Thursday, March 18, 2010

Pricing on demand

I listened to an YLE radio interview of CEO Risto Juvonen from Live Nation, a concert organizer in Finland. Risto Juvonen was predicting a change to pricing model of concerts in a few years time.
Juvonen predicted a similar model for concerts as is the case for flight tickets currently; you don´t know what the person sitting next to you is paying for. There will be the ones who are willing to pay more for better seat or better service, as some are willing to have less for a smaller amount of money.
What would you be willing to pay for a concert? Or an airline ticket? And what would you pay for? A seat in the first row? Good food and service? Great lounge and shopping arrangements? In-flight entertainment or the actual show? Having a sense of belonging or travelling to a trendy destination? Again, this direction requires more specific customer segmentation and being able to tailor service offering accordingly. Which other industries will this concern? Gyms, restaurants, sports events, parking, public transportation? And how far will it go? Backseat passes, pick-up from home, dinner, merchandising included?

Hanna Viita

Tuesday, March 16, 2010

Quality services in springtime

During one service management class we discussed Tropicana Premium Orange Juice. Best quality, real flavour, no added sugar. 2,58 Eur per liter at Stockmann department store. Must have for many despite the high price. Tropicana has become one of the most popular orange juices in Finland. How? We agreed that despite the high price, the flavour is so much better that people are willing to pay more. They even drink less.
I started thinking of my own consumer behaviour. When going to a cafĂ©, I prefer a cozy place with a good location and good coffee. When going dancing, I pick a place that features the best band in the country. When once a year going for a lovely massage, I stay away from the sports masseurs and pick an exotic spa with scents and music. I like doing grocery shopping at Stockmann´s.
What my choices have in common is that for me they are scarce but I prefer them because I feel they have top quality. I´m not an optimal consumer - I don´t buy services too often. But I may be a potential consumer if companies have me buy more of these services. I already like what they offer. If only I had more money or more time.
I came up with one solution. My friend told me how she dislikes wearing 60 den pantyhose still in March due to cold weather. Solution therefore is: spring. Focus shifts from cold weather, shovelling the snow and pantyhoses to going out and enjoying everything around you. More cafes, more dancing, more things outside. One month to go for a summer opening. Hopefully service providers do much better soon!

Friday, March 12, 2010

What is next luxury?

Trendwatching.com published their view on 10 crucial consumer trends for 2010 (http://trendwatching.com/trends/10trends2010/).
The one that caught my eye was the definition of luxury – you simply cannot define it. Luxury is what you (your customers) define it to be. According to the review you should not focus on understanding what is the next thing but how your customers define it. They appreciate it because it is scarce.
Services are often considered as luxury. But for some luxury can be simply more time, time for yourself, NOT having to do something, not spending money, contributing to charity etc.
How could we offer something that consumers are willing to have and gain value of, at the same time contributing to our company success? Productization of services is common for companies who can provide services on a more mass tailored way; haircut, spa treatment, personal trainer or coaching session. But according to trends surveys, we need to provide more unique, more tailored, more personal experiences and ways of consumption. I guess one of the key questions is how you can you make customer meeting as (cost) effective as possible, still making it unique. Or can you make the experience ultimate unique that customer is willing to pay or do most anything to have it again? Can you replace or mass-tailor physical contact? What do you say of mass wedding nights at local churches? Personal or mass-tailored luxury? Easy-to-get or easy-enough-luxury? At least fits with target audience needs – churches have been fully booked so the concept seems to work. But it´s one service which the customer should not come back to, so expect no return calls.

Hanna Viita

Thursday, March 4, 2010

Consumers adding value

Key to companys´s success is in creating value for customers while differentiating itself from competition. The term co-creation has appeal in companies´ current strategy work in regards to involving employees or customers in the development of new services. There are new methods involving the consumers or employees, though the processes are still rarely used nor used on a systematic basis. Richard Priem (2007) suggests consumer perspective is potentially important for strategic management since consumers experiencing company benefits are adding more value to the process.

Altogether companies could find new ways of increasing profitability through consumers creating more value and increasing a single purchase. The key to consumers adding value is to have them experience the brand during consumption. Everybody benefits from services improvements. Starbucks, typical example of a successful brand where consumers are sitting in the well designed cafes, listening to music, reading books, buying good coffee and Starbucks accessories. But can there be more than a sofa to a brand experience? Starbucks presents ways of involving the customer and adding value to the whole coffee drinking process. First of all, you can help Haiti through going to Starbucks stores. What else? Moderated Starbucks idea generator online by Sally and Brendan (real people with real moderator jobs) who collect customers suggestions on service improvements. And not just collecting ideas but actually reporting which ideas have been implemented and who suggested them. All suggestions are divided in 3 ideas categories: products, experiences and involvement (eg community involvement and social responsibility). All registered Starbucks community members have a chance to see the given ideas and give their vote on them or generate further ideas. And if my or my friend´s idea was implemented at Starbucks, I would definitely go and see how it´s done in the stores. More coffee, please.