By the way I've done this so far (chapters 1,2,3,4) you'd think I was pretty organized, wouldn't you. HA! Fooled you. I'm jumping all over the place doing chapters and if they fall in order of completion - a SHEER coincidence. This is the chapter on Customer Experience (not the chapter on mapping the customer experience - which is Chapter 21. I TOLD you I wasn't organized!). I've given you a case study excerpt that I think you'll find interesting - though the company, American Girl, has been discussed before.
As always, the Wordle of the entire chapter- not just the excerpt - and then the excerpt - not the chapter. At least this one looks like I wrote the chapter correctly.....
(1)The Transition from Management to Engagement through Experience
"Companies used to focus on making new, better or cheaper products and services...Now the game is to create wonderful and emotional experiences for consumers around whatever is being sold. Its the experience that counts, not the product…People…want capabilities and options, not uniform products…business is there to provide the tools." (Source - Business Week 12/19/2005)
"We have to create a great experience every time you touch the brand, and the design is a really big part of creating the experience and the emotion. We try to make a customer's experience better, but better in her terms." - (Source - A.G. Lafley, CEO Proctor & Gamble)
Why should customer experience supersede customer management as the operating paradigm for a successful CRM strategy?
Simply, customers are demanding it and customers are human beings like you, who I presume, remembers that you are a customer too.
This is more than just a nice homily to the personal side of human beings. This is a foundation for CRM if it's to be done successfully.
The premises are not too complex:
- If a customer likes you, he will stay with you.
- If a customer doesn't like you, in time, he will leave you.
- People are looking to control their own lives.
- People are looking to fulfill their own agendas. They are self-interested.
- If you help them control their lives and fulfill their agendas in valuable and unobtrusive but memorable ways, they will like you.
- If you fail to help them, they won't like you and won't continue with you because someone else will help them.
Those premises are the entire practical foundation for CRM 2.0. Simple, but the rest can be complex. I'll simplify the complex for you this entire book. I promise.
(2)The Experience Economy Realized
In 1998, Joe Pine 2 (who you met in Chapter 2) and James Gilmore wrote what has since become a classic, "The Experience Economy: Work is Theater and Every Business a Stage." Their central premise was that customers were looking to businesses to provide them with not products and services, but experiences. Products and services, the backbone of the old business model, were created to be in service of the experience. They also made the point that customers would pay premiums for those experiences.
What Pine & Gilmore make clear is that these experiences are the foundation for how the company constructs its business model (see Chapter 6). Products become the props and services the stage for the experience. The enterprise is able to charge for the experience which is both personal and memorable. I would add also sharable to their equation.
This is perhaps the most important aspect of CRM 2.0. A personalized experience that is shared - at least can be shared - is what differentiates one company from another - and engages the customer in ways that are unique and immersing.
The way that Pine and Gilmore put it was that this could be a commoditized experience. I would simplify it and say, if the customers find it valuable, they'll pay for it.
HORRORS!! How do you pay for an experience? Easy. With money.
I need to assert reality for a second. No one is talking about those who are having difficulties meeting bills or who have to scrape by each paycheck or who have no way of earning a living. These are for those people who can afford it. This is a business strategy, not a social strategy. Many businesses, like salesforce.com, have strong philanthropic programs that aren't just for PR purposes. But what we are talking about is something that people pay for - like any other commodity. This is not to be confused with their deeply personal and organic experiences that happen spontaneously. These are created experiences designed to delight and be memorable. They are authentic only in the regard they are what they are openly intended to be. Please don't confuse authenticity with spontaneity or natural growth.
Pine and Gilmore knocked it out of the park with their notion of how business experiences worked. As the millennial divide was crossed, customers' demanded personalized experiences as part of the way they were engaged and treated by the companies they were choosing to deal with.
While, of course, Starbucks, now in trouble, is the classic experience that since Pine & Gilmore has been used by the rest of the known universe, the Experience Economy is best reflected by one even more calculatedly encompassing experience - Mattel's American Girl dolls and the world that has been built around them.
(3)American Girl - A Cup of Tea and $200.00
The average cost of a pair of Fisher Price dolls is $38.00. The average cost of a Mattel American Girl doll duo is $205.00. Gaack.
Why is that?
Because American Girl has been intelligent enough to understand that their market is the mothers and grandmothers of the little girls whose imaginations they intended to capture. Rather than just sell a product, they are selling a story. This is an experience not just a plastic object. Here's how it works.
(4)American Girl - The Company
Where Fashionology LA is new, less than a year old, American Girl is an iconic company to both young girls and businesses looking for a model of success. It was founded in 1986 and became a wholly owned subsidiary of Mattel, Inc. in 1998. The numbers of staff are between 1800 and 4700 during the holiday rush. They have their HQ in Middleton Wisconsin with 560,000 square feet of doll brainpower. Over a million people a year visit their American Girl Place stores and 650,000 subscribe to the American Girl Magazine, making it among the top 10 children magazines in the United States. All in all, the numbers are big, but as you'll see, the customer experience is even bigger, which makes for an even bigger return on investment (ROI).
(4)American Girl - The Movie
In July 2008, to primarily positive (81%) reviews, a movie, starring new wildly in demand kid actress Abigal Breslin, Chris O'Donnell, and Julia Ormand, called "Kit Kittredge: An American Girl," hit the theaters. Note the title. Yes, this was based on the American Girl doll character Kit Kittredge, a doll with a life history in the 1930's U.S. Depression era.
The plot in a nutshell - Kit Kittredge, daughter of a dad with a failed car dealership, and a mom taking in boarders to make ends meet, writes articles on a typewriter in a tree house. She writes an article on a hobo camp that she tries to get the newspaper editor - who is mean - to publish. He refuses. In the meantime, her mom buys chickens and Kit goes around selling the eggs. Her mom's locked treasures are stolen and all signs (a footprint) point to a hobo boy named Will who is innocent. Kit and her friends Zach, and Ruthie (another actual doll) investigate to prove Will innocent.
What makes this truly amazing that this is the 4th film production for American Girl - the first three were made for TV movies.
Even more amazing is the following illustration (Figure 1):
Figure 2: The Experience Counts: American Girl & the Movies
Look at the prices for the various products. Kit and Ruthie are $205.00 for the pair plus a few accessories, though you can buy them separately. Then there are coordinating items like Kit's Dog Grace, adopted in the movie for $18.00 or her tree house for $250.00. Plus there are the "you might also like" items like Kit's bedroom collection - $135.00 or Kits Bed and Quilt set $80.00. This might seem insane to you because you're a guy without a daughter for whatever reason, but there are parents and grandparents paying for this without reservation - even if a large gulp precedes the unreserved payment.
But the experience doesn't stop with American Girl movies. That's just a small part of this.
(4)American Girl - The Store Experience
Four hundred dollars for a visit to an American Girl store is de rigueur. When you go to the store, you can get your doll's hair done (and yours), have lunch with your doll in the café - which is amazing, since to my knowledge, dolls don't have digestive systems. Even though, mom and youngster can eat hot dogs, lemonade, and dessert while their dolls are sitting next to them in special doll chairs attached to the table. Of course, in keeping with what you will see is their model, the chairs are also for sale. Now look at what varying permutations of the hot dogs and lemonade will cost you in the American Girl Place (one of two types of experience) store at Chicago's high end Water Tower Place.
- Brunch is $18 per person, plus tax.
- Lunch is $20 per person, plus tax.
- Afternoon Tea is $17 per person, plus tax.
- Dinner is $22 per person, plus tax.
It doesn't stop with just food. There is a theater where you, your child and her doll can watch " The American Girls Revue® for $28.00 per person. In case you were wondering, the doll is not a "person" as far as the price goes. There is also always Bitty Bear's Matinee: The Family Tree™, for a mere $15.00 per person.
In preparation for that big matinee, you can get your dolls hair styled for between $10 and $20. For a further price, you can get a photo of you and your doll taken that is then placed on the cover of a souvenir issue of American Girl Magazine (only $22.95 for six issues of the real deal).
But it doesn't stop there either. Needless to say, each store has dolls, books with the stories of the dolls, and clothing and accessories for the dolls to buy.
In addition there are special services like birthday parties, personalized tours and activities and…
Then there's the dolls themselves.
(4)American Girl -The Dolls
The American Girl experience is of course organized around the dolls themselves. There is a certain almost scary brilliance about how the dolls are used. They are not just products, but, as we will see in Chapter 6, the dolls are the centerpiece of the new business model that drives CRM 2.0 - which is, as we will see in detail in Chapter 6, an aggregation of products, services, tools and crafted experiences that are made available to customers to fulfill their own agendas and personalize their own experiences.
There are multiple lines of American Girl dolls but two are significant for us - and for space considerations.
The most famous line is the American Girl Collection line. The dolls each represent a period in history that has a story around it for the doll themselves. For some reason, the years that they represent all end in "4." I have no idea why. In any case, each of them has a book that tells their story and a line of accessories and clothing that reflect both their heritage and history. For example, here is the Kit Kittredge story according to Wikipedia "Kit Kittredge is growing up in the early years of the Great Depression in Cincinnati, Ohio. Her family struggles to adjust to the realities of the economy after Kit's father loses his job. Although referred to as 'Kit' in almost all books and promotional material, Kit's full name is Margaret Mildred Kittredge. She got this name when her father kept singing her the song, "Put All Your Troubles In Your Old Kit Bag", after he learned it when fighting in World War One. It should be noted that although the year 1934 appears on the cover of the book, 'Meet Kit' is actually set in 1932. The Kit books were illustrated by Walter Rane."
There is also a line of contemporary dolls that becomes significant (more or less) if you remember the Edelman Trust Barometer back in Chapter 1. They were called "American Girl Today" but in December 2005, the name changed to "Just Like You" dolls. 2005 was the year that "someone like me" became the most trusted source. I'm not sure that they are directly related but this reinforces the trend that occurred that time - a nodal shift toward a customer ecosystem dominated by peer trust - and moving away corporate trust.
The way the doll works is that you get 28 options each with a unique combination of face mold, skin, hair and eye color that your little girl can customize to be whatever she wants. This is directly in line with Pine & Gilmore's concept of the commoditization of experiences. You provide the customer with choices that are substantial and flexible and they pick and choose according to their personal desire. That's exactly what the story is with the Just Like You dolls.
(4)Why It Works
American Girl seems to be pretty money hungry, exceptionally pricey, and yet, parents I've spoken to who can afford to provide their children with this experience have no problem with the cost because of the incredible thrill that their kid(s) get from the visit, the stories being told and the totality of the experience.
What you are paying for here are not dolls but the tools for the child's imagination and the memory of the experience. They are engrossed in the story of their doll. It has a specifically imagined personality and also an actual story to go with that personality. That story is supported by the accessories, the clothes, the furniture and then the ambiance and attention that they and the doll get when they go to the store.
Yet, the target market is the parents and grandparents who can pay for it. People are willing to pay for a premium if they see the value in paying for it. They are willing to pay the extra if there is a memorable and sharable experience associated with the purchased goods. CRM 2.0 aims at that experience squarely because it is the experience that binds the customer to the company in ways that a product sale alone never can.
Think of it this way. The memory of the experience will be there when the dolls have long turned to whatever it is plastic degrades to.
Oh, want some numbers? Here goes. While Barbie sales in 2006 were down 13%, American Girl sales were up 15% to $436,000,000 with an operating profit of $100 million. That represented 8% of Mattel's gross sales and, get this, 15% of their operating profit.
To continue this string of left brained return, there were over a million visitors in 2006 and their revenue per square foot topped $500, which outside of Apple stores, which is an insane $2800 per square foot, is the highest rate in the world.
Not too shabby for dolls.