This post originally appeared on Entrepreneur.com - #Growing Your Business
5 min read
My family and I went out for brunch recently in Miami. We ordered about $60 worth of food, and when the waiter asked what I’d like to drink, I said what I always do: “Just water, please.”
“We charge 50 cents for water because we filter it five times,” the waiter said. That’s ridiculous, I replied. The waiter agreed — in fact, he said, he’d been trying to talk the restaurant’s owner out of this policy for a while now. But the owner wouldn’t budge because he’d invested in some fancy filtration system.
I was irritated, but I wasn’t going to buy a costlier drink simply to avoid the small fee. “Fine,” I said. “I’ll take the water.” When the check came, the waiter didn’t charge me the 50 cents after all. It was his small act of rebellion, and I showed appreciation in my tip.
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Afterward, I thought about why this experience was so frustrating. The economic logic was clear: The restaurant owner had paid up front for an expensive machine, and it provided a fine service to his customers. Also, water isn’t actually free. It’s a scarce resource in some parts of the world. But still, I was an unhappy customer. Why?
Then I realized: My expectations weren’t met.
As entrepreneurs, we are all in the expectations business. Sometimes we need to only meet expectations — a McDonald’s customer, for example, wants their burger to be exactly like their previous burger. Other times, we must exceed expectations — like, say, a burger upstart trying to steal a McDonald’s customer’s loyalty. But inevitably, we’ll also challenge consumers’ expectations. We must change something in a way they don’t expect, or do something differently than they’re used to. Maybe we’re forced to add a fee to cover our costs, or eliminate something beloved.
When that happens, we must keep a formula in mind: The new value we offer must be greater than what they expected. Or to be simpler about it: value > expectations. We must say, “You wanted X, but I’m giving you Y — and here’s why it’s better.” And our customer has to believe it.
Here’s one of my favorite examples of this. Back in 2003, the craft brewery Dogfish Head created a delicious new IPA. The beer was a runaway hit and on track to become 80 percent of all company sales. That was huge! But founder Sam Calagione was concerned because he knew IPAs wouldn’t be super-popular forever. If he let his company become defined by this one IPA — if that was the beer everyone knew him for — then when tastes inevitably changed, he’d be seen as an old brand. So he capped sales of his best-selling product. Many bars, restaurants, and consumers simply couldn’t get it.
Talk about challenging expectations! People called Dogfish just to yell at whoever picked up. But Calagione turned his staff into what he calls a “beer education force”; they explained that the limited supply of IPA meant that everything was very fresh, and then showcased their many other styles of beer. People’s expectations weren’t met, but Calagione understood that their real expectation wasn’t the IPA anyway. It was bigger than that. They expected good beer. So he’d shift them away from a smaller expectation and deliver on the bigger one.
It worked. Dogfish became known as a beer innovator, and last year it sold for $300 million.
Now consider that restaurant in Miami. I was also presented with a trade-off: I’d have to pay for water, but that water would be finely filtered. And yet, because I already expect water in a restaurant to be safe, that didn’t strike me as a fair trade-off. The restaurant forgot what business it’s in. It’s not the water business. It’s the expectations business.
When we break it down this way, change becomes easier to manage. We can’t just explain a change. Instead, we need to actively define people’s expectations. We need customers to feel like we’re giving, not taking. We’re adding value, not trying to extract it. We have to show customers that, yes, the individual product or service might change, but they can expect that we’re always looking out for them. They can expect to be taken care of.