Why Selling Experiences, Not Products Is A Good Idea?
In 2008, three recent college graduates Chesky, Gebbia, and Blecharczyk, started a website called Airbed & Breakfast(which became Airbnb) to allow people to rent out part of their homes to travelers — An alternate for expensive hotels. The idea itself was not new, and the market already had similar websites — HomeAway.com, VRBO.com, Couchsurfing.com, BedandBreakfast.com, and Craiglist.
Though Airbnb was a late entrant, it began to climb up the ladder quickly. By 2016, within eight years, the valuation of Airbnb reached $30 billion whereas, HomeAway was at $4 billion. The new company had 140 million guest arrivals in that year. It was phenomenal growth.
How did Airbnb achieve such a growth in a short time? One factor played a pivotal role in the brand’s success — Airbnb sold experiences, not products/services.
Why Sell Experiences?
Every brand aims to build a long-term business. One of the ways to accomplish that goal is to try to maximize the benefits of an investment. It implies that a brand has to develop loyal customers who would purchase the product/service again & again without the brand prompting them to buy. In this way, the brand would gain maximum value without any additional investments of money, time, and effort on expensive marketing.
Developing Loyal Customers — One of the best methods to make a customer loyal to a brand is to entice him/her to spend more time with your product or service. He or she will allocate more time only if the product/service offers pleasant experiences.
The Decision-Making Mind — Research reveals that a person’s subconscious emotional mind was responsible for a large number of purchasing decisions. And, the product/service experience directly appeals to the emotional mind. So, the product experience matters.
The Viral Component — Experiences are also relatable and shareable. A customer may not talk about product features or benefits to his/her friends but would happily share his/her feelings about the product — the experiences while using the product/service. Stories are always appealing than listening to a list of features.
1.0 What experiences should a business provide? How to find out?
THINK FROM A CUSTOMER’S PERSPECTIVE
When Chesky and Gebbia developed the website for the first time, they thought from the customer’s shoes — Why are they coming to the design conference? What would they need to achieve their objectives? How could we help them to realize their trip goals? and a few more questions. The queries helped Chesky and Gebbia to provide a pleasant experience to the customers.
When guests arrived at their home, Chesky and Gebbia presented them with a welcome package that contained a BART pass, city maps, and spare change to pass out to homeless people. They served their guests breakfasts of untoasted Pop-Tarts and Orange juice. Chesky and Gebbia also showed their guests around the city — they took them to their favorite Taco place, Ferry building, and Stanford’s design school. The founders became a local guide for them.
The guests loved their stay. They realized that they would’ve missed this experience if they’d opted to stay in a hotel. They were thankful to Chesky and Gebbia and became close friends with them. It shows how selling experience would convert a customer into a loyal one.
OVERDELIVER AT EACH TOUCHPOINT
One of the ways to determine what experience a company should sell is to go beyond the present customer needs at each touchpoint.
(From Reid Hoffman’s Blog) — Chesky says, “We basically took one part of our product and extrapolated — what would a 5 star experience be at that point? You knock on the door, the host opens the door and lets you in. You didn’t face any problems. That’s great. Would that be enough?”
Chesky, continues ‘What would a 6-star experience be?’
He imagined, “How about the host showing the guest around and welcome him/her with a gift that is to their liking. How about water in the fridge for them, toiletries in their bathroom?”
Would that be enough?
But, Chesky continued to ask himself, “What’s a 7-star experience be?”
“How about a host allowing the whole kitchen for the guest to use? How about organizing things a guest would like — For example, a cycle or a surfboard for surfing or special lessons or a car to move around or booking in a local restaurant. That could be way beyond.”
It is one of the ways Chesky and Gebbia brainstormed for new exciting experiences for their customers. Always overdeliver at each touchpoint.
2.0 AIRBNB & ITS EXPERIENCES
What experiences did Airbnb sell?
HUMAN EXPERIENCE — One of the exceptional advantages of Airbnb was the human experience — the intimate interaction a guest has with the host that could not be copied by hotels. Usually, when people travel, they would feel alone. In Airbnb, the host becomes a part of that travel, helping the guest to immerse himself/herself in the local culture. It is similar to how Chesky and Gebbia became friends with their first set of guests.
Airbnb focuses on providing a human experience with personalized touches.
CULTURAL EXPERIENCE — The critical experience Airbnb offers for a traveler is to experience new places as the locals do. It helps a customer to have a personalized experience.
It was the underlying message behind Airbnb’s marketing campaign — Don’t Go There. Live There. It is an opportunity to immerse yourself in the local culture.
“The Live There campaign is about tackling the tension that so many people feel when they travel,” said Jonathan Mildenhall, Airbnb’s CMO. “We know travelers want more. People around the world have told us they want to live like a local. They want a deeper connection to the community, to genuinely feel part of the places they visit. At the heart of this campaign is our antidote to commoditized travel — the unique, human connections that happen when you truly Live There.”
Along with the guests, the hosts also gain cultural experience. They get opportunities to connect with people of different cultures across the world. They learn about their guest’s life and travel experiences.
SEAMLESS EXPERIENCE AT CUSTOMER’S VIRTUAL TOUCHPOINTS — Before Airbnb, the home rental market had similar websites — HomeAway.com, VRBO.com, Couchsurfing.com, BedandBreakfast.com, and Craiglist. So, Chesky and Gebbia’s idea wasn’t an original one. Yet, they cornered a niche, differentiated the brand from competitors, and grew. And, from the beginning, one component played a critical role in its initial success — It was Airbnb’s website.
Delivering a successful wholesome experience to a customer depends on identifying all the touchpoints where he/she would be interacting with the product/service. It’s not just physical but also virtual touchpoints.
For Airbnb, being a digital platform, virtual touchpoints are as critical as the physical ones because several activities happen over the website — Seeing ads, opening the webpage, searching a destination, booking it, paying, contacting the host, reaching customer care, and various other activities. The website is a critical part of the product experience. At each touchpoint, the founders wanted to make sure that the customer’s experience not only has to meet his/her needs but should go beyond his/her expectations.
Don’t ask -What specific experience would we offer at each touchpoint? Ask — What would delight the customers?.
Think Like A User At Each Touchpoint — The Airbnb website’s success could be attributed partly to Chesky and Gebbia’s design background. Design Thinking taught them to think everything from a user’s shoe. From the beginning, the founders were determined to provide a seamless experience to a customer through the online platform. Their goal was to make it as easy as possible to book a room in someone’s house. Their field of knowledge became their biggest strength.
Chesky often told that when Steve Jobs conceived the iPod, he wanted never to be more than three clicks away from a song. He followed the same rule while designing the Airbnb website. It should not be more than three clicks away from booking a room. Save the user’s time as much as possible.
Airbnb’s digital experience played a significant role in its initial growth. It differentiated them from other brands.
3.0 STARBUCKS & SELLING EXPERIENCES
Starbucks, in their initial years, sold only authentic coffee beans. Howard Schultz, who became CEO in the mid-1980s, thought of ways to scale up the company. He wasn’t sure that selling only authentic coffee beans could help in achieving it. The one solution could be to add new value propositions for the users.
How to determine the new value propositions? Yes, observe the users — understand their hidden needs, desires, and the contexts of product use.
THE RESEARCH
In the early 1980s, Howard Schultz visited Milan, Italy(It was a Mecca for coffee drinkers) to observe the coffee drinking customers’ needs.
In Milan, Howard was surprised to see that every street in the city had a little espresso bar. He visited several stores and parked himself for hours to study the store and the customers.
The Human Experience — In every store, Howard observed that the Barista working behind the counter, greeted each customer cheerfully and many of them by their names. The stewards also remembered several customers’ coffee routines. After taking the order, the person moved gracefully, grinding coffee beans, pulling shots of espresso and steaming milk, and at the same time, conversing happily with his customers. The Baristas talked, laughed, and enjoyed the moment with their customers, who also responded with equal enthusiasm.
“Everyone is interested in themselves, every customer needs special attention. They need preference — They need a special assurance that they are also one of the preferred customers. Preference brings loyalty. Preference makes the sale.” -Marc Gobe.
Those espresso shops were not selling coffee, but the human experience through preference.
Customized Experience For Each Customer Segment — Howard continued to observe more coffee bars. He saw that various types of crowds visited the store at different times of the day. In the morning time, office goers frequented the coffee bar. Mothers with children and retired folks lingered around in the afternoon. In the evenings, the store became a neighborhood gathering place. Each segment of customers had different needs. And, the shops had catered to their requirements.
The Community Experience — Howard also observed that there was a wonderful camaraderie between the customers, even though they didn’t know each other well except in the context of that coffee bar. As they met often, several of them had become friends.
Howard realized that those espresso coffee shops offered comfort, community, and a sense of extended family to the customers.
Italians considered the coffee shop as an extension of their porch — an extension of their home — A home away from home.
THE INSIGHTS
Based on those observations, Howard realized that Starbucks’ connection to their customers had to go beyond just selling them coffee beans. For sustainable growth, the relationship has to happen in Starbucks’ stores. That was the most powerful, missing link Howard had been searching till that time.
In Italy, drinking coffee was a social activity. Howard felt that though Starbucks was in the coffee business, it was overlooking this social aspect.
“Starbucks had been treating coffee as produce, something to be bagged and sent home like groceries. It had stayed one big step away from the heart and soul of what coffee has meant throughout the centuries” — Howard Schultz.
THE SOLUTION
Howard felt that to grow the Starbucks coffee market, he had to sell an experience similar to what the Italian coffee bars and ‘espresso’ had been selling. He made the necessary changes in his stores and began to serve espresso drinks the Italian way.
Experience is in ‘Attention to Details’ at Every Touchpoint — Howard carefully designed the stores to enhance its quality and provide a multisensory experience to the customers, including what they saw, touched, heard, and tasted. He redesigned the interiors to encourage people to sit, relax, and drink coffee. Howard trained Baristas on the art of making pleasant conversations with the customers and build personal relationships with them.
Howard focused on every customer touchpoint and improvised them.
How about seeing an example of how Howard improvised each touchpoint — Let’s take the touchpoint — Smell.
- For coffee experience, the aroma of beans plays a critical role. The coffee smell also controls the store experience. So, Howard made sure that the flavor of brewing coffee alone would always linger to welcome the consumers. He didn’t even allow his associates to use perfumes as the beans could absorb the odor, and that would take away from the smell of freshly brewed coffee. Howard stopped the food varieties that would affect the aroma. For similar reasons, he also banned smoking.
As Howard introduced several changes, the customers began to love the experience. They started staying for a long time in the store. The more time a customer invests in a product, the more loyal they become to the brand. The customers began to feel that Starbucks was a home away from home.
Thus, Howard transformed the Starbucks brand by selling experience.
CONCLUSION
Sell experience if you want customers to come back to you. To determine what experience you should sell, think from your customer’s perspective. Analyze each customer touchpoint and go beyond their needs.
References: The Airbnb Story by Leigh Gallagher, Pour Your Heart Into It by Howard Schultz.