The experience economy

Because all business is now show business.

Over the last century the world-economy has evolved from a commodities base to a goods base, to a services base, to now as the Harvard Business Review coins it, the 'Experience-Economy'.

In the book 'The Experience Economy: Work is Theatre and Every Business is a Stage' authors Joseph Pine and James Gilmore argue the service economy is being superseded by something even more ephemeral: experiences.

Technology, affluence and increasing expectations mean services today are starting to look like commodities. The authors’ write, "Those businesses that relegate themselves to the diminishing world of goods and services will be rendered irrelevant. To avoid this fate, you must learn to stage a rich, compelling experience."

The experience economy moves businesses focus from providing unique benefits, to creating unique multiple sensations. From broadcast to brand experience. From simply buying to touching, feeling, seeing, hearing, and smelling: totally immersing consumers experientially and culturally in your brand proposition and Brand Idea.

It’s why, when Apple opened their store in Ginza, Tokyo’s fashionable shopping district, there were queues a mile long, and visitors waiting eight hours just to experience the store.

What’s driving the experience economy?

We believe there are three related factors driving the experience economy: economics, expectations and environment.

Economics

The democratisation of 'luxury'

Increasing affluence and availability of credit means we have easy access to the things we only used to dream about.
The developed world has more money in its pocket than ever before. GDP per head in OECD countries has increased tenfold over the last three decades, and the IMF shows world interest rates at 20-year lows. As the world has grown more affluent, our ability to access new things has accelerated. In the old days people didn’t have much disposable money, and so, didn’t have easy access to new things or places: experiences. Their experiential realm was limited. With increasing affluence and access to credit, people can now satisfy not only basic needs, but access what was never attainable before. Capitalism and credit has spurred the democratisation of "luxury". This has had two effects:
    a) People have more yet need more – we can actualise interests and aspirations more impulsively than ever; the things ‘they’ only used to dream about, we can realise everyday. As a result, class lines are changing. Vertical social structures based on affluence and material wealth are being recast on cultural grounds. Owning a BMW as opposed to an Audi is now a clear cultural demarcation. Brands are becoming less powerful indicators of social status but more powerful symbols of cultural affiliation. What you do in your life, and whom you do it with – your cultural experience - is becoming more important than simply what you have.

    b) People get more yet want more - In search of the elusive tangible difference, entrepreneurs and corporations have been inspired to continually introduce higher quality, more sophisticated, better engineered goods and services at ever decreasing prices. Declining prices have again increased accessibility. As a result, accessibility has undermined the key driver of brand appeal, aspiration. Less brand aspiration, equals less brand gratification which, in real terms, means less consumer value. In short the brand value creation battlefield has shifted. People are searching for new cultural experiences and affiliations that add dimension and demarcation to their brand choice, and to their world. As the Head of Audi for the Americas, Matthius Seidel, put it, "We don’t just sell cars, we sell a lifestyle experience. We sell 'The Audi Experience'. And our vehicles are simply a prop for their cultural theatre."

Expectations

The need for multi-sensory entertainment in everything
In Norway (population 4.5mn) you can choose from 200 different newspapers, 100 weekly magazines and 20 different TV channels. At last count 3M’s humble post-it note came in 18 colours, 27 sizes, 56 shapes and 20 fragrances. Even the seemingly simple Barbie doll has 15,000 potential combinations based on lifestyle and cultural platforms. Increasingly we are operating in a surplus society with bewildering levels of choice. And technology means the boundaries are constantly changing, the benchmarks are being stretched, and expectations are being raised. When Pixar released The Incredibles it made Toy Story look Mickey Mouse. With 60,000 players day or night, Sony’s on-line EverQuest firmly buries Tomb Raider in the games graveyard. And the impact of the point and click, surf and scan, now or never mentality is going far beyond the digital literati. It has heralded a shift from passive to active, from the material to the cerebral, from audiences to participants. People want to be involved. They want to be part of the theatre and experience it - to touch, taste, feel, smell and hear the proposition. Function is now only part of it: people are looking for multi-sensory engagement and fun. They don’t want to watch, they want to DO.

Environment

The ever-moving target wearing a broadcast flak jacket

With so much going on in their lives, we find it increasingly hard to reach people, not to mention engage them – they’ve seen it all before

Just 10 years ago there was around 500 ads shown every day on UK TV, today there are upwards of 11,000. In the hours between waking this morning and getting to work you saw or heard around 100 ads. In Australia each person on average sees 1300 commercial messages a day. We are being bombarded by stimuli. The commercial environment has rapidly evolved. But human evolution can’t keep pace.

The more we do, the less able we are to reach people impactfully through any one media – people are on the move. And to give us a chance of psychological survival our brains helpfully filter out just about all of the detritus, leaving us to remember at best 2 ads a day. For consumers to find your needle in the haystack means you need to think differently. It requires a new model of communication, with different rules of engagement. The answer is we need to look at how we build experiential theatre into everything the brand does, so while we can’t necessarily impose ourselves on people for 60 seconds, we can get them to play with us, if we’re clever enough. Play with our packaging, watch our film, soak up our check-in service, sing along to our on-hold music, come to our event, and do stuff with us that is new and stimulating.