The capability of AI is currently expanding beyond mechanical and repetitive to analytical and thinking. A "Feeling Economy" is emerging, in which AI performs many of the analytical and thinking tasks, and human workers gravitate more toward interpersonal and empathetic tasks. Although these people-focused tasks have always been important to jobs, they are now becoming more important to an unprecedented degree. To manage more effectively in the Feeling Economy, managers must adapt the nature of jobs to compensate for the fact that many of the analytical and thinking tasks are increasingly being performed by AI, and, thus, human workers must place increased emphasis on the empathetic and emotional dimensions of their work.

This is an MIT Sloan Management Review Article. Companies must make important decisions about which features to include in the goods and services they offer to customers. Understanding the return on investment for a feature is essential to increasing profitability. Although tadding features increases costs, it may also increase revenues, either by attracting new customers or retaining existing customers. Yet the features that retain customers, the authors argue, may be different from the features that initially attract them. The authors provide insights from their research on how to calculate the return on investment for features. Working with a global hotel company, the authors developed a model to assess how features produce financial returns by attracting new customers and/or by retaining existing customers. The model integrates three kinds of data: the revenue increase due to the effect the feature has on attracting new customers; the revenue increase due to the effect the feature has on retaining existing customers; and the costs associated with adding the feature. They tested the model using three features, or "amenities of interest," in the hotel industry: bottled water, free internet access, and a fitness center. Not surprisingly, the authors found that free wireless internet was much more likely to attract customers than free bottled water. However, the picture changed when the authors switched from looking at features that attracted guests to features that retained them. Offering free bottled water during a stay led to a bigger boost in customer retention than offering wireless internet access.

This is an MIT Sloan Management Review article. Executives typically think about productivity as something to be maximized. In service businesses, that means that companies often devote a lot of attention to designing automated processes that reduce their need for people -typically their most expensive resource. But in service businesses, increased productivity does not always lead to increased profitability. The authors analyzed data from more than 700 U.S. companies in service industries in 2002 and 2007. Their analysis suggested that, for a given level of technology, there is an inverted U relationship between productivity and profitability in service companies. In other words, service companies become less profitable if they are either too productive or not productive enough. However, because technology advances over time, the optimal productivity level increases over time. The authors found that several factors cause the optimal productivity level to be higher or lower. The optimal productivity level is not set in stone. As technology advances, the optimal productivity level increases. Online travel reservation systems offer an example. Advances in online technology enabled online travel service Expedia Inc. to increase its productivity by 15% from 2005 to 2010, with no damage to customer satisfaction. The authors argue that productivity in a service business should be treated as a strategic decision variable that depends on the business and the technology in question. One key question is the relative importance of customer satisfaction to the business model. When circumstances encourage the provision of better service quality (comparatively high profit margin, high price, low market concentration and low wages), companies should emphasize customer satisfaction more; when the opposite factors are present (high market concentration, high wages, low margin and low price), they can stress service productivity.

Companies have never before had such powerful technologies for understanding and interacting with customers. Yet too many firms operate as if they're stuck in the 1960s, an era of mass marketing, mass media, and impersonal transactions. To compete in an aggressively interactive environment, companies must shift their focus from driving transactions to maximizing customer lifetime value. That means products and brands must be made subservient to customer relationships. And that means transforming the marketing department-traditionally focused on current sales-into a "customer department" by: replacing the CMO with a chief customer officer, cultivating customers rather than pushing products, adopting new performance metrics, and bringing under the marketing umbrella all customer-focused departments, including R&D and customer service.

Consider a coffeemaker that offers 12 drink options, a car with more than 700 features on the dashboard, and a mouse pad that's also a clock, calculator, and FM radio. All are examples of "feature bloat," or "featuritis," the result of an almost irresistible temptation to load products with lots of bells and whistles. The problem is that the more features a product boasts, the harder it is to use. Manufacturers that increase a product's capability--the number of useful functions it can perform--at the expense of its usability are exposing their customers to feature fatigue. The authors have conducted three studies to gain a better understanding of how consumers weigh a product's capability relative to its usability. They found that even though consumers know that products with more features are harder to use, they initially choose high-feature models. They also pile on more features when given the chance to customize a product for their needs. Once consumers have actually worked with a product, however, usability starts to matter more to them than capability. For managers in consumer products companies, these findings present a dilemma: Should they maximize initial sales by designing high-feature models, which consumers consistently choose, or should they limit the number of features to enhance the lifetime value of their customers? The authors' analytical model guides companies toward a happy middle ground: maximizing the net present value of the typical customer's profit stream. The authors also advise companies to build simpler products, help consumers learn which products suit their needs, develop products that do one thing very well, and design market research in which consumers use actual products or prototypes.

Most executives today agree that their efforts should be focused on growing the lifetime value of their customers. Yet, few companies have come to terms with the implications of that idea for their marketing management. Oldsmobile, for example, enjoyed outstanding brand equity with many customers through the 1980s. But as the century wore further on, the people who loved the Olds got downright old. So why did General Motors spend so many years and so much money trying to reposition and refurbish the tired, tarnished brand? Why didn't GM managers instead move younger buyers along a path of less resistance, toward another of the brands in GM's stable--or even launch a wholly new brand geared to their tastes? Catering to new customers, even at the expense of the brand, would surely have been the path to profits. The reason, argue the authors, is that in large consumer goods companies like General Motors, brands are the raison d'etre. They are the focus of decision making and the basis of accountability. But this overwhelming focus on growing brand equity is inconsistent with the goal of growing customer equity. Drawing on a wide range of current examples, the authors offer seven tactics that will put brands in the service of growing customer equity. These include replacing traditional brand managers with a new position--the customer segment manager; targeting brands to as narrow an audience as possible; developing the capability and the mind-set to hand off customers from one brand to another within the company; and changing the way brand equity is measured by basing calculations on individual, rather than average, customer data.

George Caldwell, cofounder of Advaark, a cutting-edge ad agency, was listening hard to his biggest client, John McWilliams, CEO of GlobalBev. McWilliams ran a multibillion-dollar holding company for an assortment of food and beverage brands but was giving credit to Advaark for his latest product line. "We were completely blindsided by this whole 'energy drink' craze," McWilliams was saying, clearly delighted that Advaark had steered his company into the business. Then he enthused, "I'd love to get your thinking about our snack lines." "Oh, no," George thought. He hadn't realized that his partner, Ian Rafferty, had made this foray into strategic consulting. Traditionally, their agency focused only on the creative execution of ad campaigns. In fact, they'd disagreed before about whether it was wise to follow customers' needs into areas where they had no skills advantage. George thought Advaark should stick to its core competence. Ian saw a source of easy revenue and an enhanced offering to clients who, he claimed, wanted one-stop shopping. The potential was appealing, but for George, it hardly outweighed the downsides. They'd risk alienating the strategy companies that now referred clients to Advaark. They'd need to recruit or develop new kinds of talent and create a methodology and training. George was just deciding to nix the expansion when a chance meeting with a former client made him pause. She'd heard about GlobalBev's success and wanted the same kind of help. Eager to win back a lapsed account, George was tempted. Should Advaark meet more of its customers' needs by expanding its services or stay focused on what it does best? In R0202A and R0202Z, commentators Gordon McCallum, John O. Whitney, Roland T. Rust, and Chris Zook weigh in on this fictional case.

George Caldwell, cofounder of Advaark, a cutting-edge ad agency, was listening hard to his biggest client, John McWilliams, CEO of GlobalBev. McWilliams ran a multibillion-dollar holding company for an assortment of food and beverage brands but was giving credit to Advaark for his latest product line. "We were completely blindsided by this whole 'energy drink' craze," McWilliams was saying, clearly delighted that Advaark had steered his company into the business. Then he enthused, "I'd love to get your thinking about our snack lines." "Oh, no," George thought. He hadn't realized that his partner, Ian Rafferty, had made this foray into strategic consulting. Traditionally, their agency focused only on the creative execution of ad campaigns. In fact, they'd disagreed before about whether it was wise to follow customers' needs into areas where they had no skills advantage. George thought Advaark should stick to its core competence. Ian saw a source of easy revenue and an enhanced offering to clients who, he claimed, wanted one-stop shopping. The potential was appealing, but for George, it hardly outweighed the downsides. They'd risk alienating the strategy companies that now referred clients to Advaark. They'd need to recruit or develop new kinds of talent and create a methodology and training. George was just deciding to nix the expansion when a chance meeting with a former client made him pause. She'd heard about GlobalBev's success and wanted the same kind of help. Eager to win back a lapsed account, George was tempted. Should Advaark meet more of its customers' needs by expanding its services or stay focused on what it does best? In R0202A and R0202Z, commentators Gordon McCallum, John O. Whitney, Roland T. Rust, and Chris Zook weigh in on this fictional case.

As relationships and service become increasingly pivotal in business, the profitability of customers is becoming more important than the profitability of products. In this environment, marketing success will be equivalent to generating maximum profits from a firm's total set of customers. Doing so requires allocating managerial resources to the groups of customers that can be cultivated most efficiently by a firm. This article presents a management methodology called the "Customer Pyramid" that enables a firm to supercharge its profits by customizing its responses to distinct customer profitability tiers. The Customer Pyramid provides a tool for managers to strengthen the link between service quality and profitability and to determine the optimal allocation of often scarce resources to maximize profitability. Product and service strategies, customized for each customer tier, become more closely aligned with an individual customer's underlying utility functions. This results in more effective and profitable strategies for serving the customer. Also provides numerous examples and practical guidelines for improving firm profits by moving customers up the Customer Pyramid.

Too often, quality programs fail to improve quality because they concentrate on internal processes that do not affect the customer. This is at least partially due to the alienation of marketing from the quality movement, a situation for which both sides are partially at fault. Ideally, marketing should serve as the eyes and ears of the organization, linking the external customer to managerial processes. One way to do this is to organize the collection of customer satisfaction measures around the managerial processes themselves. This forms a natural bridge from the customer to management and allows management to track the impact of quality improvements all the way from internal process measures to overall customer satisfaction and market share.