The Experience Economy
The future of the experience economy October 20, 2020 The modern consumer prefers experiences over stuff. Winterberry Group found a 6.3% growth in spend on experiences—such as travel, live entertainment and dining out—over material goods in 2019. Modern marketers often refer to this shift as the “experience economy,” a term first introduced in a 1988 article by B. Joseph Pine II and James H. Gilmore. The authors suggest that the experience economy is the latest mode of the economy, following the agrarian economy, the industrial economy and the most recent service economy. The idea is that modern marketers need to create memorable events for consumers, wherefrom the memory itself becomes the product: the "experience.” But, as we all know, in-person experiences came to a sudden halt as stay-at-home orders took effect due to COVID-19. Now, even as brick-and-mortar businesses reopen, many consumers are hesitant to resume their pre-pandemic activities. According to Epsilon research published September 2020, over 33% of consumers don’t feel safe going into physical retail stores until there have been no new cases in their state for a few weeks, and nearly 1 in 4 consumers won’t feel comfortable traveling again until a vaccine has been made available. In the inaugural issue of CORE Content, we explored the impact that COVID-19 has already had on the experience economy, as well as what the longer-term impact may be. What are brands doing? Brands built around the experience economy are dramatically shifting gears. Airbnb, for example, moved in-person cultural experiences for its customers online, offering:
Tango concerts from Argentina
Wine classes from Portugal
Family baking classes from the U.S.
These virtual connections not only offer exposure to new cultures, but also intimate experiences that would be more expensive in person. Could these types of experiences continue? In May, Apple purchased virtual reality company NextVR, a startup that broadcasts live and recorded events in virtual reality, such as sporting events and concerts. But virtual experiences seem only to go so far. That same month, Disney’s theme park in Shanghai reopened and sold out of tickets within minutes. People are hungry for in-person experiences that feed our desire for human connection and connection to the physical world. So even though some marketers are getting creative when it comes to virtual experiences, it’s tough to imagine people preferring virtual concerts, for example, to the real thing for very long after a COVID-19 vaccine comes onto the scene. Perhaps it’s safe to say that component of the economy will return to normal once we’re out of the pandemic woods. Brands need to think differently about how they market their products and services to create an experience. Even if overall consumer spending is down, people still need stuff. And they’re more likely to buy stuff if their customer experience is as positive and memorable as a concert. COVID-19 reminds brands that all customer experiences should be memorable Traditionally we think of in-person events like concerts, pop-ups and cooking classes as the only components of the experience economy. In-person events are the easiest way to understand the shift from service economy to experience economy. But as associate professor at the University of Queensland David Solnet points out: “Everything is an experience.” Solnet reminds marketers that every touchpoint between a customer and a brand is an experience—an experience capable of leaving positive memories for the customers, just like a concert. Take unboxing. People are shopping more online than ever before, which means lots and lots of packages that need to be opened. These packages (and the packaging on the products themselves) can be enticing and memorable to open, or they can be lackluster and totally forgettable. The former option can develop strong brand loyalty and valuable user-generated content (unboxing videos are incredibly popular on YouTube), while the latter is a wasted opportunity. DTC brands like Glossier have already perfected the unboxing experience, to the point where there are more than 73,000 Glossier unboxing videos on YouTube. A privacy partner you can trust: CCPA and beyond Likewise, the online customer experience needs to be similarly positive and memorable. And if brands seriously dedicate themselves to developing stronger digital customer experiences, that starts with understanding customers themselves. Knowing what each individual consumer wants and needs allows a brand to create custom experiences that are positive for the consumer. So what does 2021 and beyond look like? As consumers continue to remain hesitant when it comes to their spending (Fitch Ratings estimates retail sales to remain in decline during the second-half of 2020 and for 2021 sales to be down as much as 10% from 2019 levels), there’s a good chance we’ll see brands continue to innovate in terms of developing improved experiences around their products and services. We don’t know when travel, dining and entertainment will return to pre-pandemic levels, but we do know that the economy has been changed. And perhaps the future of the experience economy looks like a return to its roots: the customer experience.