Experience Economy

Experience Economy – the WOW Factor of Customer Service

Our society is moving from a service economy to an Experience Economy. The industrial economy (which died in the 1950s) and the service economy (which is nearly dead now) brought a whole new range of products and services that didn’t exist before. Businesses must learn to stage a rich and compelling experience for customers in order to survive. Customers have become more demanding in their shopping or entertainment experiences.

According to the experience economy, consumers seek unique experiences beyond merely consuming products and services. This is because the consistent high level quality of products and services can no longer be used as a differentiating choice factor for customers. Businesses need to shift paradigm from the ‘delivery-focused’ service economy that emphasizes high quality offerings to the ‘staged’ experience economy that creates a memorable consumption experience. Experience is defined as the result of encountering, undergoing, or living through situations that provide sensory, emotional, cognitive, behavioural, relational and functional values.

Experience Economy
Experience Economy

More than a Service

Experience is explained as having a real offering as a result of a service, good or commodity. In today’s modern society, many marketers, promoters and relevant companies have taken ‘experience’ to a whole new level, charging high prices for services with additional perks, elevated association of status and a symbol of luxury. Thus being able to command high prices for a product/service offering that costs significantly less. This is what makes the Experience Economy such an attractable investment for many entrepreneurs and high gross profit margins.

Experiences must provide a memorable offering that will remain with one for a long time, but in order to achieve this, the customer must be drawn into the offering in such a way that they feel a sensation. And to feel the sensation, the customer must actively participate. This requires highly skilled actors who can dynamically personalise each event according to the needs, the response and the behavioural traits of the customers.

Companies that wish to offer their customers an experience need to see themselves as stagers of events.

Beyond Entertainment

At first sight it appears that experiences have an affinity with the entertainment, leisure and sports industries i.e. Walt Disney’s theme parks, a visit to a themed restaurant like Madame Zingara or watching a rugby or soccer game. There is no doubt that the entertainment industry has acquired the skills and talents for engaging people.

Corporates and industries have a long way to catch up to transform their service into a memorable event that the customer will want to repeat again and will want to recount this to all their friends.

Understanding the term ‘experience’

The best introduction of Experience Economy is the example of the coffee bean.

  • When you prepare coffee at home, it costs you about 50c per cup.
  • When you want to drink the same a cup of coffee from the same coffee beans at a small coffee shop nearby, you can expect to pay R12.00 a cup; ten times as much. But you’re not complaining because the coffee shop buys and prepares the coffee. That is service industry.
  • However, when you want to drink a cup of the same coffee beans at a fancy restaurant in Camps Bay, you must expect to pay up to R20.00 a cup. That is experience economy. You do not pay for the coffee bean. You pay for the experience. And you are prepared to pay 100 times as much compared to drinking it at home. Welcome to the experience economy.

Why do people pay so much more for something they could get at a fraction of the price at home? They pay for an experience that is pleasant, memorable and personal to them. There is however a flip side to providing memorably good experiences and that’s providing memorably bad experiences! Think about the last time you experienced bad service, was it memorable? Did it leave you thinking ‘no way will I repeat that again’?

 This is in a nutshell what the experience economy is. You are prepared to pay a higher price when the added value and experience is perceived to be higher.Businesses must orchestrate memorable events for their customers.

–  By Lionel Bourgeois of VETTA Communication (Pty) Ltd -Sept 2014.

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