Inspiration from the 90’s – The Experience Economy

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This blog was originally published here.

Martin Luther King Jr. rightly said, “We’re not makers of history. We are made by history.” In our previous articles, we have always talked about how critical customer experience is and how businesses must make it an integral part of their daily operations. However, in order to start with something new, it’s often necessary to take a step back and look at the list of events that have led to and shaped the ‘today.’ This brings us to an important question: how do economies progress?

While reading the widely popular HBR paper “Welcome to the experience economy” by Pine and Gilmore, I was awestruck by its futuristic take on how economies evolved from commodities to goods to services to experiences. This article is an inspiration from that paper and an attempt to share the incredible lessons we can learn from it.

Evolution of the ‘experience’ economy



Perhaps the entire series of events can be summarized in the four-stage evolution of the birthday cake. A relic of the agrarian economy, home-made cakes prepared by mothers barely cost dimes. However, with the advent of the goods-based economy, moms extended their budget a little to buy readymade ingredients. This was followed by cakes from bakeries for 10-15 dollars in the service economy. The major change was when mothers began to “outsource” the entire event to the likes of Chuck E. Cheese’s, the Discovery Zone, and the Mining Company to organize the entire event and create a memorable experience for their child for, say, $100 with an extra cake perhaps. The cake is no longer the primary good here. This marked the commencement of the experience economy.

Let’s have a look at the graph of economic progress that showcases the relative connection between two factors: pricing and the level of differentiation. Today, ‘experience’ can be appraised as the fourth economic factor following commodities, goods, and services. This is because consumers inarguably desire experiences and more and more businesses are responding to consumer demands. As services have gradually become commoditized, experiences have turned out to be the next strategic move to create a competitive advantage. When companies use services as a stage, and goods as props to involve customers in creating a memorable event, the experience chain is said to be successfully executed.

 

Source: https://hbr.org/1998/07/welcome-to-the-experience-economy

Let us look at the economic distinctions table that categorizes the kind of offerings with their respective attributes like the type of economy, function, and factors of demand. While services consider buyers as clients, experiences consider them as guests – a key differentiating factor that makes people feel that they’re ‘a part of’ of the episode.

Source: https://hbr.org/1998/07/welcome-to-the-experience-economy

The pioneers of the experience economy

No two people can have the same experience. Prior economic offerings like products and services were external to the buyer. However, experiences are deep personal constructs existing in the mind of an individual in an intellectual, physical, or perhaps even spiritual level. Walt Disney – the pioneer of the experience business – owes its enviable reputation to its unique cross-channel strategy. Its movies sell its toys, the toys sell the idea of movie characters and Disneyland, and Disneyland sells more movies and more toys.

Fun Fact: Did you know that Disney cast members are instructed to provide autographs of their character in the same way that their predecessors did years ago!

Marketers often commit the mistake of investing all their thoughts on the good or service. However, what they really should be promoting is the problem that they are solving. At the November 1996 COMDEX computer trade show, the then Intel chairman Andrew Grove declared, “We need to look at our business as more than simply the building and selling of personal computers. Our business is the delivery of information and lifelike interactive experiences.”

Products are, thus, the means to a solution. For example, the owner of an airline is not selling aviation. Rather, he is selling the comfort or the reduced time consumption added with the variety of ‘wow’ moments throughout the journey that helps customers travel in a hassle-free manner. According to Sir Colin Marshall, former Chairman of British Airways, the aim of the airline carrier has always been “to go beyond the function and compete on the basis of providing an experience.”

The experience economy is not contained in the above two sectors – even B2B companies are creating venues to sell their goods and services. In June 1996, Silicon Graphics opened its Visionarium Reality Center in Mountain View, California, to bring customers and engineers together where they could engage with real-time, three-dimensional product visualizations.

You are what you charge for

If you’re providing the experience component as an additional one to your already established product assortments or service designs, you’re not selling it. Drawing the example of IBM, in the 1960s and 1970s, IBM’s slogan was “IBM Means Service,” and the computer manufacturer provided lavish services to the customers for free. However, eventually, it had to charge the consumers for the service and unbundle its hardware and the software. Today, services are the most valued offerings of the software giant. This indicates the maturity of the services economy and also indicates an immaturity of the experience economy since most of the companies like the Hard Rock Cafe and the Geek Squad don’t charge for the experience that they provide, which is live music concerts in the case of the Hard Rock Cafe.

So, it’s important to understand the difference between an economic offering and an event to promote customer engagement. It ain’t an economic offering if it isn’t differentiated. It ain’t an economic offering if you aren’t charging for it.

A classic in case point is the Star Theatre Complex in Southfield, Michigan. It charges 3 million customers a year 25% higher admission fees for a movie when compared to a local competitor. Jim Loeks, part-owner of the theatre told Forbes magazine that “it should be worth the price of the movie just to go into the theatre”, primarily due to the fun-house experience it provides with 65,000 square feet of restaurants and stores.



Another example is Niketown stores by Nike, which were created as a merchandising exposition. Can Nike charge customers to enter the store? Perhaps yes, given the huge popularity. But then, Nike would have to justify the added charges and add extra features to the experience like games, actions, and customized photos.

Designing memorable experiences

Before a company can start charging for the experience, it should design its offering in such a way that customers are intrigued by it. The parameters such as excellent design, delivery, and innovation that define success in the service industry are not going to change. However, experience in itself has distinct qualities of its own, majorly expanded across two dimensions. The first dimension is customer participation, wherein on one end there are customers who are active participants like in the case of paragliding. And on the other end, there are passive participants, like in the case of symphony-goers, who are a part of the experience but not completely participating in it. In between the two extreme segments, there is a third kind: viewers of a ski race who contribute to the visual experience that others feel.

Source: https://hbr.org/1998/07/welcome-to-the-experience-economy

The second dimension which unites customers on the basis of performance has absorption at one end and immersion on the other. Taking notes during a class lecture is more absorbent than reading a textbook. However, watching a 3D movie at the theatre is more immersive than watching it at home. Let’s have a look at the diagram given above – the four realms of experience that show the category of activities and their relative impact. The best experience providers like Disney, encompass aspects of all the four forming a sweet spot in between where the spectra meet.

So, how can one design a memorable experience?

Choose a central theme for the experience

If you hear of the name Disney you have a particular picture in your mind. This is significantly different from when you hear of, let’s say, The Hard Rock Cafe. Pictures lead to expectations and a well-visioned theme is the crucial first step in crafting it. One cannot provide “the ideal shopping experience” if one fails to create a theme that ties the disparate merchandising presentations together into a staged experience. Ikea really rules in this case. This is how it has imagined the children’s bedroom and has brought together mere ‘pieces of furniture’ to give them some meaning.

A great theme is, thus, concise and compelling. It should tell an engaging story that customers want to listen to.

Harmonize positive cues

After creating a theme, you’d need to reaffirm it with positive cues emanating from your entire experience design. “The marriage of Old-World Italian espresso bars with fast-paced American living” – that is the theme of Barista, a franchised chain of coffee bars based in Washington, D.C. Founded by George Harrop, the interior decor supports the old world theme where customers are guided towards the counter with patterns on the floor, providing a soothing experience. For example, the attendant at a themed restaurant in the form of a pirate ship will ask you to “Aboard for an exciting adventure” instead of “Sir, your table is ready.” It is these small cues like these that add on to the experience. Unfortunately, you miss one stroke and the impression is somewhat disoriented or hazy.

Remove negative cues

Experience stagers must remove the smallest of the cues that diminish or distract from the theme. Most of the constructions are littered with messages that are not valuable and do not add to reinforcing the experience. For example, “Your wallets and belongings are not our responsibility” is a negative cue. It makes the customer disconnected from your offerings. A more positive statement would be, “Please take care of your belongings as they’re valuable.”

The most impactful example can be derived from the hospitality industry – quite ironic isn’t it. For example, how many times do you remember the front-desk staff at a hotel halting a conversation with you to attend a phone call? Or how many times have you felt irritated when your short nap was disturbed by the announcement of the pilot about some weather condition? Easy measures like more staff at the front desk or an extra headset could solve this problem. However, more often than not, companies fail to implement the solutions in real life.

Engage in memorabilia

Offer such an experience that the customer wants to hold on to it, cherish it, and showcase it proudly. For example, Mozilla organizes conferences for developers and it provides free t-shirts as takeaways for branding. A similar strategy is followed by many hackathon organizers, who provide free t-shirts with the branding of their sponsors that are majorly tech-companies. These t-shirts are more than just clothes. The developers like to wear them as it provides a feeling of association with a work that they love.



Engage all the five sensations

The sensory stimulants should support the theme in order to make it more memorable. For example, hairstylists apply lotion to add more tactile sensations to the experience. Similarly, grocery stores pipe bakery smells in the aisle to enhance the experience. The Cleveland Bicentennial Commission spent $4 million to illuminate eight automobile and railroad bridges over the Cuyahoga River near a nightspot area called the Flats. Though no-one pays tolls to visit these locations, the authorities are of the belief that it will add to the tourist attraction.

These five principles are not the only mantras for good customer experience. If companies fail to be consistent in providing good experiences or can’t find a match between the experience and the perceived value, customers are sure to drop off. The research paper from 1998 unfolds and predicts that “The growth of the industrial economy and the service economy came with the proliferation of offerings – goods and services that didn’t exist before imaginative designers and marketers invented and developed them. That’s also how the experience economy will grow: through the “gales of creative destruction.” Two decades later, and we can say that it has been almost true.

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