UNCOMMON TAKEAWAYS

• Service excellence must be funded in some way. If not, you risk delivering gratuitous service, service features that are donated to customers but never paid for in any way.

• There are four ways to fund a premium service experience: (1) get customers to pay you extra for it, (2) reduce costs in ways that also improve service, (3) improve service in ways that also reduce costs, or (4) get customers to enjoy doing some of the work for you.

• Method 1 is the simplest, at least from a design perspective. Methods 2 and 3 are the most reliable. Method 4 gets the most attention.

• Extra service fees aren't inherently good or bad. Their success depends on the specific contract you have with customers.

• A loyalty program is one way to get paid for a premium service experience. True loyalty programs —programs that increase customers' willingness to pay a premium price — are rare, largely because most loyalty programs are mislabeled retention programs.

• For self-service to be part of an uncommon service experience, customers must prefer self-service to a full-service alternative.

Here's the trick for incumbents: the experiences we just described feel very different to consumers, but they share lots of back-end processes. The Best Buys and Armanis of the world can compete with players that are more focused, because the two companies gain certain advantages by linking multiple models together. In other words, each service model in the company somehow makes the other service model better off. In Best Buy's case, for example, two distinct models share one location (a very tricky thing to pull off), which achieves economies of scale on real estate.

Everything at the Cipriani is exquisite and made to order according to local traditions that date back centuries. But here's the catch: OEH hotels such as the Cipriani charge a 50 percent price premium over the number two competitor in their local markets. And the number two competitor might be the Four Seasons. If your market will give you a 50 percent price premium on the service you're offering, then you, too, can deliver perfection across the board. In this economic moment, however, we found very few companies that live in that world.

UNCOMMON TAKEAWAYS

• Service excellence must be funded in some way. If not, you risk delivering gratuitous service, service features that are donated to customers but never paid for in any way.

• There are four ways to fund a premium service experience: (1) get customers to pay you extra for it, (2) reduce costs in ways that also improve service, (3) improve service in ways that also reduce costs, or (4) get customers to enjoy doing some of the work for you.

• Method 1 is the simplest, at least from a design perspective. Methods 2 and 3 are the most reliable. Method 4 gets the most attention.

• Extra service fees aren't inherently good or bad. Their success depends on the specific contract you have with customers.

• A loyalty program is one way to get paid for a premium service experience. True loyalty programs —programs that increase customers' willingness to pay a premium price — are rare, largely because most loyalty programs are mislabeled retention programs.

• For self-service to be part of an uncommon service experience, customers must prefer self-service to a full-service alternative.

Here's the trick for incumbents: the experiences we just described feel very different to consumers, but they share lots of back-end processes. The Best Buys and Armanis of the world can compete with players that are more focused, because the two companies gain certain advantages by linking multiple models together. In other words, each service model in the company somehow makes the other service model better off. In Best Buy's case, for example, two distinct models share one location (a very tricky thing to pull off), which achieves economies of scale on real estate.