Today’s consumers are evolving. We are living in the midst of the, “Experience Economy”. Consumers look for experience as well as product. Imagine a customer walking into a coffee shop to get a cup of coffee. Today, from the interior design of a shop to how a customer is greeted, to the menu and selection process all the way to how payment is made and how the order is processed, even to the actual cup in which the coffee is served – each of these experiences matter, as well as the taste of the coffee. At every step of the customer journey, experiences are getting compounded.
The Phenomena of ‘Experience Economy’
As well as selling products, businesses are also selling an experience. Customers are ready to pay more for the ‘right experience’. This isn’t something that happened overnight, rather it’s the outcome of an economic progression we have undergone. The progression has been further advanced by the amazing possibilities of today’s technological advancements.
Digital Transformation and Experience
The best outcomes of the experience economy come through digital transformation; which encompasses the digitalization of processes, systems and data resulting in understanding the consumer better than before. Digital transformation enables us to create better experiences. Service and product providers can do their job better by leveraging technology and best practice through data insights and analytics. Digital transformation is the enabler of an improved experience economy. Data insights allow businesses to both measure and understand what is happening. Analytics are key to seeing what makes the customer happy and then repeat the best experiences and eliminate the bad ones. Personalized communication at scale with customers is rapidly becoming the future of marketing that serves consumers with more ‘relevant’ marketing messages that have a profound impact.
EXPERIENCE
A Harvard Business Review article by Joseph Pine and James Gilmore (July 2016) describes the ‘Progression of Economic Value’.(1)
Using the analogy of the four-stage evolution of the birthday cake, they explain this progression, to the stage of buying ‘experience’.
The first stage is when mothers would make birthday cakes from just the basic commodities available like eggs, flour, butter and sugar; and all of it would just cost mere dimes. As times progressed and we reached the stage of a goods-based industrial economy, there was a point when people would pay a nominal amount for premixed ingredients and bake a cake at home. As time progressed further into the service economy era, busy parents would pay more to bakeries or grocery stores and buy ready-made birthday cakes. Now, we are in the fourth stage of experience. Birthday parties are outsourced to event companies that arrange a custom birthday cake and setup the entire party with every detail accounted for. At this stage most activities are outsourced and personalized to provide an ‘experience’ that is not easily forgotten.
The article explains, “an experience acts on each individual person differently, an experience is always customized and never mass produced, meaning it is inherently personal, authentic, and meaningful for the one experiencing it.” Data driven analytics allow us to give a personalized experience in ways we could never have done before. A customer’s preferences for things based on previous behaviors means they get what they want faster and with more accuracy. Digital transformation allows better insights and better experiences ultimately resulting in more value for businesses and customers alike.
Recognizing this allows businesses to customize and differentiate their value proposition for their customers. This is of vital importance as supply continually outstrips demand for mass produced goods, so spending on experiences steadily increases.
Many businesses make the mistake of thinking of experience as something that is just associated with what they are offering. Experience ought to be thought of as an actual service or product offering. Customers nowadays want experiences and are willing to pay for it. Businesses who realize and understand this develop offerings, not based on selling tangible or intangible products and/or services rather they take into account experience, and charge more for this. As HBR describes, “…a company intentionally uses services as the stage, and goods as props, to engage individual customers in a way that creates a memorable event.”
Staging experiences is not something that businesses can do so easily, no doubt. It requires a holistic approach and reimagining the entire length and breadth of the customer journey. It essentially requires thinking across the entire spectrum of business operations, the technology that a business uses and the strategies that are employed to advance business interests.
Though in theory, experiences are the fourth stage of consumer development after commodities, goods and services. The massive spending that corporates are dedicating to customer experiences further exemplifies that the experience economy is a reality.
- According to International Data Corporation (IDC), Global CX technology spending is expected to reach $641 billion in 2022. (2)
- While according to Forbes, 87% of business leaders tag CX as their top growth engine—the highest of all growth areas. (3)
Apart from this, a recent survey by Accenture revealed some staggering insights.
- Based on a a survey of 25,000 consumers across 22 countries, 50% of consumers say that the pandemic caused them to rethink their personal purpose and re-evaluate what’s important to them in life.
- 42% percent say the pandemic made them realize they need to focus on others more than themselves. (4)
These people are being referred to as, ‘reimagined consumers’. Their buying habits are being influenced and many businesses may lose their customers. The prime reason being that their tactical and strategic approaches are aimed towards the ‘traditional consumer’ while the ‘reimagined consumer’ is not yet realized. Accenture noted in their survey that these ‘reimagined consumers’ represent a significant buying power. While for some businesses this is an opportunity, for others this could be a threat, whereby their customer base will shrink.
Using digitalization, businesses can retain their existing customer base as well as capture the new, ‘reimagined consumers’ and become leaders of the experience economy. Digital transformation lies at the core of the experience economy. How can you ensure the experience is good, greater or better? Data is essential. Through digital transformation businesses can anticipate problems that the customer is yet to experience and avoid them. Technology allows companies to really know the customer well and provide experiences that will not just retain customers, bring them back but also have unforgettable experiences.
References
1- B. Joseph Pine II and James H. Gilmore, Harvard Business Review Magazine Welcome to the Experience Economy. (July–August 1998)
2- Business Wire. Spending on Customer Experience Technologies Will Reach $641 Billion in 2022, According to New IDC Spending Guide (August 06, 2019)
3- Blake Morgan, Forbes. 10 Stats Showing The Growth Of CX. (August 09, 2021)
4- Accenture. Report: Life Reimagined: Mapping the motivations that matter for today’s consumers. (2021)
