If you spend any time on this blog you will quickly find that we talk a lot about experience and the experience economy. But what is it all about? What is the experience economy?
The Transition to Experience
Joseph Pine and James Gilmore explain in their 1999 book, The Experience Economy, that fundamental change is going on in the very fabric of the modern economy.
The United States, like nearly all societies began with an agrarian economy. This agricultural economy relied nearly completely on farming. Items that grow in the ground, are raised on the ground, or are pulled out of the ground. Mostly animal, vegetable, and mineral. These items were extracted from the ground and then sold on the open market.
Most agrarian economies disappeared during the Industrial Revolution. In the industrial economy goods became the predominate economic offering. These are made and manufactured goods.
As goods became commoditized – treated like a commodity – we moved from an industrial economy to a service economy.
We have made the shift from the service economy to an economy of experience. That is to say that experience has become or is becoming the predominate economic offering. Economists have typically lumped experiences in with services, but experiences are a distinct economic offering, as different from services as services are from goods.
Gumballs and Getaways
Every child has used a gumball machine. When I was a kid I would ask my parents for change and I would run over and purchase a colorful gumball. Why? Because I wanted a gumball. Recently, I saw a group of kids at a store putting quarters into one of those elaborate gumball machines with flashing lights, music, spiraling tunnels, and a dizzying array of cascading chutes and slots – a roller coaster of sorts for gumballs. They were inserting coin after coin into the machine only to watch gumball after gumball circle around and around. The kids didn’t take a single gumball they purchased! Instead, they just laughed and giggled. They seemed simply to enjoy the show. What were they buying? An experience. This is an example of an even bigger consumer trend. Today, consumers increasingly desire neither goods nor services but sensation-filled experiences that engage them in a memorable way.
Another example of the push toward experience happened in my own home. When my wife and I were first married she mentioned that rather than receiving birthday gifts from me she would much rather go on a trip for her birthday. Each year we have chosen a weekend around her birthday to get away and experience a city together (San Francisco, Chicago, San Diego among others). To her the experience and memory of a trip is of far more value than any product she could receive.
Think about themed restaurants (ESPN Zone, Hard Rock Café, Rainforest Café), experiential retailers (Build-A-Bear, American Girl), Luxury 5-star hotels (Four Seasons, The Ritz Carlton, The Peninsula), and Disney – the world’s premier experience stager. They certainly all provide a service but they do far more than just that. They focus on experience and they create memories. There is huge value in a memory. When a person buys a service, he purchases a set of intangible activities carried out on his behalf. But when he buys an experience, he pays to spend time enjoying a series of memorable events that a company stages – as in a theatrical play – to engage him in an inherently personal way.
But this doesn’t mean that experiences rely exclusively on entertainment. You don’t have to own a theme park in order to focus on experience. Rather, companies stage an experience whenever they engage customers, connecting with them in a personal and memorable way.
It’s not enough to provide an excellent product or service at a fair price. More companies than ever are beginning to compete on the basis of compelling experiences. Consumers are no longer satisfied with simply receiving a good or service. Customers are looking for an experience – a lasting memory. Organizations must understand the customer experience on every level. Businesses must learn to stage experience if they want to survive. A company’s ability to deliver an experience that sets it apart in the eyes of its customers will increase the amount of consumer spending with the company and inspire loyalty to its brand. Whether you are a church, a small business, a non profit, or large corporation, you can benefit from an investment in the experience of your organization. Welcome to the emerging experience economy.