Experience : Redefining Economy
The way we consume goods and services has been slowly but steadily changing over years. As consumers, we no longer seek gratification from merely the commodity or service, but we also want an added experience to it. This is the experience economy, and you have, unwittingly, been a part of it too!
Coined in 1998 by B. Joseph Pine II and James H. Gilmore, the term has been explained as the next economy after the agrarian, industrial and service economy (Gilmore & Pine, 1998). The term revolves around the idea of value creation that sticks with the customer even after the experience is over. Economists usually consider experiences and services as part of the same packet. However, they are two different things in the current context.
Take, for example, the simple act of ordering a shirt through the internet. The shirt is a good that is made available to you through a host of services (websites) like Amazon, Myntra, Jabong etc. Through the whole process of ordering the shirt, you will experience the frequent updates, the prompt customer-vendor interactions and the follow up service. You may even win some additional coupons or a free trinket! This whole process becomes an add-on experience to the service we are being offered.
Why should companies care?
The Progression of Economic Value deals with how experiences are the next stage after the commoditisation of services (we pay for streaming videos on Netflix), just like delivering services was the stage after the availability of goods. Companies that fail to add this essential piece of value to their offerings won’t find their customers satisfied.
By making an economic transaction inherently personal, the experience economy ensures that the good or service sticks in the customer’s mind. Even coffee shops, tea shops and cafés have latched onto this idea. Walk into a Chaayos store and the first thing you will hear is the employee greeting you with a smile and the Chaayos signature song. Dylan’s Café in Shillong has captured this very well by dedicating the whole ambience of the place to Bob Dylan. From mugs with the lyrics to his songs, to carefully crafted names on the menu, one leaves the place with more than a full stomach. The Bombay to Barcelona Library Café in Mumbai offers the unique experience of a library within a café, backed up with a message of social good.
The trend of ‘Instagramming’ everything from our morning coffee to our evening rituals has fuelled the rise of the experience economy. People have a fear of missing out (or FOMO, popularly called) when it comes to experiences. Simply owning an item isn’t enough; its experiences matter too!
Walt Disney was the pioneer of the experience-driven economy. Think of Disney’s theme parks, and how Disney extends its experiences to themed clothes, performances and castles. There is a reason why you just can’t forget the fairy tales you grew up with! Experiences have always been part of entertainment, but it has now also extended to sectors such as banks. DBS’s motto is “Live More, Bank Less” and their focus is on experiences.
Even tech companies are realising the importance of experiences in driving sales and customer satisfaction. At CES 2019, Google revealed a 3 minute roller coaster called “The Ride” that rode the travellers through the experience of using Google Assistant. Amazon’s Alexa is a good that provides a service while at the same time giving its user a uniquely personal experience that is customised to the person’s habits, wants and needs. The same goes for other AI-equipped services and products. This is the reason that the ‘future’ is often imagined as a world where robots join us in our day to day life; actually becoming a part of our everyday experiences.
Thus, to sum it up perfectly, Pine and Gilmore defined an experience as, “An experience occurs when a company intentionally uses services as the stage, and goods as props, to engage individual customers in a way that creates a memorable event. Commodities are fungible, goods tangible, services intangible, and experiences memorable.” (ibid).
The shift from the industrial economy to the service one had its own teething troubles, and so will the gradual shift from the service economy to the experience one. A true experience economy would require charging customers for the experience, like the Gilroy Garlic Festival in California (a food festival) or the Minnesota Renaissance Festival (recreating the Renaissance feel). However, this stage hasn’t reached a ubiquitous level yet. What must also be remembered is that all companies that offer experiences are not always guaranteed a success. Much more complicated factors are at play for a company’s success. However, in order to stay a step or two ahead of others, businesses must take into account the importance of experiences.
Products could be designed taking into account the experiences the consumers will go through with them. The marketing for these products/ services could also take that into account. Brands need to become more conscious, not just about the message they carry but also about the customer experience in physical and emotional terms.
In this age that is increasingly dominated by social media and the sharing of experiences, companies that fail to capitalize on this trend might find themselves unable to retain customers. A company or business must ask itself if it is offering its customers more than a good or a service — is the customer leaving with something memorable?
Sources for further reading
Gilmore, H., & Pine, J. (1998). ‘Welcome to the Experience Economy’. Harvard Business Review, July-August
Newman, D. (2015). ‘What is the Experience Economy, and should your business care?’. Forbes, November. Retrieved from: https://www.forbes.com/sites/danielnewman/2015/11/24/what-is-the-experience-economy-should-your-business-care/#59f7744f1d0c