There is an undeniable phoniness underlying much of today's marketing practices. Think of the appeal of any mouthwatering hamburger in a TV spot versus the reality encountered in the actual fast food joint. Or consider the countless direct mail pieces for shiny new automobiles versus the dirty or disheveled dealership one has to visit to buy or lease one. Or think of any airline, hotel, or even hospital advertisement; if you could only check into the ads, you'd have a great experience. Indeed, the easiest way to be perceived as fake is to advertise things you are not.
A new approach to demand creation is needed, one that forces a company to be what it says it is; and someone needs to head this new effort. Enter the CXO.
One of the key responsibilities of CXOs - and something that should differentiate them from all the responsibilities of Chief Marketing Officers - is ensuring that the experiences under their purview are worth an admission fee. Without a doubt the most controversy we encountered over our last book, The Experience Economy, centered on our insistence that experience stagers of all stripes - not just those that use them purely to generate demand, but retailers, restaurateurs, hoteliers, and even B2B suppliers - should charge admission for the experiences they stage. But we mean it. Such a step is the logical consequence of recognizing experiences as a distinct economic offering.
Moreover, charging admission means that an experience exists as an offering in and of itself. It's not the representation of a thing, like an ad; it's a thing in its own right. It's not just marketing; it's an actual offering rendered all the more real by its explicit fees.
We do admit charging admission is not yet prudent for all companies in all situations - but the exceptions are shrinking fast. If you don't charge admission, budgets will eventually get squeezed. So understand exactly how admission fees affect the return on investment equation that already is the bane of most CMOs' existence (and will be for CXOs if they fail to heed our warning here).
On its face, return on investment for any marketing endeavor is a fairly simple calculation:
ROI = Incremental revenue
While it's hard enough measuring the incremental revenue a traditional marketing campaign yields - we'll spare you the old saws - you certainly know its cost. So let's focus on the denominator here. When you stage an experience, its cost is not the only below-the-line factor, for charging an admission fee generates revenue in and of itself.
So the return on investment for experiences becomes:
Cost - Admission fees
Thus, admission fees reduce the denominator of the equation and can therefore make ROI go up dramatically. If you create an unquestionably compelling experience truly worth an admission fee, you actually can recoup your costs, and perhaps even make a profit. Although the company will not divulge figures, it seems that most of the experiences at each American Girl Place pay for themselves, if not for the entire venue. As do, we believe, REI with its climbing mountains (which is at least partially paid for by suppliers), Vans with its Skateparks, and - we know, thanks to its sale to Blackstone - Lego with its theme park experiences. ING Direct, of course, charges for the coffee (and biscotti) in its cafés, which while technically not an admission fee, certainly sets a price point for customers to value the worthiness of each place, and recoup their costs.
With a great experience - so compelling that your customers gladly pay you to sell to them - you can drive the denominator in the ROI equation down to zero, and thereby have infinite ROI on all the incremental revenue you generate. Imagine going in to the CEO or CFO during your next budget cycle and demonstrating how you will achieve infinite ROI on your next demand-generation activity - not by marketing, but by creating places for staging authenticity-rendering experiences.
It's not fantasy; it's reality. Companies are doing just this today by thinking imaginatively about engaging their current and potential customers and designing creatively around admission-fee experiences in ways that no advertisement can do. They have stopped fretting about the declining efficacy of ads, turned their backs on how ads tend to make them perceived as fake, and pursued a whole new medium: the experience, where they can demonstrate exactly what they are, and thereby be perceived as real.
James H. Gilmore and B. Joseph Pine II are the authors of Authenticity: What Consumers Really Want.