The rise of the experience economy

Posted in Business and entrepreneurship.

The experience economy is an economy where goods and services are sold by emphasising their effect on the buyers’ lives. James H. Gilmore and B. Joseph Pine II coined the term in their book and their original Harvard Business Review article. Customer experience is not alien to older businesses. It has existed for quite a long time now, but the idea that experiences can hold material value has only recently gained traction.

Experiences count as their own category much like goods and services do. It exists above those in a sort of hierarchy much like Maslow’s hierarchy of needs. When needs lower down in the hierarchy – eg. hunger, sleep, shelter – are fulfilled, people seek to fulfil higher order needs like social status and self-actualisation. Similarly, commodities are refined to goods which are presented via services which are all packaged into experiences. When everybody has access to the same quality and quantity of goods and services, they look to experiences to differentiate worth.

What is the value of an experience?

Time is a resource. The value of an experience ties into what one defines as a good use of time. Minimising the amount of time a transaction takes works into this equation by freeing up time to be used well. It may not be a good time, but it allows more freedom in choosing what to do with said time. While in older paradigms only bad experiences were penalised and “adequate” was adequate, there has been a shift towards positive experiences over unmemorable ones. These experiences encompass the entire buyer’s journey from initiating contact all the way to the end of the product’s or service’s life.

The kind of experiences valued differs from person to person much like how different products are valued differently by different people. However, good products usually share common denominators; working as intended, lasting a reasonable amount of time, being visually appealing etc. It is not universal, but likewise, good experiences are usually punctuated with ease and personalisation.

Typically, a good experience leaves buyers with positive emotions. At the end of its usage, a product or service should leave an impression on users that they can look back on positively. Marketing has shifted to focus less on what a product can do and more on how that product can affect buyers. It is a subtle change, but while the product or service needs to be marketed to some extent, what carries that weight is experiential. Apple products are great in their own right, but there is often mention of the price tags attached. See, status is an experience. The Apple exclusivity is an experience. Apple is not just selling products – they are selling experiences, and are often standard examples of businesses tapping into the experience economy.

How to make it in the experience economy

Make no mistake, nonparticipation in the experience economy does not equate to exclusion. You are still part of the experience economy, and your business does not operate outside of it. If you are not able to leverage your worth in this economy, then someone else will attract the attention of a buyer ecosystem that demands good experiences.

Convenience is the product of a good service. But it is not enough. People are looking for frictionless interactions and seamless transactions. They want more than just a business. They want a living, breathing entity. They want the stories behind businesses, they want the values of the value chain. Businesses need to create an atmosphere that conveys meaning to its buyers. And people will pay for such experiences in the experience economy.

The personal relationship between a business and its customers drives home the personality of a business – its metaphorical heart. Slack is known to listen attentively to its users, fine-tuning services as feedback comes in. They enhance the services that they offer while providing positive experiences in the form of users feeling like they have been listened to. That is the kind of positive impression users can look back on. And it can hold economic value.

Fail to engage customers from the get-go and a simple swipe and tap on a smartphone means you have already been forgotten. This is not a consumer-only thing. B2B businesses rely primarily on long-lasting relationships with customers. These are built through experiences with sales reps, navigating websites, and valued engagement. After all, B2B businesses can gain something from utilising emotion in marketing, which is typically seen as a B2C thing, so the same can be said for experiences. Are transactions easy? Do you connect with the people behind the business? In the experience economy, you can put a price on trust.

The experience economy seems pretty abstract as it deals with a facet of buyer psychology that is itself pretty abstract, but there is no doubt that you can put a price tag on intangible experiences. It varies widely and finding out what kinds of experiences your customer base values is a hefty task at the beginning. Fortunately, the power of data analysis allows for the personalisation of experiences. That is ultimately what buyers are looking for – an experience that caters to them. And they would pay for it.