Customer Experience Design: The Ritz-Carlton Philosophy Versus IKEA Philosophy

When we talk about remarkable customer experiences, we usually think about creating something that is "bigger, better, more". I often argue in conversations about customer experience that “you don't need fireworks to deliver remarkable customer experiences". Bigger, better, more is not the only way to deliver great customer experiences.

It might be the most fashionable approach to improve customer experience (everybody wants to work on projects that make a brand more "premium" and "exclusive") but this is not the only possible path. Let’s look at two different philosophies for creating remarkable customer experiences.

The Ritz-Carlton Philosophy
The Ritz-Carlton Hotels are famous for their exclusive interior, world-class service and the extraordinary customer experiences that are delivered by each-and-every employee. The biggest challenge with this “Ritz-Carlton Customer Experience Philosophy" is that in order to provide more benefits to the customer, organizations are confronted with additional costs to provide them. More employees, better technology, more exclusive interior require higher prices if profit margins want to be sustained.

The effect of higher prices is that customer-perceived value, the ratio between perceived benefits and perceived sacrifice, is only slightly improved. Perceived sacrifice includes all the costs a buyer faces when making a purchase while the perceived benefits are the combination of physical attributes, service attributes and technical support.

This "premium" strategy only works when you target a price-insensitive customer segments that is willing to pay more for these additional benefits. The remarkable experience comes from the accumulation of these benefits into "peak experiences".

The "Ritz-Carlton Customer Experience Philosophy" creates remarkable customer experiences through extraordinary benefits at extraordinary prices.

The IKEA Philosophy
Another approach, which I call "The IKEA Philosophy", is to deliver extraordinary customer experiences by increasing customer perceived value through reducing perceived sacrifice for the customer.

IKEA creates remarkable experiences through its modern, utilitarian furniture and store design while at the same time ensuring lowest-prices through reduced shipping and inventory costs and self-assembly.

The IKEA approach increases customer perceived value primarily by decreasing sacrifice (the same benefits at a lower price) and secondarily by increasing benefits with constant sacrifice (more benefits at the same price).

When following such an approach, the focus shifts from "bigger, better, more" to "easier, cheaper, faster". The necessary tactics to realize this are well known: process optimization and cost-cutting. Usually we only think of these tactics when we are facing a recession, serious competitive pressure or when profit margins are sinking.

Organizations that can leverage process-optimization and cost-cutting to increase customer perceived value have a powerful tool to create remarkable customer experiences.

The "IKEA Customer Experience Philosophy" creates remarkable customer experiences by reducing the sacrifice and costs that customers incur to experience a company's products and services.

What does this mean for your organization?
Instead of pursuing a "Ritz-Carlton" customer experience strategy that focuses on "bigger, better, more", think about what you could achieve in your organization if you pursue an IKEA "easier, cheaper, faster" philosophy to deliver remarkable customer experiences?

Which processes could be improved to reduce perceived sacrifice? Instead of lowering prices, could you deliver more benefits to the customer through operational efficiency?

While this is not an either/or decision, it is necessary to understand these two different options for designing remarkable customer experiences. The Ritz-Carlton philosophy might be more “fun” to work on, you can probably have a bigger impact on the bottom-line by following the IKEA philosophy for customer experience design.

Further Links:

Examples of companies, products and services that follow the "Ritz-Carlton experience philosophy" can be found in the trend report "ÜBERPREMIUM".

Examples of companies, products and services that follow the "IKEA experience philosophy" can be found in the trend report NO FRILLS CHIC.

This is a repost from the blog The Customer Experience Labs.