Economists have argued for centuries over the nature of competition. In the 18th Century, economist Adam Smith stated that every individual “intends only his own gain.” Therefore, he exchanges what he produces with others who sufficiently value what he has to offer. The one topic that most economists agree on is the elusive nature of individual utility; What one man values, others often ignore. This simple fact is what drives human innovation and ingenuity.
Most business leaders will claim that you must choose only two of the three competitive dimensions: price, quality, or speed, and that you cannot compete on all three. In today’s market, however, consumers expect all three.
Additionally, it is worth arguing that there is a missing dimension that will set you apart from your competition and ensure that you don’t get caught in the commodity trap. First, let’s discuss the original three:
Speed: In a world that is always connected and always on, immediate gratification is expected. If you are not able to provide a product or service to your customer when and where they need you, your competitor will. If you are not fast, you will not be competitive for long.
Quality: Thanks to hyper connected social media, product or service quality is expected. People make decisions around crowd-sourced rating data every day, and consumers are not afraid to speak out on social media for the world to hear when you drop the ball. You must simply be great at what you do in order to compete.
Price: As a result of near perfect information symmetry between marketers, consumers, and competitors, pricing your product or service fairly is essential. You can be more expensive than your competitors, but you must be able to rationalize the difference in the value you provide.
So what’s left? How do you defend your margins and compete in today’s economy if you expect to grow into a powerful brand?
Experience is the final frontier of competition.
“People will forget what you said, people will forget what you did, but people will never forget how you made them feel.” – Maya Angelou
Howard Shultz, Jeff Bezos, Steve Jobs , and Walt Disney all built successful companies by focusing on their most important goal: building brand advocates through memorable and thoughtful customer experiences.
The performance specs on an Apple hardware device aren’t near what you can build into other comparable devices at a similar price. When you buy Apple products, you are locked into their closed ecosystem and forced to use their ever changing and proprietary connection systems and media outlets. However, they provide the best in class experience for their consumers. From pre-sales to purchase, to opening the box, all the way to upgrades when their product reaches its end of life, Apple has mastered consumer experience.
Starbucks doesn’t sell a cup of coffee; They have mastered experience as a competitive differentiator and with it have created a tribe of consistently loyal customers. Can you remember the last time you saw a Starbucks advertisement? Howard Shultz, the CEO of Starbucks, has said, if given the choice, he would much rather spend his advertising dollars improving customer experience.
Experience is the differentiator with the most transformative and disruptive power. It explains why Disney, Starbucks, Amazon, and Apple are such powerful brands. The products these companies produce are not necessarily better than their competition, but their focus on the customer’s experience is superior. As a result, their consumers are happy to pay a premium for the unique experience the company provides.
The same is true of all successful brands today. They obsess about their customers and the experience they have with their brands. If they want to compete tomorrow, they need to think about their customer’s experience today.
Technology has an increasingly critical role in the customer journey for every company. It has the power to rapidly move your customers up or down the loyalty ladder in the blink of an eye, and it is one of the most scalable investments you can make in your customer’s experience. Thus, as leaders, we must get our firms aligned around the importance and power of customer-facing technology, and how that interaction will impact loyalty and ultimately advocacy towards your company.
- Adam Smith, “An Inquiry into the Nature and Causes of the Wealth of Nations”
- Gerson Antell, “Imperfect Competition,” Economics: Institutions and Analysis (New York: Amsco, 1970l. pp. 100-103.
- Joseph S. Fulda, “Product Information on the Market,” The Freeman 36 (January 1986):29-33.