We have been brought up to accept three forms of differentiation:

Product. "A quality product sells itself" was the assumption. Making a product better or improving its functionality was the first form of differentiation.

Market. Using customer segmentation, we believed we could create mass- customized offers to large customer groups in ways that added value and created a competitive advantage.

Price. Through economies of scale, we could pass on cost savings to customers and achieve the pricing advantage of a low-cost producer.

With the rise of competition from marketing titans such as the monoline card companies and brokerage houses, however, these views of customer interaction and value added may be too limited. Differentiation can and should go beyond the three traditional components and to the core of the one-to-one interaction with the customer-the customer's experience.

Many of us consider air travel a product whose function is to bring us from point A to point B. Southwest Airlines has perfected that definition and added value through highly efficient processes and low-cost production. It positions itself as the "fun airline." Its differentiation comes through a unique customer experience and improving the way the product itself works.

British Airways used a slight variation on that theme to make flying pleasant. To avoid commoditization of its product, the airline created a singular and specific customer experience.

Both companies compete effectively in chosen markets and achieve growth and profitability through memorable customer experiences. A similar lesson can be learned in the food business.

Theme restaurants such as Fashion Cafe and Planet Hollywood grew rapidly, not because of the food they served but because of the experiences associated with dining there. A hamburger is not just a hamburger when eaten in the company of Arnold Schwarzenegger's "Terminator" outfit.

Similarly, a cup of coffee at Hard Rock Cafe is not merely a beverage-it is an experience.

How do we translate this into the financial services business? This is our challenge as we build new stores and redesign product lines with customer interaction in mind.

We can build value not only through price, product functionality, and convenience but also through the design of unique customer experiences. We can make a branch visit highly personal and pleasant by paying attention to things the customer values most.

Reducing waiting times, giving immediate access to information, and making service truly pleasurable are achievable objectives in our industry. There is every reason why our customers should feel about interacting with us as they do about their favorite clothing store or restaurant.

A waiter or waitress who recognizes you, brings you food he knows you like, and gives you a few extra special treats in recognition of your patronage is the restaurant experience for you. It is almost like a visit to a friend's house, and the value associated with it goes well beyond the food itself.

Here is a story I heard from Joe Pine, the pioneer theorist in mass customization:

Standard Parking of Chicago has decommoditized its business, creating special experiences in a service as mundane as airport parking. Each floor of its O'Hare Airport garage is decorated with murals depicting a Chicago sports franchise. Music is selected for each floor so that guests can immediately hear when they are on the right floor. The murals serve the same purpose.

Creating customer experiences can be applied to making financial institution products more attractive and to maintaining customer loyalty. As our services become increasingly commoditized, differentiation through experience will be the key to value creation.

The only way to truly differentiate service is to make each customer a unique client. There is a real difference between a customer and a client. The former gets value directly from a good; a client gets it through an agent. Services and products are means to deliver value.

Service providers must go beyond the manufacturer's understanding of customers, lest their product lines become commoditized.

We must spend time interacting with customers individually to understand their needs and then customize to meet them. That will create a special experience and build a bond, converting an ordinary service space-the branch-into a personal place, like a favored restaurant.

The possibilities are as broad as our imaginations and perceptions of what consuming banking services should be like. Let's think outside the box, break the old paradigm, and become the British Airways of the financial services industry.

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