The Value of The Experience

Tomorrow morning, I’ll open the DEMO Conference with my semi-annual observations on the state of the information technology market. (We’ll post it here just after 8:30am.) One point I’ll touch on is the importance of the total customer experience with a product, a site, a brand, and/or a company. It’s my belief that those companies that provide a complete experience will profit most richly.

(In fact, I made this argument more than a year ago in a DEMOletter column, suggesting that the mobile operator that focuses on customer experience rather than minute plans will take the market lead. I am not, of course, holding my breath on that one.)

A case in point was brought to my attention by Rick Schutte, COO of New York money management firm Galleon Management and a long-time hardware analyst. Rick made the observation that had Apple charged a $10 entrance fee to its 200 Apple Stores, the company would have generated an incremental operating profit of $1 Billion in 2007.

Apple had more than 100 million customers visiting its 200 stores in 2007. Had the security guard at the door charged $10 per entrant at no incremental expense, Apple would have generated an incremental $1B in operating profit in 2007. Apple stores generate highly valuable traffic, even without the cover charge. Rick pointed me to a Sanford Berstein report that says Apple stores generate five times the sales per square foot than BestBuy, the leading electronics retailer. At nearly $4,500 in sales per square foot, Apple stores out-perform luxury retailers including Tiffany ($2,746) and Coach ($1,648). BestBuy rings up $929 per square foot, by the way.

All those Apple store shoppers have other options when it comes to acquiring their Apple gear. But the experience of browsing an Apple store, talking with staff at the Genius Bar, and laying hands on the latest Apple products builds a strong bond between Apple and its “faithful.”

Are Apple products better than those from other vendors? It’s an arguable point. But there is no question: the Apple experience far outstrips any other technology, mobile phone, or consumer electronics provider. And as such, Apple is the vanguard of the new experience economy.

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