Flip Read online

  But if those isolated anecdotes are impressive, think of the industry as a whole. The dollar value of this market sat at around US$8.5 billion in 2003 and is projected to rise to over $11 billion by the end of 2008 and a whopping $13.9 billion by the end of 2010; $693 million was spent on self-help books in the US alone in 2006. An estimated 40,000 people in the US work as 'life coaches' and this $2.4 billion market is growing at a rate of 18 per cent per year.

  In 1986, the American Self-Help Group Clearinghouse had 332 associations on its roster. Today it has over 1100. According to Dr John Norcross from the University of Scranton, at least 75 to 80 per cent of Americans will use the internet at some point to access self-help information about their health or career. Almost 20 per cent will visit, in person, a self-help group. A 2004 survey found that one in every three Americans had purchased a self-help book. In Australia, over a million copies of self-help books were sold in 2004, at a value of more than A$24 million.

  FGC + FUN

  When you are selling a product or service that has substitutes, and your cost structure prevents you from doing much else, you could always just make it more fun. This is what Virgin Blue has done in the extremely competitive Australian airline industry.

  Virgin Blue is not only about fun, of course. The airline is definitely fast, good and cheap, and it is also green. The Virgin Blue website proudly announces that Virgin is 'the first airline in Australia to have a comprehensive program for carbon offset'.

  But in keeping with the cheeky, iconoclastic brand identity of Richard Branson and all Virgin businesses, Virgin Blue pushes the envelope on the fun side of flying. It is not uncommon for the customer service manager on a Virgin Blue flight to announce a fake destination. You see customers start freaking out, only to hear the customer service manager say, 'Just joking,' and move on with the rest of the announcements. On one Virgin Blue flight, I was sitting with a chap who was carrying two boxes of Krispy Kreme doughnuts (which he totally didn't need, mind you). When we touched down and people started collecting their carry-on luggage, the flight attendant told him that in the state of Victoria you couldn't bring any food or drinks into the terminal from the plane. He was very apologetic and asked where he should leave the doughnuts. She said she would take care of them. A full thirty seconds later, as the doors were opening, she told him she was joking and that he could have his doughnuts back. He was so embarrassed he almost refused them.

  While Virgin Blue has not been a run-away, show-stopping success, most suggested it would never last. Since its first flights in August 2000 the airline has proven that not to be the case. Even with the arrival of Jetstar, offering even lower fares, fun seems to be keeping Virgin competitive. In addition, one of the problems Virgin had was that its primary story – 'We are the fun, low-cost airline' – didn't attract business-class passengers. Originally they thought it was just that the message wasn't getting through, so they poured money into advertising. But eventually they found that 'fun' just doesn't cut it for businessclass travellers, who really want to be treated with an extra level of care and to stay connected while in the air. Virgin introduced the Velocity club for frequent fliers and fully flexible fares. These options, and the ability to pay an extra $30 to get a front row or extra roomy exit aisle seat, now make Virgin a viable option for businesspeople flying at times and to destinations that Qantas business-class service doesn't reach.

  Now it is not that business-class travellers don't like fun. They do. They just need the travel experience to, above all, be easy. On its trans-Atlantic flights Virgin Atlantic has turned on the cosseting style in their business-class offerings. Including an in-flight bar, flat-sleeper seats (like the Qantas SkyBed) and masseuse, as well as a limousine transfer and first-class waiting lounge,Virgin Atlantic offer the complete service experience – both at sea level and at 40,000 feet. Anything to help business travellers feel better prepared for that first day of meetings in London or New York.

  In-flight extras include dining when you want and eating what you want (rather than the traditional 'here it is, eat it now' style).And the amenities kit actually has beauty products as well as basic toiletries, complimentary noise-reducing headphones and extra-large in-chair video screens.

  FGC + HEALTHY

  Healthy may be the strategy with the most competitive advantage over the next couple of decades. The only thing more important to baby boomers than staying healthy in their retirement years is having the money to enjoy their youthful energy and appearance (bet on the plastic surgery industry continuing to soar as part of that trend, too). And Generations X and Y are even more fitness-obsessed than their parents.

  Let's have a look at some examples.

  It has taken just twelve years for Fitness First to grow from a single club in the UK to a sixteen-country, 500-plus gym and 1.2 million–member organisation. Sydney was home to the 500th Fitness First gym in 2006. In 2005, Fitness First was acquired by a private equity firm (BC Partners) for over US$2 billion. It is the fastest growing health club company in the world; in 2007 Fitness First registered an 18 per cent growth in earnings and was on track to match its 2006 record of forty-nine new clubs worldwide. In the UK, the company has enjoyed sixteen consecutive months of impressive like-for-like sales growth (even excluding the impact of new clubs).

  Organic food only accounts for 1 to 2 per cent of food sales worldwide, but the organic food market is growing rapidly. The organic food market in the United States has enjoyed 17 to 20 per cent growth over the past few years. Meanwhile conventional food sales grew only at 2 to 3 per cent a year, or in other words about the same rate as the growth in population. Multinationals are beginning to see the value of these products and to invest in organic produce, leading to increased competition, increasing economies of scale, and a subsequent decrease in price and increase in accessibility to fuel the market and force heavily polluting and industrialised agribusiness to clean up its act. Earlier in the chapter I talked about Wal-Mart's green push into practices and products that further environmental sustainability. That has included a substantial increase in organic food offerings in the grocery sections of Wal-Mart stores.

  In the UK, the market has gone from just over £100 million in 1994 to £1.2 billion in 2006, and will break the £2 billion mark in 2010. Tesco – the nation's largest supermarket chain – reported a 30 per cent rise in organic sales in 2005–06. Here in Australia the organic food market is valued at A$400 million a year and has enjoyed 25 to 30 per cent growth per year over the last few years.

  Vitamins and food supplements (the epitome of selfhelp and self-medication) are a booming market. For example, the European Molecular Biology Association puts the global food supplements industry consumption at roughly 125 billion euros a year. In the European Union in 2001, sales of food supplements reached almost two billion euros, which was growth of almost 7.7 per cent from the previous year.

  In the UK in 2005, vitamin sales alone were valued at over £320 million, which constituted over 15 per cent of total overthe- counter drug sales. This was up from £280 million in 2001 and included a massive 8 per cent jump in 2004. The UK Food Standards Agency places the consumption of high-dosage vitamins alone at between £30–40 million a year, and says nearly 50 per cent of the population takes vitamins.

  Obviously there are more X-factors, and the list could probably go on forever. This is enough to get your mind clicking over. What X-factor can you offer to set you apart from your competitors?

  When you come up with some possible X-factors (the only limit on them is your imagination), you need a model to work from as you set about redesigning and repositioning your products and services. And you need to do it from the perspective of the customer. The model I suggest you work from is what I call the total ownership experience.

  THE TOTAL OWNERSHIP EXPERIENCE

  A few years ago Joseph Pine and James Gilmore published a wonderful book called The Experience Economy: Work is Theatre & Every Business a Stage. The book has been very suc
cessful – deservedly so – but I sometimes become almost angry at how little people seem to have learned from it. I meet real estate agents, retailers and even bankers who say they've read the book and who talk urgently about the customer experience. When I ask them what they are doing about it, they say things like, 'We brew coffee before we show a new house to stimulate the senses'; 'We make sure there is lots of colour in the stores' or 'We have all our financial products online'.

  It is not that multi-sensory stimulation is not a key part of the Total Ownership Experience. It is, but as you are about to find out, it's just one step in building a much deeper connection to your customer. Just ask brand- building legend Howard Schultz. In a memo Schultz sent to his senior management at Starbucks in February 2007 (later leaked to the media), he reflected on the importance of this relationship, and criticised the company for losing sight of it:

  Over the past ten years, in order to achieve the growth, development, and scale necessary to go from less than 1000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in retrospect, have led to the watering down of the Starbucks experience, and what some might call the commoditization of our brand . . .

  For example, when we went to automatic espresso machines, we solved a major problem in terms of speed of service and efficiency. At the same time, we overlooked the fact that we would remove much of the romance and theatre that was in play with the use of the La Marzocca machines. 3

  Schultz noted that the height of the new machines blocked the customers' view: they were denied the 'intimate experience' of watching the barista make their drink. He also criticised the new streamlined store design. Changes had been made to achieve greater efficiency and ensure that return on investment was satisfactory, but the result was that Starbucks coffee shops no longer had the 'soul of the past'. They felt like 'a chain of stores', said Schultz, as opposed to the 'warm feeling of a neighbourhood store'.

  Do you and your people strive to make your service delivery 'romantic'? Are your call centre staff striving to have an 'intimate experience' with your customers? When you are faced with opportunities to gain efficiencies in your operations, do you first consider the impact they will have on how it 'feels' to do business with you?

  As you expand and grow your business you have to hold on to what made you you in the first place. It is exactly this kind of authenticity that makes brands attractive. And as you will learn in this chapter, it is these intangibles, like the 'warm feeling of a neighbourhood store' that will differentiate your brand, your product, your business from the competitors.

  Schultz, however, does not stop there. Later in the memo he goes on to say:

  Now that I have provided you with a list of some of the underlying issues that I believe we need to solve, let me say at the outset that we have all been part of these decisions. I take full responsibility myself . . .

  In a world of corporate executives who usually seem far more concerned about their share options and golden parachutes than about customers or staff, you've got to love a leader who takes a full share of responsibility for moves that have put his company at risk, relishes the accountability of his position, and then uses it to rally the troops to join him in doing it better:

  Push for innovation and do the things necessary to once again differentiate Starbucks from all others. We source and buy the highest quality coffee. We have built the most trusted brand in coffee in the world, and we have an enormous responsibility to both the people who have come before us and the 150,000 partners and their families who are relying on our stewardship.

  Let me stop a moment and say with unbridled admiration that these are the words of a true flipstar. Howard Schultz changed how the world drinks coffee and he obviously hasn't lost one iota of his imaginative passion for supplying customer wants as well as needs. And it is not just about the customer, it is as much about the staff, who by the way are not called staff – instead they are called 'partners'.

  I once gave a presentation in LA about becoming a talentcentric organisation and at the session before me, two Starbucks partners shared their experience of what it was like to work for Starbucks. I swear I am not making it up, a young man who still works in a store as a barista was in tears as he spoke about how proud he was to be a part of Starbucks's organisation. In tears, and it was not just me that noticed – the 400-odd executives in the room did too and were clearly moved by the young man's story. And it was not as though the company had rescued him from the depths of despair. He just loved working there that much. But I digress – back to the point . . .

  In regard to 'Superficial is Anything But', Schultz's memo makes clear that details like the smell of a Starbucks store can only have significance in the context of a total customer experience that is much bigger than using sensory stimulation to trigger emotional responses. In other words the customer experience goes beyond sensory stimulation or a jazzed up transactional environment, whether bricks and mortar or online. Buying and selling coffee in a way that helps indigenous coffee growers is as much a part of the Starbucks brand story as good coffee. Being able to inject 'romance and theatre' into the making of a cup of coffee satisfies much more than the customers' need for caffeine and a warm drink. It satisfies their desire to be taken to another place. The 'third place', as Starbucks call it. The customer's total ownership experience includes four things:

  service

  form

  functionality

  story.

  Service is essentially how it feels to buy your product or service. It is about store design and layout, the behaviour of staff, the simplicity and ease of navigation on a website, and so on.

  Form is how it feels to use your product or service. It is less about the performance capability of your product or service than it is about design, appearance and ergonomics.

  Functionality is how it feels to own the product or service. It is about how well the product or service integrates into and supports the customer's daily life and lifestyle. It is about both quality and integration.

  Story is how it feels for customers to say they own the product or use the service. It is the story customers tell themselves about why they bought your product or service and why they have an affinity with your brand. And it is the most powerful of the four elements of the total ownership experience.

  Notice the use of the word 'feel' in the above descriptions. This is deliberate, considering it is emotions that drive our decisions, not our rational thought processes. As I said a few paragraphs ago,we tend to seize on relatively superficial things to justify our emotional imperatives.

  Consider an experience I had with my wife. (I am not sure how she will respond when she learns I have included it in this book!) A few years ago we were shopping in Surfer's Paradise on the Gold Coast.We were on a street of boutiques for Gucci, Prada, Bally and other high-end fashion brands. In the Gucci shop,my wife Sharon admired a handbag that cost something near $1500. I could tell she really wanted it and I also thought it looked nice, as it should for the money.

  But something about the bag bugged me. And no, it wasn't just the price tag. It looked strangely familiar. And then it hit me. I had recently seen the same bag in a street vendor's stall in Southeast Asia.

  Wise spouses will know that I should have kept my mouth shut. But I couldn't help myself. I said, 'I saw the exact same bag last week in Malaysia at a fraction of the price. I will be there again next month and I will bring you one home.' (Interesting how a developed-world luxury item generates economic activity in the developing world, too, isn't it?)

  'What? I don't want some bag from a street stall in Malaysia. That bag would be a fake!' Sharon said.

  'Well, sure it would be, but a darned good one.' I could see the bag in the stall in Malaysia in my mind's eye as I held the genuine Gucci in the boutique in Surfer's Paradise. It was exactly the same bag. 'Nobody will ever be able to tell the difference.'

  'Of course they will. You may not be able to see it, but peop
le who really know about these things will.'

  'Nah. I bet if you put the bags side by side, ninety-nine out of one hundred people and assorted experts who think they know all about Gucci will pick the wrong one as fake,' I said. 'Listen, I will bring you back two of those bags in different colours.We will still save a bundle, and I guarantee you, no one will ever know they're fake. I am pretty sure they have them in Chinatown in Sydney as well.Maybe we could look there.'

  'No way. I want a real one. Firstly, most people will know the difference, and even if they didn't, I will. And every time I wear the bag, I will know it's a fake. Plus I never buy things like this. It has been a hard year with the new baby so I think I deserve it,' she ended in a rush, as she rationalised her decision to buy a $1500 handbag. 'So quit making a fuss. I'm buying the damn bag.'

  So she bought the bag. Typically, however, I could not let it rest. 'So tell me, darling,' – a poor choice of words, I saw instantly from my wife's expression – 'how will people know this is a real Gucci bag?'

  'The stitching!' she almost yelled as we left the store.

  Stitching was her justification. Damn stitching.

  'So, $1450 worth of stitching!' I yelled back as I started to get worked up about how irrational this behaviour was. But then I realised I had made a similar decision some years before based on exactly the same thing – stitching.More on that soon.

  Reflecting on that experience now, I have decided we were both right. The bag in Malaysia was quite a convincing knockoff. But buying and owning a fake, and pretending it was real, were not part of my wife's story about herself. She wasn't just buying the bag because of what it said about her to the world, but because of what it said to her about her. This is what I call Aspirational Inside.