model for product design that bridges the gap between marketing and engineering. This model provides a common language, yes, marketing and engineering do speak two different languages, but they both can relate to a framework for correlating product attributes to the customer experience. This same approach also works for a service. The only difference is that operations would be involved rather than engineering. In either case, we've provided the methodology, all the company has to do is put together a cross-functional team and lock them in a room for a day or two. We guarantee the results will be amazing.

Q: What are some ways companies can measure the bottom-line value that these practices bring?

Britton: In 1999 BusinessWeek sponsored the "Designs of the Decade: Best in Business 1990-1999 Awards" competition. For the first time in any formal competition, companies were required to show in quantitative terms the impact design had on a company's bottom line. This same approach applies to the customer experience. The criteria they used included measurements such as market share, brand strength, customer loyalty, and corporate image. They also evaluated financial performance in terms of annual growth in profits, margins, stock price, and return on investment. What is important to note here is that along with the tangible bottom line-benefits, the company should also consider things like brand strength and corporate image.

Q: Is there one most important practice a company can start with?

LaSalle: Yes. Be your own customer. The only way to truly understand a customer's experience is to walk in his shoes. Every decision maker in the company from the CEO on down should be a part of this exercise. Each should receive telemarketing calls, email and direct mail promotions just as often as customers. They should be required to periodically call for customer service, using the same telephone numbers the consumer uses. They should try to resolve a problem or make an appointment, locate, store and dispose of products or wait at home for a service call. Whatever the customer experiences in the course of doing business with a company, its representatives or associates such as retailers or service providers, company leaders should share the same experience.

This practice alone will help a company identify its strengths and weakness and allow it to begin working on those areas where experience improvement is needed most. It's also important to be your competition's customer. Customers have so many choices today, not just in products and services, but also in experiences. So a company might have a great product or service but some part of the surrounding experience might be sending customers to the competition. The only way to know for sure is to experience it first hand.

We can't emphasize this enough. You can hire people to be "secret shoppers" and bring customers in for focus groups, but until you've waited on hold for twenty minutes yourself, you really can't understand the full impact of the experience. Nothing is more important than the experiences a company sets in motion for its customers, so nothing should be more important to its leaders.


HBS Working Knowledge is a free, weekly Web publication by Harvard Business School. Visit hbswk.edu to register for access.

This article is Copyright 2001 President and Fellows of Harvard College