Is Your Business Part of the Experience Economy?
Since the notion of an ‘experience economy’ was first written about in 1998, the way businesses operate has changed. Forward-thinking businesses adapted their offering to include the staging of experiences, and in doing so, have driven revenues at an accelerated pace. In today’s economy, a memorable experience is much more valuable than any product or service.
In the experience economy, products and services are tailored to our emotions and personal interests. Staging experiences for customers elicits a powerful response that greatly improves the perception of value. Some taxi companies are going out of business because of the better experience riders receive through ride sharing services like Uber. This is just one of many industries adapting to the experience economy.
Ultimately, all businesses must look at their value delivery model to ensure positive experiences are being delivered to customers. So, is your organization part of the experience economy? This article will shed more light on what the experience economy is, and how to transition your business to provide experiences.
The Progression of Economic Value
The economy has evolved from supplying basic commodities to staging experiences through four stages:
- Commodities: Extracting raw inputs;
- Goods: Assembling or processing of commodities;
- Services: Delivering products; and
- Experiences: Staging memorable interactions.
Example: The Progression of Coffee
Coffee is an excellent example of economic progression:
- The Commodity Economy: Buying whole coffee beans that we can dry and ground ourselves, costing $0.03 per cup.
- The Goods Economy: Coffee products, such as pre-ground beans in a package, costing $0.25 per cup.
- The Service Economy: Going to a local coffee shop where someone else makes our coffee and hands it to us for $1.50 per cup.
The Experience Economy: Having time to ourselves on comfy couches, with instrumental jazz playing in the background, as we check our social media and catch up with friends for $3.50 per coffee-based event.
Why does the Experience Economy Provide Such Value?
We are seeing the success of experience-based (typically entertainment) businesses and traditional product/service-based businesses who move to become providers of experiences. Data continues to suggest that purchase behaviour is dictated by experiential qualities in addition to the quality of good or service.
Experiences involve customer participation and connection within a staged environment. This can run from passive absorbing experiences (like watching movies at the theatre or attending the symphony) to active immersing experiences (such as white water rafting trips or adventure rooms). In all cases, the customer is part of the ‘product’ itself and their participation will affect the outcome.
In a world filled with stuff, we are now searching for something more.
The yearning to create memories rather than accumulating possessions applies to a broad consumer base, but this movement is partially attributed to the growing buying power of millennials. Market research on this demographic shows they seek experiences in their purchases and use social media accounts to receive recognition of their experiences.
The experience economy is about using elements of entertainment and education to offer something memorable, personal, and focused on sensations.
Transitioning Your Business to the Experience Economy
What do you offer? Even if it is goods and services, what other needs surrounding these can you fulfil? In entering the experience economy, businesses need to think beyond the traditional tenets of marketing – product, price, place, and promotion.
This shift not only requires emphasis on other elements – such as perception, emotion, relationships, memory, customization, sensation, co-creation, and engagement – but also a shift in marketing perspective. Experiences are intangible perishable offerings and require a new way of thinking about product development and marketing.
Designing Memorable Experiences
Principles of experience design centre on the:
- Themes or impressions surrounding your offering;
- Positive cues that underline the theme and uniqueness of experiences;
- Elimination of contradictory or distracting cues;
- Reminders of the experience or memorabilia;
- Engagement of senses – beyond the visual – to enhance the theme and memory
Is A Fifth Economy Emerging?
If the experience economy is the fourth evolution – what will the fifth be?
There may be a transformation economy on the horizon, where we not only seek experiences in our purchases, but we seek experiences that will change us in some way.
This will involve a more intense personalization and customization of offerings with a focus on individual perceptions of identity, which we are seeing emerge in consumer-driven industries such as tourism.
