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In 2006 Harley-Davidson's net income climbed to US$312.7 million from US$265 million a year earlier. Revenue rose 14 per cent to US$1.64 billion, and shipments jumped 11 per cent, including a substantial 22 per cent jump for highend models. Predictions are that earnings per share will rise 11 per cent to 17 per cent by the end of 2009.

There are lots of good motorcycles that cost a lot less to buy than a Harley-Davidson. In every category of product and service, the winning providers, the ones who have the highest profit margins in their fees and prices, are the ones who sweat the small stuff to create a distinctive, mind-blowing customer experience, as Harley-Davidson have done with the look and feel of their motorcycles. They go beyond the product or service itself to the total ownership experience that customers have, and they do everything in their power to make that experience truly unique.

Apple, an obvious flipstar, have understood this for a long time. As my Apple mates say to me when comparing PCs to Apple computers, 'Apples are beautiful'. And it seems as though other computer makers are getting on board too.

Dell's new cases look much more modern and slick. Asus have teemed up with Lamborghini (an instance of characterisation by association with a well-established brand) and produced a leather-bound laptop – not the carry case, but the actual casing of the laptop itself is leather. Hewlett- Packard have reclaimed the number one PC spot over Dell in large part because they have been faster to jump on the trend that design is a powerful differentiator.

SERVICE

Service usually gets the most attention in discussions of the customer experience. But in many cases, product form, functionality and story can trump bad service. That was my experience with an Italian lounge that I bought recently.Actually it only
arrived
recently; in fact I bought it some time ago.

I want to mention the establishment by name, because their service was appalling, and they deserve to be called on the carpet, but my publisher's lawyers prevent me from doing so. It was a struggle to get assistance from the staff from the first moment my wife and I walked in the door. And after we had ordered the lounge, they sprung the good news that delivery would take three months. I was thinking more like three days so we'd be able to start enjoying the new lounge that weekend.

Four months later,
nothing
. No lounge, no phone call, no email, no letter from the shop explaining what was happening. I rang and asked where in blazes my lounge was, and they told me there were always shipping delays from the Italian manufacturer. They assumed I was an idiot and didn't realise the true situation: that they were a small importer of specialty furniture with no inventory except what was on display, and that they minimised costs by only shipping full containers. They had obviously had a slow year, and as the rare customer who had actually bought something I was paying the price.

Two months after that, half a year after I had initiated the purchase, the store called to say that my lounge would arrive the next day. This was with no update correspondence or any other communication in between. I called back to say that tomorrow was not convenient, but they would have none of that. I asked if they could at least tell me when it would be arriving, so I could arrange for someone to be home to receive it. No information there, either.

To top it all off, the delivery people refused to take away the cardboard and plastic the lounge arrived in. 'Sorry, sir?' they said, 'that is your responsibility.'

I could not imagine a worse service experience. But we absolutely love the lounge. It is both gorgeous and amazingly comfortable. It is a perfect fit for our space. When we have visitors, I can't resist pointing out that the lounge is imported direct from Italy, that it features a unique grade of leather, and that we sat on dozens of lounges and it is without a doubt the best lounge we tried.

In other words, the service was appalling but the total ownership experience is still awesome. The trials and tribulations we went through to get the lounge only make the story better in the end.

I'm not discounting the importance of the buying experience in general. If a product or service is highly commoditised, then it is the buying experience that may be the only thing that differentiates one offer from another. Such is often the case in banking. In the case of, say, a hotel room, the customer service is the form and function and the primary reason for the transaction. One hotel room is very much like another, and it is the service wrapped around the room that makes the difference.

Like all frequent business travellers, I stay in lots of hotels. Some I visit regularly, perhaps a few times a month. I belong to every loyalty program, but none of the hotels seems able to remember what my preferences are. Every time I check in, I still have to fill in my details on the form and say I like a non-smoking room with a doona and a firm pillow. I am sure any corporate road warriors reading this have similar stories.

Several years ago I was staying at a hotel just off St Kilda Road in Melbourne, overlooking the F1 racing track. I'd been on the last flight from Sydney and landed well after midnight, only to have to wait forty minutes for my bags to come out at the baggage claim area. When I reached the hotel well after 1 am, dragging a rolling suitcase with a briefcase attached and a suit bag over my shoulder, the lady at the desk smiled and asked, 'Checking in?'

Of course, this is what she had been trained to say and do, never forgetting the smile. But I felt like saying, 'No, I am taking my bags for a walk. What do you think I'm doing?' Instead, I simply said, 'Yes.'

After checking in, I asked for a wake-up call for four hours later, which I got as per usual via a recording. Having worked in the hotel business myself, I wondered why a member of the hotel staff didn't call me personally and ask if I wanted room service, since the restaurant was not yet open. Or the lady who checked me in after 1 am could have dumped her script and suggested breakfast in my room.

By showing a little empathy, the hotel could have made my morning more pleasant, increasing my likelihood of visiting the hotel again, and if I'd ordered room service they could have generated a 20 per cent increase in high-margin revenue on my bill. Instead, I have never stayed at that hotel again.

I've been stressing the difference between customer needs and customer wants. The hotel gave me the minimum I needed, but nothing more than that. And I don't think my expectations of something more were unreasonable.

In fact, like most customer expectations today, my expectations of a hotel are high in relation to what is normally offered. But they are not high at all in relation to what is possible. Remembering the check-in information I put down on the loyalty rewards forms should be standard operating procedure. Thanks to new technology, the hotel industry has the opportunity to give much better service than the customer is used to experiencing.

The hotel in St Kilda may not have figured this out yet, but the Four Seasons hotel chain has. The
BusinessWeek
top twenty-five listing of 'client-pleasing brands' (a customer service ranking) ranks Four Seasons Hotels and Resorts number two. Lexus, not surprisingly, ranks number seven. USAA, an insurance provider to mostly military families, is number one.

Four Seasons, in the words of founder Isadore Sharp, set out to 'redefine luxury as service'. For instance, they implemented what they call 'curbside check-in' for frequent guests. When you arrive, you are literally handed your room keys as you get out of the car. Oh, and how many visits makes a 'frequent' guest? As few as
five.

The 'no luggage required' policy is a feature of the hotel to help guests who lose luggage in transit. Lost or forgot a tie? No worries – tell them what your suit looks like, they'll fix you up. Wait, what was that? You lost your
whole suit
? No worries – we'll fit you for a new one you can borrow.

Consider the following stories that appeared in a
US News & World Report
article about Four Seasons hotels:

• A concierge donned fins and a snorkel to find a wedding band lost in a lagoon.
  
• A hotel telephone operator spent forty-five minutes on the phone directing a lost guest all the way to the hotel's entrance.
  
• A man asked room service for a martini shaker, only to find a tuxedoed server standing at his door – accessories in hand – ready to do the shaking.
  

The results speak for themselves. A tiny 2 per cent of guests in 2006 reported problems or registered complaints about service (down from the lofty heights of 4 per cent in 2005 . . . oh the shame!) at the hotel. RevPAR (revenue per available room) was up 11.8 per cent in 2006, on the back of a 10.6 per cent rise in room rates, at the same time as a 70 basis point rise in occupancy. Gross revenues were up 10.5 per cent and operating profits 18.2 per cent. Four Seasons are committing to 20 per cent earnings growth for each of the next five years. Only an unstinting commitment to the customer experience makes this possible.

DESIGNING THE TOTAL OWNERSHIP EXPERIENCE

The Apple iPod is an excellent example of how all four fundamentals of the total ownership experience can come together to create profitable global hits.

When the iPod came along it didn't sound better than existing digital music players and it cost more. Worse, it had lousy batteries that often failed long before they were supposed to.

But thanks to Steve Jobs, whose brainchild it was, the iPod had a great marketing slogan, 'A thousand songs in your pocket', that instantly told the story of what it would do for customers in their daily lives. It had a distinctive look, a pure white rectangle with white bud earphones where other digital music players were all shiny metal and awkward, complicated shapes. And it set a new standard in ease of use and ergonomics on its own and in tandem with Apple's iTunes software. When Apple later launched the iTunes Music Store, customers finally had a compelling, comprehensive answer to their digital music player needs and wants. The battery problems, serious though they were and are, have never held the iPod back because of the way the product and iTunes work in customers' lives.

As important to the rise and rise of the iPod is how people think they look when they're carrying their iPods and listening to them. They feel cool and believe they look cool. They are part of a hip community formed around and experienced through a commodity, just like the middle-aged businessmen who buy Harley-Davidson motorcycles and fantasise about riding them with Marlon Brando in the movie
The Wild One
or with Peter Fonda, Dennis Hopper and Jack Nicholson in
Easy Rider.

Part of the story of the iPod community even came to include the fact that the white bud earphones were a signal to muggers and pickpockets: this person has an iPod. In places like New York City it became a weird badge of honour that the pickpockets on the subway or the bus would focus on you because of your iPod earphones. It meant you were cool enough to have something worth stealing, something hot that everyone wanted. The New York Police Department and the Metropolitan Transit Authority even put up posters specifically warning iPod owners to be wary of pickpockets and other thieves.

Popular retail chains can also engender loyal communities of customers. In the last chapter I spoke about the Uniqlo chain in Japan and elsewhere. In the United States the discount superstore Target has carved out a distinctive brand identity as the favourite discount store of design-conscious, hip consumers in all demographics. The millions who are in on the secret often refer to Target as 'Tar-zhay', as if it were a fancy French boutique. This brand identity, summed up in the slogan 'Expect More, Pay Less', allows Target to enjoy a price premium over rival retailers such as Wal-Mart and K-Mart.

Target's formula for flipping the discount-store brand DNA around and making itself known for high-quality, well-designed products that it can charge a little extra for has two main prongs. One is a product mix that is on the cutting edge of customer trends, thanks to in-house trend-spotting and product lines from style gurus such as the fashion designers Isaac Mizrahi and Todd Oldham and the architect Michael Graves. The other is to have superb customer service that would be more expected from a luxury department store than a discounter. Both support the hip design- and value-conscious story that Target customers experience in shopping there.

Target has not succeeded in establishing the same brand identity in Australia, but their recent deal with Stella McCartney, Paul McCartney's designer daughter, was a good step in the right direction. In March of 2007, Target launched an exclusive Stella McCartney clothing line at its Australian stores and triggered scenes of chaos. Racks in Target stores in Melbourne (where there were queues before opening – unheard of for Target in Australia) were cleared of the Stella garments in as little as forty-five seconds, with security having to be called in to keep the commotion under control. The scenes of women fighting with each other to 'steal a bargai?' was the stuff of reality TV programming. One hundred Target stores across Australia opened at eight-thirty am, only to be emptied of mid-sized Stella range dresses by twenty past nine. It was absolute chaos. People were actually stripping clothes off mannequins as they cleared the stores of stock.

Target paid McCartney $1.27 million to design the one-off range of clothes exclusively for their stores. This is part of their move to position themselves at the 'high end' of the discount market. Target US last year teamed up with style guru Isaac Mizrahi for the same reason, and H&M have Madonna designing clothes for them in a similar push, as discussed in chapter 2, 'Fast, Good, Cheap – Pick 3.'

However, a few weeks after these scenes of mass hysteria, a few articles surfaced which mentioned that the glow had worn off rather quickly. After the initial run on the products, they actually sold really slowly after the hype wore off, with Target only marginally (and sometimes not at all) meeting its sales targets (no pun intended). So
while
it was a great marketing coup initially, there wasn't really a sufficient follow-through.