Why does coffee cost more at Starbucks than the local diner, or the coffee you purchase at the grocery store and brew yourself? What makes it different? The difference is not in the product itself, but the offerings and touchpoints that extend from it. At Starbucks it’s about how they deliver their service. Or more specifically, it’s about the experience that defines their service, not just the coffee.
The service economy is already crowded with multiple options to choose from. A recent report by the Coalition of Service Industries said that services accounted for nearly 80% of the US GDP and jobs in 2005, equivalent to about $8.5 trillion (CSI, 2007). The more there are to choose from, the harder it becomes for each service to stand out and differentiate. We have seen this before with products, where even the best of them have had their form emulated and passed on as a similar offering. Services are not safe from this threat either. Starbucks finds itself today competing with other coffee chains both domestically and abroad, despite a successful service model. There are followers (Peet’s Coffee, Seattle Coffee Company) and those that blatantly try to rip-off (Shanghai Xingbake).
Successful products have battled the challenge of commoditization by adding related services that extend a customer’s engagement, such as a new business model, an exciting retail experience or an environment to engage with other customers either in-person or online. This amplifies the value to the end user. But as services become increasingly commoditized, form and efficiency alone will not suffice as differentiators. The experience is the differentiator.
What is Service Design?
Service design is a “design of systems and processes around the idea of rendering a service to the user” (DDC 2006). They can be tied to a tangible product, such as the delivery of a courier package or an intangible offering such as watching a movie, but services alone have no form. You cannot hold or archive them in a storage box, and their value is consumed at the same time it is produced. Services can be deployed through a series of touchpoints, in the form of virtual interfaces, physical interfaces, or people. For example, a department store’s touchpoints might include the brick-and-mortar store, the website, their credit card, the monthly statement, the customer service center, and the sales associates.
The existing value of form, function, and optimization of a service should not to be discounted. However, these are efficiency-oriented processes; widely used and only part of the solution to differentiation. Feelings stirred within the sender and receiver will resonate with the individual and are what define the experience. When you send a courier package, the challenge lays not in how fast it can be transported, but how the touchpoints are enhanced to define a memorable experience on the delivery or receiving end.
Services Can Be Commoditized Too
It’s not just products but also services that can be commoditized, thanks to insatiable consumer demand. In the famous words of Lady Amiel Black, wife of the fallen Hollinger International titan Lord Conrad Black, “I have an extravagance that knows no bounds.” This perpetuates an increase in supply from providers and floods the market excessively. Services too become ubiquitous and their novelty wears thin.
Advances in technology have also contributed to the commoditization of services, by facilitating the rapid exchange of information, the ease of duplication, and shortening the turn-around time from concept-to-market. Information is no longer centralized, making it easier to send, search, share, and retrieve. For example, the popular ready-to-wear Spanish fashion retailer Zara has an incredible turnaround time of six-weeks. Everyday, an army of photographers go out and snap pictures of what fashionable women and men are wearing, then quickly design, produce, and ship to the retail floors. Other retailers can no longer compete solely on what they produce and sell, but must be able to offer customers a unique experience somewhere along the shopping journey.
Services that focus on process and efficiency will eventually see market share erode as they lose ground to competitors who differentiate based on experience. Optimization tools such as Six Sigma may have made sense at one point, but today new ones are needed to avoid commoditization.
What Makes for Good Service Design?
Services are good when they are efficient. However, ultimately the experience is the differentiator, and that will leave a meaningful impression. Customers may even sacrifice some efficiency for a better experience. In order to create a great service experience, there are three important things to consider: (1) visibility; (2) customer engagement; and (3) positive feelings and perception.
Customers like to see what is happening. A behind the scenes tour at Walt Disney World reduces mystery and brings transparency. Restaurants with open kitchens offer a new layer of experience, a new stimulus to the senses, and engage diners earlier in the customer journey. In traditional restaurants, your first interaction with the tangible part of the service – the meal – does not occur until it arrives at your table. Meanwhile, the food has already undergone a complex series of non-visible touchpoints such as purchasing, preparing, cooking, and plating. By making kitchens visible, restaurants are bringing transparency to an opaque touchpoint.
Customer engagement is not exclusively between the provider and customer, but also includes engagement between customers. Engagement with the provider empowers customers to feel like they are helping build the experience and they have contributed to the outcome. Individuals feel attachment and ownership, which ideally results in customer loyalty. When customers engage with other customers, they get affirmation from an equal that their choices will lead to the best experience. When I go to a new restaurant, I always like to check online reviews, or talk to friends who have eaten there. On-site, I may discuss recommendation with the server. I am fairly confident that after engaging with other diners and the server that my meal will be a delectable experience.
Positive Feeling and Perception
In the ideal scenario, you want to deliver customers an outright good experience. However, even a bad experience that was rectified can still leave people with a positive feeling and perception. One New Year’s Eve, I ordered a steak to be cooked rare. The server recommended blue: quickly seared on the outside leaving the inside untouched. But what I received was not what he promised. The server quickly rectified this by bringing back a proper blue steak. Thanks to his efforts to ameliorate a bad experience, I still walked away with a positive feeling that evening. My perception of the restaurant remained satisfactory despite the original disappointment and extended waiting time.
A Tool for Designing Services
A useful tool to design for services is a blueprint. Like a recipe, it tells you which ingredients to use, the specific amount, and how they should be combined. How much of each ingredient you use, the method and order in which you combine them will all affect the outcome of the recipe.
The blueprint shows the pre-, during and post-journey touchpoints that impact the experience, from behind the scenes to the customer’s exit point. Taking time into consideration, it documents the sequence of touchpoints that facilitate the service relationship. These events can be broken down into four parts: (1) the physical evidence; (2) the customer actions; (3) the onstage contact/employee actions; (4) the backstage contact/employee actions; and (4) the behind-the-scenes support process.
There is not necessarily a specific path, and mapping out the blueprint can be challenging when there are multiple options or unexpected surprises arise. It must allow for some degree of flexibility, otherwise it runs the danger of becoming too prescriptive.
No formula will predict with guaranteed accuracy how your customers will react at any touchpoint, but with a blueprint you can anticipate which ones will have the most impact. The visible or non-visible experience is delivered to the customer through these touchpoints. By enhancing them, particularly the visible ones, your chances of enhancing the customer’s experience are vastly improved.
Experience Design at its Best
When you go on vacation and return to the office, everyone peppers you with questions about your trip. The stories you remember are the climax points, or those final days, which are the freshest in your memory. Acclaimed psychologist and Nobel Laureate Daniel Kahneman describes this as the peak-end rule. He argues that people recall experiences at the peak-point and end-point. Whether that experience is good or bad, they remain the most vivid points in your memory. Time and duration becomes less important; the net positive or negative experience even more negligible. For example, imagine when you eat a slice of pizza. You are hungry and the aromas of the pizza waft into your nose, making you even hungrier. That first bite is critical in order to satisfy your hunger and taste buds. The pizza needs to be hot, gooey with cheese and melt-in-your-mouth satisfaction. On the opposite spectrum, the last bite of your pizza is the crust. The type of crust and its quality is the last thing you will bite into, affecting what you remember as tasty and memorable.
As commoditization shifts us from a service economy to an experience economy, well-designed services can no longer rely solely on engineering mechanisms to produce good form, or efficiency tools like Six Sigma to deliver operational optimization. This is not to say their value is discounted, but they will not differentiate you from the competition and your product or service runs the risk of imitation. China’s learning curve is a testament to this truth, and has challenged many of the best-known products and services out there such as Louis Vuitton and Starbucks. Successful companies saved themselves from commoditization by adding service extensions. They now need to offer compelling and engaging experiences. The experiential value at each touchpoint is what a person will remember the most, and the best are delivered when least expected.
Coalition of Service Industries, Research and Education Foundation. “Services by State and Congressional District. ” June 2007.
Drive U.S. Growth and Jobs: The Importance of Services by State and Congressional District. ” June 2007.
Danish Design Council. August 2006. “Service Design and Why It Matters to Business: Interview With Simona Maschi and Vinay Venkatraman.”