The term ‘experience economy’ was first coined in an article published in 1998 by B. Joseph Pine II and James H. Gilmore. In it, Pine and Gilmore argued that businesses will need to start orchestrating memorable events for their customers, as consumers lose interest in ownership. In an experience economy, memory and documentation of an event, usually in the form of a photo posted on social media, becomes as much of the product customers are purchasing as the experience itself.
As we move into Spring 2017, the experience economy has infiltrated every single service sector in some way, leading to the rapid rise of some businesses and the demise of others. Here’s how businesses, industries and even governments are taking advantage of the experience economy:
No sector is as closely linked to the experience economy than the tourism industry. It is something that has been particularly targeted by emerging tourism markets. Patricia Maher, the newly-appointed CEO of Grenada’s Tourism Authority, recently stated that the millennial market are continuously seeking a unique experience. Maher aims to market Grenada as a place where visitors can connect with local communities and customs, providing a much more authentic experience than tourist trap destinations around the globe.
The experience economy offered by smaller, less commercialised islands such as Grenada isn’t just attractive to millennials. Many older people in search of an authentic adventure are heading to to the Caribbean due to Grenada’s citizenship by investment programme. These initiatives are popular with retirees who are enticed by the experience of spending their sunset years in a paradisiacal haven.
For many small islands like Grenada, tapping into the experience economy with tourism and CBI programmes can generate income essential to their economic growth. For instance, tourists seeking an authentic holiday are more likely to integrate with local communities, thus spending their money on locally sourced goods. Furthermore, Grenada’s CBI programme encourages applicants to invest in its National Transformation Fund, a government fund designed to improve healthcare, education, industry and renewable energy on the island nation.
When Henry Ford introduced his first Model-T automobile, he famously claimed “any customer can have a car painted any colour that he wants so long as it’s black”. Today, the motoring industry has changed so much so that car accessories have become just as important as the car itself.
Car owners no longer want their vehicles to be machines that serve the simple purpose of getting from A to B. Instead they want owning and driving a car to be an experience. This is why many car ads emphasize the feeling of driving a car, rather than the car’s functions.
Cars have become extensions of ourselves and accessories play a huge part in that, whether that’s customised wheels, speaker systems or personalised number plates. For example, personalised number plates can be an expression of individuality. They allow you the opportunity to stand out from the crowd and highlight your unique identity.
In 2015, Chinese tourists cumulatively spent $229 billion on overseas purchases. The Japanese have coined a word for the phenomenon – ‘bakugai’, meaning “explosive shopping by the Chinese”. Writing for Business of Fashion, Divia Thani claims that to capitalise on this, retailers must make shopping in their stores an immersive experience, where customers will share their experience on social media or with their friends in order to increase footfall.
Experiential retail turns the often mundane act of shopping into something unique, fun and memorable. Several major high street stores have already experimented with immersive retail. Topshop have used augmented reality to allow their customers to ‘try on’ clothes digitally, and in 2015 created the world’s first Twitter-powered crane in their flagship Oxford Street store. Meanwhile, River Island have teamed up with Snapchat to create bespoke on-brand filters that can only be used in one of their stores.
OCS Retail Support predict that not only will the use of virtual reality will become more prominent as more outlets embrace experiential shopping, it may be the very thing that can save the high street. Consumers know they can buy any product online quickly and easily, so the only way for stores to stay relevant is by offering an experience.
A 2013 study found that the current restaurant profitability models are “organisation-centric and focus on product profitability or customer profitability”. But restaurants lose at as these models “overlook the customer perspective in the restaurant evaluation process, they are not sophisticated enough to meet the challenges of today’s experience economy.”
Restaurants, rather than determining prices by calculating costs, should focus instead on the experience they offer. Pop-up restaurants are successful because they tap into what the consumer wants – they help create memories that are so valuable in an experience economy.
Commercial kitchen providers, Dephna argue that pop-ups are so attractive to consumers because they don’t stay in the same place for very long which creates a sense of urgency in potential customers. They also do this by offering unique eating experiences, often outdoing each other with their eccentricity take cat cuddle cafes and hovering restaurants held 100ft above London’s Canary Wharf.