Transactional exchanges

I mentioned in my post about customer service that there are certain kinds of experiences which I call transactional. I’m not sure where I heard that term (or if I made it up) (Google makes transactional experiences look like a legal term), and my usage of it is probably not common based on Batman’s reaction to it in the comments (lots of great comments, by the way). For the rest of this post, I’m going to use the term transactional exchange instead of transactional experience – you’ll see why later.

What I meant by a transactional exchange is a completely basic economic exchange: you give me something, I give you money, we both go on our way. There is no past or future to our buyer-seller relationship; it exists purely for the time it takes to perform this single transaction.

This sounds like a very cold view of the world, but there are times when it is appropriate. When I’m going to the grocery store, I don’t want the cashier commenting on my groceries or asking about my life; I want to get my groceries and go home. When my friend Seppo goes into the store and knows exactly what games he wants to buy, he should be able to do so.

There are a couple interesting aspects to this. One comes out of my classes at Columbia. We’ve been discussing the ubiquitous S-Curve of technology adoption, where any given technology is adopted by very few initially, and then reaches a tipping point where everybody adopts it. Our professor pointed out that when your technology hits the top of the S-Curve, you can’t continue to sell it based on its new features, because those features are now mainstream. At that point, the technology is a commodity, and the only competition is going to be based on price (and efficiency so as to deliver the lowest price).

How does this relate to the rest of this post? Anything that is a commodity will be primarily served by transactional exchanges. If I can buy a video game anywhere, then what I want is the lowest price and the least hassle in acquiring it. The same is true of books, which is why Amazon is where I buy most of my books now.

This makes it important to realize where your product is in the technology life cycle. As your product becomes a commodity, you need to be prepared to compete on price and efficiency; at that point, our professor points out that you are competing with the Wal-Marts of the world. I think it affects the customer service as well; you need to focus on providing your customers with an efficient and hassle-free experience. If they experience any problems, they won’t come back, because they can go elsewhere to purchase the same thing.

The other interesting thing about transactional exchanges, though, is that they can be turned into something else. One example is my shoe-buying experience. I knew exactly what I wanted to buy. I first went to Macy’s, where I tried to have a transactional exchange (they give me the boots, I give them money), but failed as they were too disorganized to execute the transaction successfully. I then went to Benedetti Custom Shoes. My transaction was smooth and efficient (I got the boots, tried a couple different colors in my size, picked one, paid for it and went on my way), so it was successful on that level. But because I chatted with the salesman about my boots, and got his feedback and a sense of his passion about his business, I felt much better about my purchase. It was more than a transactional exchange, it was an experience.

And that’s really interesting, because I’m willing to pay more for an experience than I am for a purely economic transactional exchange. It’s why we pay more for good customer service, as I discussed in that last post. It indicates that we are not necessarily heading to a completely sterile world where we have no relationships with anybody, where we purchase food from Automats, and have only transactional exchanges. There is always a place for companies that add something to the experience.

A great example is the recent repositioning of the Target brand. For years, Target was known as just a discount store. Then Wal-Mart came in and dominated that space based on its superior technology and supply chain management efficiencies. Target has since repositioned itself as the design-conscious boutique discount store. It has added to its image, so it is no longer competing solely on price and efficiency. In my class terms, it has created a new S-Curve. The experience is still more of a transactional exchange, but Target has added value to move itself out of the commodity marketplace.

One other aspect of the experiential exchange is that unlike the transactional exchange, there is a continuing relationship between the buyer and the seller. There is history. There is likely to be a future. If all exchanges were between buyers and sellers meeting only once, there would be no incentive to provide anything but a transactional exchange. It’s only worth the extra effort to construct an experience for the buyer if that work will be rewarded by a continuing relationship in the future. A reputation has to be maintained (shades of the ultimatum game). This actually relates to some ideas I’ve been wanting to write up about community but I’ll save that for another night when I don’t have class.

I’ve been trying to figure out how to apply these ideas in my own work. Doing tech support tends to be a transactional experience. A customer calls up, and they have a problem. They don’t want to chit-chat, they don’t want to be massaged, they just want me to answer their question, fix their problem, so they can go back to their lives. I’m pretty good at that – I’m efficient at figuring out their problems, and I don’t particularly like talking on the phone, so I get the problem dealt with and then hang up. There’s no continuing relationship (hopefully), as problems should not recur.

Doing pre-sales calls, which is what I’m doing now, is different. It’s less transactional, in general. I need to get a conversation going with open-ended questions, and provide some value or perspective. I am the expert imparting wisdom about bug tracking to the potential customer. It’s an experience. Sometimes people call up with specific questions, and then it’s more of a transactional exchange, but I need to get better at creating a better experience in the other cases.

My point is that, as a retailer, companies need to examine what they’re doing and what they’re selling and have an honest self-examination to figure out where they are currently positioned. If they are in a commodity market, where price and efficiency are valued, then they need to streamline their customer experience to match, such that their customers have an efficient transactional exchange with no hassle. If they are earlier on the S-Curve, then they should concentrate on the customer experience, providing some value above and beyond the mere economic transaction. My last post (plus the comments) has some examples of this type of great customer experience; I’m sure there are others. But it all starts with self-awareness. Know Thyself.

6 thoughts on “Transactional exchanges

  1. Nice post. The thing that it immediately brought to mind for me is a thought I’ve had about my current employer. As a company, they clearly want to be creating experiences for the publishers they work with. They want to create lasting relationships, so that they can get more work in the future, and be trusted with larger and more complex projects.

    However, they are currently competing in a space that is dominated by transactional exchanges, as you describe, where the sole metric for whether you get the job is price. This, to me, is their biggest problem, because they’ve essentially pigeonholed themselves, and by doing so, made themselves disposable. With price as the main metric, there’s little reason to keep a relationship going. One wrong move, and my employer loses all their business.

    The difference, I think, you see in companies that have longer-term relationships with larger entities – studios like Insomniac and Sucker Punch, that aren’t necessarily tied to a specific hardware manufacturer (though maybe they are – I’m not entirely certain), but whose relationships with those hardware manufacturers and publishers are so deep that the two are deeply intertwined. If my memory is wrong, and they are official second-party studios, then this is sort of a moot point, though.

    But I think what my current employer really needs to do is Target themselves (with a capital T), and create a *value* for the publisher that they can’t acquire elsewhere. Right now, I can’t say what that is, other than price.

  2. Yeah, one of the other points our prof makes is that once you are competing only on price, there’s nothing to prevent your work from being outsourced to someplace cheaper. Part of what has driven a lot of IT work to India and China is that some IT work has become commoditized, where it can be done by anybody, so price is the only differentiator. That’s a dangerous place to be, as you point out.

    I’ve discussed this before, but I think that it’s important to do some self-examination, figure out what differentiates you from other companies/people, and then capitalize on that. Put yourself in a position where you can take advantage of your differentiating qualities. That’s the theory, at least – still working on the practice part.

  3. I’m amused by your observation that people don’t want to have an interaction when they go to the grocery store, since there is definitely a set who do. Midwesterners and senior citizens probably make up the majority of the set.

    I like it when the cute cashiers at the natural food coop in Austin talk to me, for instance. I’m sure I’d be less thrilled if the sullen teenager at the huge chain grocery talked about how great the weekly special on pizza rolls was, though.

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