In the pursuit of customer loyalty, companies are investing an increasing portion of their marketing budgets in loyalty programs. These programs are geared towards creating an incentive for customers to repeat their purchase with the same vendor. To accomplish this, companies are providing financial incentives and costly rewards to entice customers’ repeat business. All of these programs then become part of the cost of doing business and is ultimately applied to the cost of the products. There is something rather superficial in these programs. It would be reasonable to assume that if the products or services sold and provided by the companies were really that great, customers would not need incentives to repeat their purchases. They would gladly return on their own. If the products and services were designed to delight customers and not just to deliver “me too” value, relationships and repeat business would happen without artificial support.
Some companies are starting to discover this little secret. Those companies are making a radical shift from the “one size fits all” and “lets make an efficient model” into very personal experiences. In designing their products, they allow and encourage true customer participation and they bring the customer in into the fold of designing their product at an early stage. A great example of this is NIKEID. This new web based service allows customers to design the shoes they purchase to their own specifications. The customer selects the colors and look that they feel express their own identity. The customized shoes are, of course, more expensive than the Nike sneakers anyone can buy in the store. However, when looked at in a different light, the additional expenditure is a small price to pay for the personal expression it delivers to customers. Customers participating in NIKEID are creating shoes that are very personal and, in fact, part of their identity. The NIKEID shoes are becoming more than just an external product they share with millions of others around the world. The shoes are as unique as the designer (a.k.a. customer) and reflect each person’s individual taste, preferences, values and personality. This level of intimacy between products and customers achieves the highest level of customer experience. At this level the product becomes the platform for expression. Companies relinquish the dictatorial position of “we know better” and embrace the position of “let’s share ideas” and “you participate in the process”. By yielding some of the control they traditionally held, companies are trading logistical efficiency for a high degree of customer commitment to the product, great loyalty and are obtaining a premium price. This is a great trade off, if you ask me.
When examining the iPod phenomena, we can trace similar behavior. What made iPod successful, in my opinion, is not the cool device but rather the unique play list created by each customer. In fact, the device did not get people to bond at all. It was merely a platform for each person to create their own unique play list of songs which reflects their individual taste and personality. In this case again, the product becomes a platform. Apple allowed customers to create and reflect their identity by providing them with the ability to create their own one of a kind play list. Compare this to the predefined song lists contained in CDs sold worldwide and you can clearly see the difference in approach. The record/CD labels determine the product for customers and force them to purchase 10-12 pre-selected songs versus the ability of customers to select only the songs they like. Trends such as eBay successfully reinforce products as platforms by allowing customers to obtain the oddest products they wish to buy and not settle for products preselected by buyers of large store chains.
Sharing power with customers is not an easy transition to make. It has more to do with ego and traditions than with actual product design. Executives cannot accept the fact that they need to share power with customers. This denial has them refusing to accept the fact that their customers can reach millions of people today via web sites and tools and are almost in a position equal to that of the company, which has the ability to reach millions of people via advertising. The transition can be done in baby steps. Start by allowing customers to select or create the external design on their own. Then gradually allow more sharing of design creation with customers to reach the ultimate personal platform status.
I recently came across a new refrigerator offered by an Israeli company. The company allows customers to create the external design of their refrigerator to suit to their overall kitchen design. The refrigerator arrives with art painted on it to match the overall kitchen look. This is another transformation toward products as platforms. This new service is, of course, offered at a premium price and is distinguished from the regular refrigerators offered in the stores. The more customers get to be involved in the design and creation process, the more intimate their commitment will be to the product and the company. Using the process of products as platforms, the products become a natural part of the customer’s identity and are woven into their lives. It is such a natural match that there is no need for artificial loyalty programs. There is no need to increase the costs of sales and erode the margins. By treating products as platforms companies actually increase prices and create greater margins.
Lior Arussy is the President of Strativity Group and the author of several books. His latest book is Passionate & Profitable: Why Customers Strategies Fail and 10 Steps to Do Them Right! (John Wiley & Sons, 2005).