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Case Studies Comparison

Sudhakar Varada
Roll No: 133307

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News Articles Summary

Sudhakar Varada
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Service Company

Sudhakar Varada
Roll No: 133307

Hard Rock Café
The first Hard Rock Cafe opened its doors to the public on June 14, 1971, in London, England. Founded by Isaac Tigrett and Peter Morton, two enterprising and music-loving Americans, beginning with a guitar, it is only a joke among the friends at first, later on founder of the band -Cream and Derek & the Dominoes sent a guitar of his here, and has booked a desk for a longtime. From then on, the other guitars were sent here continually, have not stopped at all times. Hard Rock Cafe was an instant classic, attracting droves of customers with its first-rate, but moderately priced casual American fare, warm service and ever-present rock 'n' roll music and sensibility. At that time it has been doing things its own way. It was initially decorated with an eye toward eclectic American. What started as an American dinner in the heart of London has blossomed into a way of life. Hard Rock
In 2007, Hard Rock was sold to the Seminole Tribe of Florida, and is headquartered in Orlando, Florida. Currently, there are 191 Hard Rock locations in 59 countries including 145 cafes, 21 hotels and 10 casinos.
Mission: “To spread the spirit of rock ‘n’ roll by creating authentic experiences that rock.” To spread the spirit of Rock 'n Roll by delivering an exceptional entertainment and dining experience.
Hard Rock Services 1. Hard Rock Cafes 2. Hard Rock Hotels 3. Hard Rock casinos
From their services I took the Hard Rock Café services
Hard Rock Café Locations in India * Gurgaon * Hyderabad * Mumbai Andheri * Mumbai worli * New Delhi * Pune

Hyderabad Hard Rock Café
Started in September 2009
Hard Rock Cafe Hyderabad follows Hard Rock's world famous tradition of offering guests great American fare in a rock 'n' roll atmosphere.
The cafe features three distinct sections, including a restaurant, a bar area and Hard Rock’s signature retail Rock Shop. Memorabilia from Hard Rock’s world-famous collection, including items representing both contemporary stars and rock legends adorn the walls of the cafe.
Hard Rock Cafe Hyderabad is ideally situated near luxury hotels and great shopping places, offering a convenient destination for both local fans and international travelers. Add some rock to your next trip! We're waiting to serve it to you Hard Rock style at the Hard Rock Cafe Hyderabad.
Service Concept
Hard Rock is bringing the concept of the ”experience economy” to its café operations.

* Parking Lot * Building Exterior * Entrance * Welcome counter * Interiors * Ambience * Restaurant Furniture
Serving Mechanism * Cutlery * Crockery * Tissues etc.
Menu:
* Coffee * Snacks * Cold/Hot Beverages
Merchandise
Customer
Customer
Customer
Customer
Receptionist
Waiter
Waiter (or)
Billing Counter
Waiter
Physical Evidence
Customer Interaction Points
Front Desk
Back Office &
Tech Support * Chef/Cook * Equipment * Coffee Machine * Parking Lot * Building Exterior * Entrance * Welcome counter * Interiors * Ambience * Restaurant Furniture
Serving Mechanism * Cutlery * Crockery * Tissues etc.
Menu:
* Coffee * Snacks * Cold/Hot Beverages
Merchandise
Customer
Customer
Customer
Customer
Receptionist
Waiter
Waiter (or)
Billing Counter
Waiter
Physical Evidence
Customer Interaction Points
Front Desk
Back Office &
Tech Support * Chef/Cook * Equipment * Coffee Machine
Service Blue Print

* Inventory of Merchandise * Inventory of Merchandise

Service Delivery Process INPUT | PROCESSES | OUTPUT | * Signage * Parking Area * Welcome * Assigning Table * Menu | * Order Taking * Cooking/Preparation * Delivering quickly * Giving a choice/recommendation while ordering * Customizing standard orders | * Response time * Delivery Time * Environment * Ambience * Music |

Service Delivery Timings
Restaurant:
* Hours: Open Daily 12:00PM - 11:30PM

Merchandise:
Hours: Open Daily 12:00PM - 11:30PM

* There is no data available to know the Hyderabad Hard Rock Café seating capacity

Taking Orders
Preparing Order
Preparing Order
Delivering Order
Additional Person Assigned during peak hours
Taking Orders
Preparing Order
Preparing Order
Delivering Order
Additional Person Assigned during peak hours
Service Order Planning

Service Experience Service Experience: * Standardized offering of Coffee and food items. * A quiet place for a conversation * Crowded during weekends * Good Music * Shopping | Service Outcome: * Great Conversation * Great Experience with friends * Internet Services (select Outlets) * No interruption while working | Service Operation: * Good parking facility * Air Conditioned Serving area * Clear Menu * Single Queuing | Service Value: * Price excludes Wi-Fi * Expensive product, but worth the environment * Reasonably priced * Good Value for Money |

* Service Operations Of Hard Rock Cafe
THE DESIGN OF GOODS AND SERVICES: * Hard Rock café customers don’t just want a meal; increasingly, they want an experience. this experience concept is to provide not only a custom meal from the menu, but a dining event that includes a unique visual and sound experience not duplicated anywhere in the world which means that The strategy of Hard Rock has been led by the DIFFERENTIATION. Therefore, the design of goods and services at Hard Rock café (food& drinks, music, memorabilia, rock concerts, retails..Etc) is meant to provide this kind of experience. * While Hard Rock café adaptation with every location, Social norms and preferences often suggest some tweaking of menus for local taste
QUALITY MANAGEMENT:
Quality management is an important factor in regard to the success of Hard Rock Café, and it can be discussed from a variety of perspectives: The Food: food quality must top the charts and several factors are taken in consideration to achieve that: * Good food ingredients. * Good suppliers. * Operations personnel constantly review menus. * Food research is ongoing. * Quality surveys are done regularly. If food scores aren’t a seven on a one to seven scale of quality, it’s a failure. * The employees have extensive or passionate knowledge in the music or rock‐n‐roll industry and have engaging personalities. This allows for courteous service because a customer has something to relate to instead of just ordering food.
PROCESS AND CAPACITY DESIGN: * Hard Rock works to create products in an efficient manner, analyzing them for cost, quality, and labor requirements. The whole production process, from receiving ingredients, storage, grilling, baking, and frying is designed to create a quality meal for the customer. Over time, the process and capacity design at Hard Rock café developed according to the developing of its activity. Initially, Hard Rock was a London café serving classic American food, then it became a “them” chain with memorabilia in tourist destinations. After that it added stores. Then live music and rock concert. And when it became an established name it began opening hotels and casinos. Then it upgraded its menu and went from classic American—burgers and chicken wings—to include higher‐end items such as stuffed veal chops and lobster tails, therefore the kitchen process changed. And the last improving was moving into cities that are not the typical tourist destination. LOCATION SELECTION:
Each cafe is a “museum in the environment of a bar-restaurant.”
Location is a major long‐time decision that can make or break business strategy. When Oliver Munday, Senior Director of Worldwide Café Development, is looking where to place the next Hard Rock café, he takes inconsideration many key factors from a global view.
Key Factors for Store Location Selection 1. Political Risk 2. Currency Risk 3. Social Norms 4. Brand Fit 5. Social Cost 6. Business Practices.
Several location candidates appear due to Mundey’s researches, that is why A break even analysis (Determine fixed and variable costs for each location, Plot the cost for each location, Select location with lowest total cost for expected production volume) helps after that to choose the most convenient location among the several candidate locations. And this is how the company systematically narrows the search from country to city and then precise street corner.
According to the articles about Hard Rock Café * 70% of Hard Rock customers are tourists, due to the Location strategy of the company, who has searched world widely the best tourist sites. This is good as far as the best tourist regions are traditionally good markets, but also makes the company dependable on this variable (tourism) which has made Hard Rock susceptible to economic fluctuations that hit the tourist business.

LAYOUT STRATEGY: * After choosing the location of the new facility, Hard Rock café face two decisions: whether to remodel an Existing Site or to purchase a land and construct a new site. After applying any of those both situations, the layout design is the critical new stage. The company must consider the kitchen flows for food preparation and restaurant and bar layout for maximum revenue. Every piece of the experience strategy including memorabilia, music, and visuals takes on a big significance. This means lighting, sound, screens, contemporary music, and circulation paths are designed to show off memorabilia and expose customers to merchandise for sale. The retail shops generate close to half the company’s profit and are carefully integrated into restaurant layout, flow, and work stations.

HUMAN RESOURCES AND JOB DESIGN: * With the continuing growing of this company, the rang of talents needed keeps expanding; from cooks to wait staff and bartenders, to merchandisers, to cooks for a wider more expensive menu, to coordinators and performers for the live music facilities. That is why human resources department plays a key role in this company by recruiting, training, maintaining, and constant developing of the staff members.

* When choosing Hard Rock employees, competency in job skills is not the only criteria to be taken in consideration. All the staff members must be passionate about music, love to serve, can tell a story, and convey the experience to visitors. I think their motto “we love to spread the spirit of rock’n roll” gives a clear image about this idea.

SUPPLY CHAIN MANAGEMENT: * In any food service operation, the supply chain management is very important. Hard Rock work with qualified suppliers to supply the right amount of good ingredients on time, to ensure providing fresh, quality meals. (for instance: contracts for meat and poultry are signed 8 months in advance).

* Selling retails and merchandises also requires working with good suppliers (for instance: Some items like leather jackets have a 9 month lead time). INVENTORY MANAGEMENT: * Hard rock, like any restaurant, has a critical inventory issue that requires food to be turned over rapidly and that food in inventory be maintained at the appropriate and often critical temperatures. But the interesting thing about Hard Rock’s inventory is that they maintain Millions of memorabilia with all sorts of special care, tracking, and storage issues.

* A Core group of people that work at the warehouse in Orlando; bear the responsibility of cataloguing every single item, every single story with that item, and knowing exactly what is on what wall in what café. They also choose several cafes every 5 to 7 years, takes all of the inventory (memorabilia) out of it, bring it back to Orlando to refurbish it, and then replace it with new gear. SCHEDULING: * Hard Rock’s employees take in consideration many factors when they prepare work schedules such as: sales, any events— community events—in the area, seasonality. They also take a look at trend for their trade for the past couple weeks, and then they come up with a sales forecast. The sales forecast is basically that nucleus that they write the schedule from.
MAINTENANCE:
* Maintenance (preventative& corrective) plays a key role in keeping maximum efficiency and providing all products as advertised. At Hard Rock café, they look at Maintenance as the other face of reliability. The café doors must open every day for business, whatever it takes to provide a reliable kitchen with hot food served hot and cold food served cold must be done. Bar equipment and point of sale equipment must also work, along with the maintenance of memorabilia. * For instance: As mentioned in Inventory Management Every 5 to 7 years they choose several cafes, takes all of the inventory (memorabilia) out of it, bring it back to Orlando to refurbish it, and then replace it with new gear.)
What new services can be introduced to the existing services?
Take Away: * Take away using mobile apps so customers can book the order before coming to the café using mobile but customer need to register first so they can get genuine orders from customers.
Events:
* Hard Rock café conducting events in most of the countries it operates but in India they don’t conducting any event or musical shows in their café so introducing events in India also can improve their service experience for customers.

Game Zone: * Week days they can offer gaming area with games like chess, caroms for customers so they can attract more customers and customer experience will also increase.

How do you want to manage the ‘Service Experiences’ of the customers? (Use the available models from the text book)
Service Experience
As I mention earlier Hard Rock Café service concept is “Experience the Economy” we can use same concept to improve the service experience.

Today we can identify and describe this fourth economic offering because consumers unquestionably desire experiences, and more and more businesses are responding by explicitly designing and promoting them.

An experience occurs when a company intentionally uses services as the stage, and goods as props, to engage individual customers in a way that creates a memorable event. goods tangible, services intangible, and experiences memorable.
Experiences are inherently personal, existing only in the mind of an individual who has been engaged on an emotional, physical, intellectual, or even spiritual level. Thus, no two people can have the same experience, because each experience derives from the interaction between the staged event (like a theatrical play) and the individual’s state of mind.

Service Experience Model

By using this model we can improve the service experience we can conducted events which are already going on in other countries we can improve the entertainment level and by changing the themes continuously will create the better experience with surprise events.
By making available all kind of editorials to customer will make the experience educational.
Mix in memorabilia.
Certain goods have always been purchased primarily for the memories they convey. Vacationers buy postcards to evoke a treasured sight, golfers purchase a shirt or cap with an embroidered logo to recall a course or round, and teenagers obtain T-shirts to remember a rock concert. They purchase such memorabilia as a physical reminder of an experience.
Eliminate negative cues.
Everything in the cafe display and express the theme of the concept so that will give more memorable experience.
And we can improve experience by following principles
Attentiveness:
Employees are trained to notice, and when appropriate act on, even the tiniest scraps of information they observe or discover about a guest. Ex: if any customer having a birthday employees will extend birthday wishes to appropriate person.
Recognition:
By recognizing the regular customer and greeting them will improve customer experience.
Personalization:
By remembering the likes of customer who regularly visits the café by delivering their orders without getting order from customer will create experience.
Consideration:
Staff regularly walk customers to the door and open it for them as they're leaving if the customers are aged or regular customers.
Delight:
Put a smile on their face and in their heart by doing something special for their child, their parent, their pet will make the customer delightful.
By following all above factors we can improve or create customer service experience Hard Rock café following all of this concepts but that is differ from place to place so they need to make sure all employees of Hard Rock Café following they can improve service experience more.

Identify all major risks involved in the service operations for the above company
Service provider related risks * Managing the inventory of merchandising * Getting the same talented pool of employees (music knowledge) * Training the employees.
As important point we can see the below news article for improving the customer (or) service experience Hard Rock Café changing their theme to attract more customers who are young.

Hard Rock Cafe Wants You to Forget That Old Time Rock and Roll
By Venessa Wong March 25, 2014

Photograph by Luke Sharrett/Bloomberg
Hard Rock Cafe in downtown Nashville on Feb. 8
Hard Rock Cafe isn’t all Bruce Springsteen and Bon Jovi. Walk into one of the company’s 140 restaurant locations today, and you’ll hear recent hits from Katy Perry and Imagine Dragons along with the guitar-hero relics in the showcases and Kiss merchandise in the retail shop.
Of course, a large segment of lost Hard Rock customers haven’t visited since, say, a long-ago family vacation. Executives at the company, which has been owned by the Seminole Tribe of Florida for the past seven years and is headquartered in Orlando, are not unaware of this situation. They even have a name for the problem—”old tape”—and their mission is erasing it.
“There’s a particular segment that we particularly want to reach out to that hasn’t really, for whatever reason, thought about us or experienced us in the last 10 or 15 years,” says Fred Thimm, chief operating officer of cafe operations. Bringing them back, he adds, “that’s almost the evangelical mission for a lot of us.”
Hard Rock Cafe International began in London in 1971, and 11 years passed before first U.S. location arrived. The footprint remains heavily international, with most of the franchise and company-owned restaurants located abroad. Since opening the first Hard Rock hotel and casino in Las Vegas in 1995, the company has expanded to 19 hotels and nine casinos. Six more hotels are now planned along with a new casino in Hungary. The unifying concept behind the hamburgers and memorbilia, says Chief Marketing Officer John Galloway, is offering “experiences that rock.”

The perception that Hard Rock’s business has stagnated over the decades is simply wrong, Thimm says. The restaurants, casinos, and hotels together generated about $3.5 billion in sales last year, along with record profit for a Hard Rock that is feels surprisingly little nostalgia for the good old days. As new locations opened from 2007 to 2013, the cafe business expanded at a 4 percent compound annual growth rate, hotels at 25 percent, and casinos at 9 percent. Today the casinos in particular are a significant profit generator for Hard Rock overall.
Most of the growth has come overseas. On Facebook (FB), for instance, Hard Rock has more fans in such countries as Italy and India than in the U.S., and franchisingnow focuses on overseas markets.

The other thing to understand about Hard Rock’s business is that despite its strong identity as a theme restaurant, over the past decade it has emphasized tourism and hospitality more broadly. “Part of our model is built on satisfying the needs of tourists,” says Galloway. Even the cafes work with travel groups, including school tours, and get about 72 percent of their business from out-of-town visitors.
Courtesy Hard Rock CafePhiladelphia Hard Rock Cafe before-after
The problem, Hard Rock executives say, is that in the 1990s, the brand suffered as other theme restaurants proliferated. Over the years the cafes also became cluttered with a growing inventory of random memorabilia and outdated décor (remember those checkered tablecloths?). After sales dipped in the early 2000s due to a slowdown in tourism, former owner Rank (RNK:LN) sold Hard Rock to the Seminole Tribe in 2007, and the new owners invested in the brand despite the slump in casual dining. Planet Hollywood, by contrast, is down to eight restaurant locations today from 95 in 1998.
As part of efforts to keep the 42-year-old Hard Rock brand fresh, which have in the past included memorabilia makeovers to reflect each location’s local music heritage better, Hard Rock Cafe is set to launch a new menu next month. Hard Rock will boost marketing efforts through events and national advertising in airline magazines, Voice Media publications, and radio and outdoor media. The new menu, says Galloway, is one way to get old customers back in and erase the “old tape” in their minds.
But food is only one part of Hard Rock’s brand update. “If I had to think of the expansion of the brand right now, the hotel and casino is a big focus of our group,” says Galloway.
The strategy is to reach consumers of all ages, not aging boomers pining for rock music’s heyday. To appeal to young adults who aren’t frequenting the restaurants, Hard Rock sponsors music festivals and events, including electronic dance music and indie rock, some of which is staged in its own live music arenas. “There’s no better brand representation than a 22-year-old musician repping this brand,” Galloway says.
Source:
http://www.businessweek.com/articles/2014-03-25/hard-rock-cafe-wants-you-to-forget-that-old-time-rock-and-roll

Welcome to the Experience Economy * B. Joseph Pine II * James H. Gilmore
FROM THE JULY 1998 ISSUE

EXPLORE THE ARCHIVE
How do economies change? The entire history of economic progress can be recapitulated in the four-stage evolution of the birthday cake. As a vestige of the agrarian economy, mothers made birthday cakes from scratch, mixing farm commodities (flour, sugar, butter, and eggs) that together cost mere dimes. As the goods-based industrial economy advanced, moms paid a dollar or two to Betty Crocker for premixed ingredients. Later, when the service economy took hold, busy parents ordered cakes from the bakery or grocery store, which, at $10 or $15, cost ten times as much as the packaged ingredients. Now, in the time-starved 1990s, parents neither make the birthday cake nor even throw the party. Instead, they spend$100 or more to “outsource” the entire event to Chuck E. Cheese’s, the Discovery Zone, the Mining Company, or some other business that stages a memorable event for the kids—and often throws in the cake for free. Welcome to the emerging experience economy.
Economists have typically lumped experiences in with services, but experiences are a distinct economic offering, as different from services as services are from goods. Today we can identify and describe this fourth economic offering because consumers unquestionably desire experiences, and more and more businesses are responding by explicitly designing and promoting them. As services, like goods before them, increasingly become commoditized—think of long-distance telephone services sold solely on price—experiences have emerged as the next step in what we call theprogression of economic value. (See the exhibit “The Progression of Economic Value.”) From now on, leading-edge companies—whether they sell to consumers or businesses—will find that the next competitive battleground lies in staging experiences.

The Progression of Economic Value
An experience is not an amorphous construct; it is as real an offering as any service, good, or commodity. In today’s service economy, many companies simply wrap experiences around their traditional offerings to sell them better. To realize the full benefit of staging experiences, however, businesses must deliberately design engaging experiences that command a fee. This transition from selling services to selling experiences will be no easier for established companies to undertake and weather than the last great economic shift, from the industrial to the service economy. Unless companies want to be in a commoditized business, however, they will be compelled to upgrade their offerings to the next stage of economic value.
The question, then, isn’t whether, but when—and how—to enter the emerging experience economy. An early look at the characteristics of experiences and the design principles of pioneering experience stagers suggests how companies can begin to answer this question.
Staging Experiences that Sell
To appreciate the difference between services and experiences, recall the episode of the old television show Taxi in which Iggy, a usually atrocious (but fun-loving) cab driver, decided to become the best taxi driver in the world. He served sandwiches and drinks, conducted tours of the city, and even sang Frank Sinatra tunes. By engaging passengers in a way that turned an ordinary cab ride into a memorable event, Iggy created something else entirely—a distinct economic offering. The experience of riding in his cab was more valuable to his customers than the service of being transported by the cab—and in the TV show, at least, Iggy’s customers happily responded by giving bigger tips. By asking to go around the block again, one patron even paid more for poorer service just to prolong his enjoyment. The service Iggy provided—taxi transportation—was simply the stage for the experience that he was really selling.
An experience occurs when a company intentionally uses services as the stage, and goods as props, to engage individual customers in a way that creates a memorable event. Commodities are fungible, goods tangible, services intangible, and experiencesmemorable. (See the chart “Economic Distinctions.”) Buyers of experiences—we’ll follow the lead of experience-economy pioneer Walt Disney and call them “guests”—value what the company reveals over a duration of time. While prior economic offerings—commodities, goods, and services—are external to the buyer, experiences are inherently personal, existing only in the mind of an individual who has been engaged on an emotional, physical, intellectual, or even spiritual level. Thus, no two people can have the same experience, because each experience derives from the interaction between the staged event (like a theatrical play) and the individual’s state of mind.

Economic Distinctions
Experiences have always been at the heart of the entertainment business—a fact that Walt Disney and the company he founded have creatively exploited. But today the concept of selling an entertainment experience is taking root in businesses far removed from theaters and amusement parks. New technologies, in particular, encourage whole new genres of experience, such as interactive games, Internet chat rooms and multi-player games, motion-based simulators, and virtual reality. The growing processing power required to render ever-more immersive experiences now drives demand for the goods and services of the computer industry. In a speech made at the November 1996 COMDEX computer trade show, Intel chairman Andrew Grove declared, “We need to look at our business as more than simply the building and selling of personal computers. Our business is the delivery of information and lifelike interactive experiences.”
Today the concept of selling experiences is spreading beyond theaters and theme parks.
At theme restaurants such as the Hard Rock Cafe, Planet Hollywood, or the House of Blues, the food is just a prop for what’s known as “eatertainment.” And stores such as Niketown, Cabella’s, and Recreational Equipment Incorporated draw consumers in by offering fun activities, fascinating displays, and promotional events (sometimes labeled “shoppertainment” or “entertailing”).
But experiences are not exclusively about entertainment; companies stage an experience whenever they engage customers in a personal, memorable way. In the travel business, former British Airways chairman Sir Colin Marshall has noted that the “commodity mind-set” is to “think that a business is merely performing a function—in our case, transporting people from point A to point B on time and at the lowest possible price.” What British Airways does, according to Sir Colin, is “to go beyond the function and compete on the basis of providing an experience.” (See “Competing on Customer Service: An Interview with British Airways’ Sir Colin Marshall,” HBR November–December 1995.) The company uses its base service (the travel itself) as the stage for a distinctive en route experience—one that attempts to transform air travel into a respite from the traveler’s normally frenetic life.
Neither are experiences only for consumer industries. Companies consist of people, and business-to-business settings also present stages for experiences. For example, a Minneapolis computer-installation and repair company calls itself the Geek Squad. Its “special agents” costume themselves in white shirts with thin black ties and pocket protectors, carry badges, drive old cars, and turn a humdrum activity into a memorable encounter. Similarly, many companies hire theater troupes—like the St. Louis-based trainers One World Music, facilitators of a program called Synergy through Samba—to turn otherwise ordinary meetings into improvisational events that encourage breakthrough thinking.
Business-to-business marketers increasingly create venues as elaborate as any Disney attraction in which to sell their goods and services. In June 1996, Silicon Graphics, for example, opened its Visionar-ium Reality Center at corporate headquarters in Mountain View, California, to bring customers and engineers together in an environment where they can interact with real-time, three-dimensional product visualizations. Customers can view, hear, and touch—as well as drive, walk, or fly—through myriad product possibilities. “This is experiential computing at its ultimate, where our customers can know what their products will look like, sound like, feel like before manufacturing,” said then chairman and CEO Edward McCracken.
You Are What You Charge For
Notice, however, that while all of these companies stage experiences, most are still charging for their goods and services. Companies generally move from one economic stage to the next in incremental steps. In its heyday in the 1960s and 1970s, IBM’s slogan was “IBM Means Service,” and the computer manufacturer indeed lavished services—for free—on any company that would buy its hardware goods. It planned facilities, programmed code, integrated other companies’ equipment, and repaired its own machines; its service offerings overwhelmed the competition. But eventually IBM had to charge customers for what it had been giving away for free, when a Justice Department suit required the company to unbundle its hardware and software. The government order notwithstanding, IBM couldn’t afford to continue to meet increasing customer-service demands without explicitly charging for them. Services, it turned out, were the company’s most valued offerings. Today, with its mainframe computers long since commoditized, IBM’s Global Services unit grows at double-digit annual rates. The company no longer gives away its services to sell its goods. In fact, the deal is reversed: the company will buy its clients’ hardware if they’ll contract with Global Services to manage their information systems. IBM still manufactures computers, but now it’s in the business of providing services.
It’s an indication of the maturity of the service economy that IBM and other manufacturers now make greater profits from the services than from the goods they provide. General Electric’s GE Capital unit and the financial arms of the Big Three automakers are cases in point. Likewise, it’s an indication of the immaturity of the experience economy that most companies providing experiences—like the Hard Rock Cafe, the Geek Squad, or Silicon Graphics—don’t yet explicitly charge for the events that they stage.
No company sells experiences as its economic offering unless it actually charges guests an admission fee. An event created just to increase customer preference for the commoditized goods or services that a company actually sells is not an economic offering. But even if a company rejects (for now) charging admission to events that it stages, its managers should already be asking themselves what they would do differently if they were to charge admission. The answers will help them see how their company might begin to move forward into the experience economy, for such an approach demands the design of richer experiences.
Companies should think about what they would do differently if they charged admission.
Movie theaters already charge admission to see featured films, but Jim Loeks, part-owner of the Star theater complex in Southfield, Michigan, told Forbes magazine that “it should be worth the price of the movie just to go into the theater.” Star charges 3 million customers a year 25% higher admission for a movie than a local competitor does because of the fun-house experience it provides. Soon, perhaps, with 65,000 square feet of restaurants and stores being added to the complex, Star will charge its customers admission just to get into the complex.
Some retailers already border on the experiential. At the Sharper Image or Brookstone, notice how many people play with the gadgets, listen to miniaturized stereo equipment, sit in massage chairs, and then leave without paying for what they valued, namely, the experience. Could these stores charge admission? Not as they are currently managed. But if they did charge an admission fee, they would be forced to stage a much better experience to attract paying guests. The merchandise mix would need to change more often—daily or even hourly. The stores would have to add demonstrations, showcases, contests, and other attractions to enhance the customer experience.
With its Niketown stores, Nike is almost in the experience business. To avoid alienating its existing retail channels, Nike created Niketown as a merchandising exposition. It’s ostensibly for show—to build the brand image and stimulate buying at other retail outlets—not for selling. If that is so, then why not explicitly charge customers for experiencing Niketown? Would people pay? People have already queued to enter the Niketown on Chicago’s Michigan Avenue. An admission fee would force Nike to stage more engaging events inside. The stores might actually use the basketball court, say, to stage one-on-one games or rounds of horse with National Basketball Association players. Afterward customers could buy customized Nike T-shirts, commemorating the date and score of events—complete with an action photo of the winning hoop. There might be more interactive kiosks for educational exploration of past athletic events. Virtual reality machines could let you, as Nike’s advertising attests, be Tiger Woods. Nike could probably generate as much admission-based revenue per square foot from Niketown as the Walt Disney Company does from its entertainment venues—and as Disney should (but does not) yield from its own retail stores. For the premier company of the experience economy, Disney’s specialty retailing outside of its own theme parks disappoints. Its mall stores aren’t much different from anyone else’s, precisely because Disney doesn’t charge admission to them—and so doesn’t bother creating the extraordinary experiences it so expertly creates elsewhere.
An entrepreneur in Israel has entered the experience economy with the opening of Cafe Ke’ilu, which roughly translates as “Cafe Make Believe.” Manager Nir Caspi told a reporter that people come to cafés to be seen and to meet people, not for the food; Cafe Ke’ilu pursues that observation to its logical conclusion. The establishment serves its customers plates and mugs that are empty and charges guests $3 during the week and $6 on weekends for the social experience.
Charging admission—requiring customers to pay for the experience—does not mean that companies have to stop selling goods and services. Disney generates significant profits from parking, food, and other service fees at its theme parks as well as from the sale of memorabilia. But without the staged experiences of the company’s theme parks, cartoons, movies, and TV shows, customers would have nothing to remember—and Disney would have no characters to exploit.
In the full-fledged experience economy, retail stores and even entire shopping malls will charge admission before they let a consumer even set foot in them. Some shopping malls, in fact, already do charge admission. We’re not thinking of the Mall of America outside of Minneapolis, which contains an amusement park; it charges for the rides, but the shopping is still free. We’re referring to the Gilroy Garlic Festival in California, the Minnesota Renaissance Festival, the Kitchener-Waterloo Oktoberfest in Ontario, Canada, and other seasonal festivals that are really outdoor shopping malls and do indeed charge admission. Consumers judge them worth the fees because the festival operators script distinctive experiences around enticing themes, as well as stage activities that captivate customers before, after, and while they shop. With nearly every customer leaving with at least one bag of merchandise, these festival experiences clearly capture shopping dollars that otherwise would be spent at traditional malls and retail outlets.
Some companies will eventually be like trade shows, charging customers to sell to them.
The business equivalent of a shopping mall is a trade show—a place for finding, learning about, and, if a need is met, purchasing exhibitors’ offerings. Trade-show operators already charge admission to the experiences they create; individual business-to-business companies will need to do the same, essentially charging customers to sell to them. Diamond Technology Partners for instance, stages the Diamond Exchange, a series of forums that help members explore the digital future. Current and potential clients pay tens of thousands of dollars annually to attend because what they gain—fresh insights, self-discovery, and engaging interactions—is worth it. No one minds that in staging the event, Diamond greatly improves its chances of selling follow-up consulting work.
The Characteristics of Experiences
Before a company can charge admission, it must design an experience that customers judge to be worth the price. Excellent design, marketing, and delivery will be every bit as crucial for experiences as they are for goods and services. Ingenuity and innovation will always precede growth in revenue. Yet experiences, like goods and services, have their own distinct qualities and characteristics and present their own design challenges.
One way to think about experiences is across two dimensions. The first corresponds tocustomer participation. At one end of the spectrum lies passive participation, in which customers don’t affect the performance at all. Such participants include symphony-goers, for example, who experience the event as observers or listeners. At the other end of the spectrum lies active participation, in which customers play key roles in creating the performance or event that yields the experience. These participants include skiers. But even people who turn out to watch a ski race are not completely passive participants; simply by being there, they contribute to the visual and aural event that others experience.
The second dimension of experience describes the connection, or environmental relationship, that unites customers with the event or performance. At one end of the connection spectrum lies absorption, at the other end, immersion. People viewing the Kentucky Derby from the grandstand can absorb the event taking place beneath and in front of them; meanwhile, people standing in the infield are immersed in the sights, sounds, and smells that surround them. Furiously scribbling notes while listening to a physics lecture is more absorbing than reading a textbook; seeing a film at the theater with an audience, large screen, and stereophonic sound is more immersing than watching the same film on video at home.
We can sort experiences into four broad categories according to where they fall along the spectra of the two dimensions. (See the exhibit “The Four Realms of an Experience.”) The kinds of experiences most people think of as entertainment—watching television, attending a concert—tend to be those in which customers participate more passively than actively; their connection with the event is more likely one of absorption than of immersion. Educational events—attending a class, taking a ski lesson—tend to involve more active participation, but students (customers, if you will) are still more outside the event than immersed in the action. Escapist experiences can teach just as well as educational events can, or amuse just as well as entertainment, but they involve greater customer immersion. Acting in a play, playing in an orchestra, or descending the Grand Canyon involve both active participation and immersion in the experience. If you minimize the customers’ active participation, however, an escapist event becomes an experience of the fourth kind—the esthetic. Here customers or participants are immersed in an activity or environment, but they themselves have little or no effect on it—like a tourist who merely views the Grand Canyon from its rim or like a visitor to an art gallery.

The Four Realms of an Experience
Generally, we find that the richest experiences—such as going to Disney World or gambling in a Las Vegas casino—encompass aspects of all four realms, forming a “sweet spot” around the area where the spectra meet. But still, the universe of possible experiences is vast. Eventually, the most significant question managers can ask themselves is “What specific experience will my company offer?” That experience will come to define their business.
Experiences, like goods and services, have to meet a customer need; they have to work; and they have to be deliverable. Just as goods and services result from an iterative process of research, design, and development, experiences derive from an iterative process of exploration, scripting, and staging—capabilities that aspiring experience merchants will need to master.
Designing Memorable Experiences
We expect that experience design will become as much a business art as product design and process design are today. Indeed, design principles are already apparent from the practices of and results obtained by companies that have (or nearly have) advanced into the experience economy. We have identified five key experience-design principles.
Theme the experience.
Just hear the name of any “eatertainment” restaurant—Hard Rock Cafe, Planet Hollywood, or the Rainforest Cafe, to name a few—and you instantly know what to expect when you enter the establishment. The proprietors have taken the first, crucial step in staging an experience by envisioning a well-defined theme. One poorly conceived, on the other hand, gives customers nothing around which to organize the impressions they encounter, and the experience yields no lasting memory. An incoherent theme is like Gertrude Stein’s Oakland: “There is no there there.” Retailers often offend the principle. They talk of “the shopping experience” but fail to create a theme that ties the disparate merchandising presentations together into a staged experience. Home-appliance and electronics retailers in particular show little thematic imagination. Row upon row of washers and dryers and wall after wall of refrigerators accentuate the sameness of different companies’ stores. Shouldn’t there be something distinctive about an establishment called Circuit City, for example?
Consider the Forum Shops in Las Vegas, a mall that displays its distinctive theme—an ancient Roman marketplace—in every detail. The Simon DeBartolo Group, which developed the mall, fulfills this motif through a panoply of architectural effects. These include marble floors, stark white pillars, “outdoor” cafés, living trees, flowing fountains—and even a painted blue sky with fluffy white clouds that yield regularly to simulated storms, complete with lightning and thunder. Every mall entrance and every store-front is an elaborate Roman re-creation. Every hour inside the main entrance, statues of Caesar and other Roman luminaries come to life and speak. “Hail, Caesar!” is a frequent cry, and Roman centurions periodically march through on their way to the adjacent Caesar’s Palace casino. The Roman theme even extends into some of the shops. A jewelry store’s interior, for instance, features scrolls, tablets, Roman numerals, and gold draperies. The theme implies opulence, and the mall’s 1997 sales—more than $1,000 per square foot, compared with a typical mall’s sales of less than$300—suggest that the experience works.
An effective theme is concise and compelling. It is not a corporate mission statement or a marketing tag line. It needn’t be publicly articulated in writing. But the theme must drive all the design elements and staged events of the experience toward a unified story line that wholly captivates the customer. Educational Discoveries and Professional Training International of Orem, Utah, stage a day-long course on basic accounting skills to nonfinancial managers. Their exquisitely simple theme—running a lemonade stand—turns learning into an experience. Students use real lemons and lemonade, music, balloons, and a good deal of ballyhoo while they create a corporate financial statement. The theme unifies the experience in the students’ minds and helps make the learning memorable.
Harmonize impressions with positive cues.
While the theme forms the foundation, the experience must be rendered with indelible impressions. Impressions are the “takeaways” of the experience; they fulfill the theme. To create the desired impressions, companies must introduce cues that affirm the nature of the experience to the guest. Each cue must support the theme, and none should be inconsistent with it.
To create the desired impression, companies must provide cues that affirm the nature of the experience.
George Harrop, founder of Barista Brava, a franchised chain of coffee bars based in Washington, D.C., developed the company’s theme of “the marriage of Old-World Italian espresso bars with fast-paced American living.” The interior decor supports the Old World theme, and the carefully designed pattern of the floor tiles and counters encourages customers to line up without the usual signage or ropes that would detract from that theme. The impressions convey quick service in a soothing setting. Furthermore, Harrop encourages baristas to remember faces so that regular customers are handed their usual order without even having to ask.
Even the smallest cue can aid the creation of a unique experience. When a restaurant host says, “Your table is ready,” no particular cue is given. But when a Rainforest Cafe host declares, “Your adventure is about to begin,” it sets the stage for something special.
It’s the cues that make the impressions that create the experience in the customer’s mind. An experience can be unpleasant merely because some architectural feature has been overlooked, under-appreciated, or uncoordinated. Unplanned or inconsistent visual and aural cues can leave a customer confused or lost. Have you ever been unsure how to find your hotel room, even after the front-desk staff provided detailed directions? Better, clearer cues along the way would have enhanced your experience. Standard Parking of Chicago decorates each floor of its O’Hare Airport garage with icons of different Chicago sports franchises—the Bulls on one floor, the White Sox on another, and so forth. And each level has its own signature song wafting through it. “You never forget where you parked,” one Chicago resident remarked, which is precisely the experience a traveler wants after returning from a week of travel.
Eliminate negative cues.
Ensuring the integrity of the customer experience requires more than the layering on of positive cues. Experience stagers also must eliminate anything that diminishes, contradicts, or distracts from the theme. Most constructed spaces—malls, offices, buildings, or airplanes—are littered with meaningless or trivial messages. While customers sometimes do need instructions, too often service providers choose an inappropriate medium or message form. For example, trash bins at fast-food facilities typically display a “Thank You” sign. True, it’s a cue to customers to bus their own trays, but it also says, “No service here,” a negative reminder. Experience stagers might, instead, turn the trash bin into a talking, garbage-eating character that announces its gratitude when the lid swings open. Customers get the same message but without the negative cue, and self-busing becomes a positive part of the eating experience.
The easiest way to turn a service into an experience is to provide poor service—thus creating a memorable encounter of the unpleasant kind. “Overservicing” in the name of customer intimacy can also ruin an experience. Airline pilots interrupt customers who are reading, talking, or napping to announce, “Toledo is off to the right side of the aircraft.” At hotels, front-desk personnel interrupt face-to-face conversations with guests to field telephone calls. In the guestrooms, service reminders clutter end tables, dressers, and desktops. (Hide them away and housekeeping will replace these annoyances the next morning.) Eliminating negative cues—by transmitting pilots’ offhand announcements through headsets instead of speakers, by assigning off-stage personnel to answer phones, and by placing guest information on an interactive television channel—creates a more pleasurable customer experience.
Mix in memorabilia.
Certain goods have always been purchased primarily for the memories they convey. Vacationers buy postcards to evoke a treasured sight, golfers purchase a shirt or cap with an embroidered logo to recall a course or round, and teenagers obtain T-shirts to remember a rock concert. They purchase such memorabilia as a physical reminder of an experience.
People already spend tens of billions of dollars every year on memorabilia. These goods generally sell at price points far above those commanded by similar items that don’t represent an experience. A Rolling Stones concert-goer, for example, will pay a premium for an official T-shirt emblazoned with the date and city of the concert. That’s because the price points are a function less of the cost of goods than of the value the buyer attaches to remembering the experience.
If airlines truly sold experiences, more passengers would actually shop in the seat-pocket catalogs for mementos of their flight.
If service businesses like airlines, banks, grocery stores, and insurance companies find no demand for memorabilia, it’s because they do not stage engaging experiences. But if these businesses offered themed experiences layered with positive cues and devoid of negative cues, their guests would want and would pay for memorabilia to commemorate their experiences. (If guests didn’t want to, it probably would mean the experience wasn’t great.) The special agents of the Geek Squad, for example, stage such a distinctive computer-repair experience that customers buy T-shirts and lapel pins from the company’s Web site. If airlines truly were in the experience-staging business, more passengers would actually shop in those seat-pocket catalogs for appropriate mementos. Likewise, mortgage loans would inspire household keepsakes; grocery checkout lanes would stock souvenirs in lieu of nickel-and-dime impulse items; and perhaps even insurance policy certificates would be considered suitable for framing.
Engage all five senses.
The sensory stimulants that accompany an experience should support and enhance its theme. The more senses an experience engages, the more effective and memorable it can be. Smart shoeshine operators augment the smell of polish with crisp snaps of the cloth, scents and sounds that don’t make the shoes any shinier but do make the experience more engaging. Savvy hair stylists shampoo and apply lotions not simply because the styling requires it but because they add more tactile sensations to the customer experience. Similarly, grocery stores pipe bakery smells into the aisles, and some use light and sound to simulate thunderstorms when misting their produce.
The mist at the Rainforest Cafe appeals serially to all five senses. It is first apparent as a sound: Sss-sss-zzz. Then you see the mist rising from the rocks and feel it soft and cool against your skin. Finally, you smell its tropical essence, and you taste (or imagine that you do) its freshness. What you can’t be is unaffected by the mist.
Some cues heighten an experience through a single sense affected through striking simplicity. The Cleveland Bicentennial Commission spent $4 million to illuminate eight automobile and railroad bridges over the Cuyahoga River near a nightspot area called the Flats. No one pays a toll to view or even to cross these illuminated bridges, but the dramatically lighted structures are a prop that city managers hope will help attract tourist dollars by making a trip to downtown Cleveland a more memorable nighttime experience.
Not all sensations are good ones, and some combinations don’t work. Bookstore designers have discovered that the aroma and taste of coffee go well with a freshly cracked book. But Duds n’ Suds went bust attempting to combine a bar and a coin-operated laundromat. The smells of phosphates and hops, apparently, aren’t mutually complementary.
Entering the Experience Economy
Using these five design principles, of course, is no guarantee of success; no one has repealed the laws of supply and demand. Companies that fail to provide consistently engaging experiences, overprice their experiences relative to the value perceived, or overbuild their capacity to stage them will of course see pressure on demand, pricing, or both. One stalwart of the children’s birthday-party circuit, Discovery Zone, has had a rough few years because of inconsistent experience staging, poorly maintained games, and little consideration of the experience received by adults, who are, after all, paying for the event. More recently, the Rainforest Cafe and Planet Hollywood have encountered trouble because they have failed to refresh their experiences. Guests find nothing different from one visit to the next. Disney, on the other hand, avoids staleness by frequently adding new attractions and even whole parks such as the Animal Kingdom, which opened in the spring of 1998.
As the experience economy unfolds, more than a few experience stagers will exit the business. It’s hard to imagine, for example, that every one of the scores of theme-based restaurants operating today will last into the millennium. Recall that once there were more than 100 automakers in eastern Michigan and more than 40 cereal makers in western Michigan. Now only the Big Three automakers in Detroit and the Kellogg Company in Battle Creek remain. The growth of the industrial economy and the service economy came with the proliferation of offerings—goods and services that didn’t exist before imaginative designers and marketers invented and developed them. That’s also how the experience economy will grow: through the “gales of creative destruction,” as the economist Joseph Schumpeter termed it—that is, business innovation, which threatens to render irrelevant those who relegate themselves to the diminishing world of goods and services.