Understanding the importance of the experience economy

Clinton Scott, managing director at TechSoft International

Commodity, goods, and services are three of the fundamental economic values organisations deliver to their customers. However, experience has emerged as the fourth (some say most crucial) one. While experiences have always been around, they have traditionally been grouped together with services. When a person buys a service, they purchase tangible activities. On the other hand, when a person buys an experience, they pay to spend time enjoying a series of memorable events or more intangible activities.

This is the foundation of the experience economy.

In his seminal piece, Joseph Pine of Harvard Business Review, wrote that experiences are about time. In other words, customers value the time the organisation spends with them. Today, companies can engage with people using both physical as well as digital means. But fundamental to this is the staging of individualised customer experiences. Experiences can even be transformative, helping customers achieve their highest aspirations.

Already, many companies have embarked on transitioning from a product-centric strategy into one built around delivering a more customer-focused approach. This is designed to not only improve sales but also help grow loyalty at a time when people can easily migrate between service providers that best meet their individual needs.

Experiential value

This has resulted in companies finding a new source of value in creating experiences for their customers. Think of the hierarchy in the following way. A service is already more customisable than the goods provided. An experience is even more personalised than a service as it accounts for several different factors designed to elicit a response from the customer.

To this end, an entirely different business model is created that focuses less on promotion to draw customers in and more on customers eager to buy experiences at a premium price and higher margin. Part of this entails providing an organisation with more personal data about themselves. In this way, more nuanced products and services can be created. More importantly, insights are developed on who the individual customer is and how a company can develop a bespoke experience focus on that person.

By doing this, companies can create or even improve their customer intimacy.

A new approach

Such a strategy encompasses three major criteria – customer-driven offerings; predictive engagement; and connected experiences.

Customer-driven offerings reflect the capability of the organisation to understand the segmented and nuanced needs and wants of its customers. This is done in a way that anticipates not just the physical goods or nature of services, but also the unique ways in which those goods and services are delivered.

Secondly, predictive engagement is the ability to understand past behaviour and combine those insights with real-time contextual awareness. This provides the means to engage with an experienced-focused ‘best action’ that builds on and enhances customers’ expectations and satisfaction.

Finally, connected experiences reflect the capacity of the company to seamlessly deliver experiences across many digital and physical platforms of engagement. These are designed to increase customer interactions, attention, and money while giving the impression of less friction and lower time spent overall.

Even though some might argue that focusing on the experience economy is too narrow as it prioritises form over function, customers have been demanding such an environment for many years. With technology sufficiently evolved to help enable organisations to deliver this, it is best to capitalise on the experiential before losing market share to competitors.