The New Experience Economy

April 28th, 2013

Where did this New Experience Economy come from?

Let’s sit down for a cup of coffee.  Back in the day of the commodity driven economy, we would have bought or traded for our own basic coffee-creating commodities like water, firewood, coffee beans, milk and sugar to prepare that delicious cup of coffee.  Our cost for a commodity based cup of coffee would be pretty low.

Leap forward to the goods based economy.  We’re not interested in basic undifferentiated goods.  Instead we’re looking for distinctive tangible goods like our favorite fresh coffee beans in a can all ready to dump into our automatic electric coffee maker.  Our cost for a cup of coffee just went up.

Flash forward to today and we’ll outsource the whole project.  We aren’t at all as interested in the cup of coffee as we are the experience that comes with it.  We spend time finding the hottest coffee shop, check our phone for their daily special, wait in line, check-in to the shop on our phone, wait for our beverage, take a picture of our beverage and share it with our peers, pay top dollar for the coffee and then try to find a seat to enjoy it.

Welcome to the New Experience Economy.

Just like with a cup of coffee, hotel guests seek experience.  As we’ve just demonstrated, an experience is a distinctive economic offering.  That’s good news for hoteliers because you’re in the business of selling and delivering experiences.  Sounds easy, but these experiences need to satisfy your guests.  Satisfying today’s guest means that you’re really in the transformational business.

Satisfaction is more than a score.  Real guest satisfaction is work and, just like any work these days, we’re all looking to work smarter and only sometimes harder.  The simple formula (Time + Cost) Experience = Satisfaction will help us all understand the fundamental steps required to produce a truly satisfactory guest experience.

Before we dive into the processes associated with satisfaction, we should better understand what satisfaction is.  Satisfaction is commonly defined as the fulfillment of a guest’s expectations and needs.  Satisfying the expectations and needs of your guests will help your bottom line, help you keep the guests you have and attract more guests all while building an experience carefully crafted around the voice of the guest.

As we’ll explore, you can deliver two main experience types that lead to satisfaction:  a (usually) low cost ‘service experience’ and/or a (usually) high cost ‘transformational experience.’  Of course, there are several experiences that are below and between these two classifications but these are hybrids of the main experiences we’ll explore.

How do you deliver satisfaction the New Experience Economy?

Your guests, and potential guests, are calculating the cost and value of your hotel at each step of their experience with you.  Guests today have limited the resources that they’re willing to invest in a vacation experience (time and money) and have amped up their resources to gauge the value of that experience relative to replacement experiences (social media and peer reviews).

In the New Experience Economy, the guest’s voice is louder and more important than yours.

Time

Time is a limited resource.  We all have less time than we once did and your guests are no exception.  Consequently, the time your guest invests in their experience with you plays a big role in their resultant satisfaction.  Let’s have a look at where a guest literally chooses to spend their time throughout their experience with you – before even walking through your front door.

Time spent finding you.

Guests seek you out a variety of ways and not finding you where they expect to may negatively impact their overall expectations, experience and, ultimately, their satisfaction.  If you’re not everywhere your guests are looking, you’re forfeiting a piece of their satisfaction before they even know your room rate.
This means that beyond ramping up your social media presence, you’ve got to be ubiquitous and engaged via social media and always ready to communicate with your guests the way they want to be communicated with when they want to be communicated with.  Remember, your guests now control the conversation and it’s their voice that will craft their experience.

If you’re not where your potential guest wanted you, you’ve not met their expectations, not satisfied their needs and likely won’t satisfy them.  In fact, you may have lost them if they’ve invested all the time in you that they care to.

Time spent getting you.

Beyond tracking you down, your guests will also need to ‘get’ you in a hurry.  Here, ‘to get’ is ‘to understand.’  You can help your guests understand who you are and what you’re all about in a variety of ways.  The most important is actually knowing who you are and what you’re all about.
When communicating your brand to your potential guests, make sure you’ve got the right voice.  Be direct and be honest.  UNDER-promise and OVER-deliver.  Most important, make sure what you say is true and embodied by your team.  If a potential guest likes what they hear from you, they’ll see if it checks out with their peers.

The experience, message and voice you deliver must always be consistent.  If claims you make on your website don’t match the reviews found on TripAdvisor, then your potential guest might not invest any more of their time trying to figure you out.  Further, if you actually host the guest at your hotel, you must live up to the expectations you’ve set through all of the interactions you’ve had with them.

Cost

Time and money aren’t the lone determinants of the cost of an experience.  The true cost of an experience is largely determined by what your guests would have to give up with you to go someplace else – the cost of switching.  If a guest has to give up a whole lot with you to stay somewhere else, then that’s good for you because the cost to them is higher to go to the other spot.  Conversely, if a guest doesn’t really have to give up all that much to go to the spot across the street, that’s bad for you because the low cost for them to leave you might compel them to go.

The easiest way to increase your cost of switching is to create a differentiated experience through a unique set of activities specific to your hotel.  Though this sounds like a rather complex endeavor, it’s pretty straightforward.  Remember, in the New Experience Economy, experiences are crafted around the voice of the guest.

Differentiation and unique activities need not be limited to room amenities, mattresses, lobby design and food menus.  While important, your guests already expect all of those things to be top notch.  What was once your experience-maker is now just a standard feature.  Today, your differentiation strategy must include community building and the conversion of that community into a fan base.

You can develop a community by proactively reaching out to past and present guests and encouraging and providing a real emotional investment and attachment to the experience you deliver.  Remember, in the New Experience Economy, no news is silence and silence can be deadly.  Once you develop your community, engage your community and deliver on your promise to your community, you’ll have a fan base.

We should also note that your guests may ‘sign up’ with somebody else’s community regardless of their level of involvement with yours.  Further, a community and fan base you’ve taken so long to build can also be destroyed if you fail to deliver on the expected experience that brought all of your guests together in the first place.

Experience

If you’ve developed a community into a fan base and have both crafted and delivered a differentiated experience based on the voice of the guest, then you’ll be charging for and delivering a ‘transformational experience.’  This particular experience will set high expectations with a high value perceived and will have a correspondingly high cost.  Here, you charge for the benefits guests receive by both engaging and spending time with you.
If you haven’t developed a community into a fan base and haven’t really crafted a differentiated experience, then you’ll be charging for and delivering a ‘service experience.’  This experience will set relatively low expectations with a low value perceived and comparatively low cost.   You charge for the function you provide and that’s it.

Will a service economy standard still exist for hotels in the next several years or will transformational experiences across all price points become the new standard?  It’s tough to say but, as a hotelier, your focus should be on what’s next, not what’s now.  When it comes to the next experience you provide, striving for a transformational experience at a service experience price point is a great way to differentiate your hotel in the marketplace.

Satisfaction

If you deliver the right experience (either ‘service’ or ‘transformational’) where your guests find exactly what they want for what exactly or less than they’re willing to invest, you’ll have satisfied guests.

What’s the best measure of satisfaction?

Listening.  The voice of your guest will tell you whether their investment in your experience was too great or if the expectations they had weren’t met by the experience you delivered.  Be sure to listen what your guests are saying, analyze what they’re saying and act on what they’re saying.  After all, expectations can make or break an experience and a business.
Speaking of the voice of your guest, let’s go back to our coffee shop.  Here’s what happened with that message that went out to a few thousand community members with our cup ‘o joe photo:

Coffee Purchaser:      “Can’t believe I waited in line… and still paid for this!  It’s not even my order!! Poor form Coffee Shop A!!”
Community Member #1:    “Crazy – that happened to me last time!  I’m done with Coffee Shop A.”
Community Member #2:     “You should try Coffee Shop B next time – they’re waaayyy better.”
Coffee Shop A Owner:    “Dear Coffee Purchaser and Community Member #1 – c’mon back to us and your next two drinks are on the house!  Dear Community Member #2, we’re waaayyy better than Coffee Shop B and we’ll prove it to you.  Your first drink’s on us, too.”
Coffee Purchaser:    “Community Member #1 and Community Member #2 – let’s meet at Coffee Shop A tomorrow at 10am!!”
Coffee Shop A Owner:    “We’ll be here – message us your orders so you don’t have to wait in line this time!”
Community Member #1:    “AWESOME!”
Community Member #2:    “SWEET!!”

This exchange sums up satisfaction nicely.  Coffee Shop A missed at first, but then promised to satisfy the expectations and needs of its guests.  This will help the shop’s bottom line, helped the shop keep the guests it already had and attracted more guests.  The shop did this all while building an experience carefully crafted around the voice of the guest.  You can do the same in your hotel, just be sure to listen and remember that (Time + Cost) Experience = Satisfaction.

As published here

Tags: customer service, guest experience, small business advise

Posted in service