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The Experience Economy

The idea of an “experience economy” isn’t new. It was first popularised in the late 1990s by two business consultants called Joe Pine and Jim Gilmore. In an article for the Harvard Business Review, and a book called The Experience Economy, they proposed that, after the agrarian, manufacturing, and service economies, the experience economy is the logical evolution of capitalism.

James Wallman, Future Gazers report

By this, they meant that just as the creation and delivery of food and drink were the hallmarks of the agrarian system, and that the people who owned the means of production were the wealthiest—and just as the creation and delivery of material goods were the pillars of the manufacturing economy, and the people and businesses that owned the factories were the most successful, and so on for the service economy—so the creation and delivery of experiences will be the essential characteristics of the experience economy, and the firms which create and deliver the most exciting, engaging, meaningful and compelling experiences will be the victors in the experience economy.

What’s new now is that, as described in James Wallman’s Stuffocation and the Postmaterialist times section above, people are becoming determined experientialists and the experience economy is taking off.

In the future, all firms will compete through ever better customer experience (CX) and user experience (UX), and track this through research provided by companies such as Utah-based survey firm Qualtrics.

Many will look to VR and AR to enhance their offer — as Diageo has done recently. In Singapore, whisky drinkers got the chance to (virtually) visit Scotland while they sipped the firm’s Singleton Single Malt Scotch Whisky.

But the experience economy is about far more than fancy technology. The experiences that will help firms stand out will be the sort of high-touch and humantouch offerings that small businesses specialise in. Consider the rise of escape rooms, where a handful of people are locked in a room for an hour and can only get out by solving brain teasers, puzzles and challenges.

In the UK, by late 2014 there were 50 escape rooms; there were 200 by the end of 2015 and there are more than 850 today1. Most escape rooms are operated by small groups of enthusiasts — like the bawdy Lady Chastity’s Reserve, established by frustrated advertising creative Ben Tucker and run by his small firm, Handmade Mysteries.

You won’t have to lock people up to connect with them in the experience economy of the future. Retailers will create experience stores, where the focus is less “stuff on sale” and more how you can find out about the brand — like Samsung’s 837 in New York’s Meatpacking District. You can’t purchase a single Samsung product anywhere inside the 55,000-square-foot space, which Samsung describes as a “technology playground and cultural destination” and a “physical manifestation” of the company’s brand.

Other retailers will use in-store entertainment to entice shoppers, borrowing ideas pioneered by Pike Place Fish Market in Seattle, interiors firm Pirch in San Diego and retailers like Burberry and Selfridges — which have both hosted in-store music gigs.

Instead of simply letting shoppers browse its goods, Pirch invites experts and shoppers to use the real, working home vignettes they create. The kitchens always smell of fresh coffee, because it’s being made in there. You can take cooking classes in their kitchens. And if you reserve the store’s Sanctuary room, you can try out the steam room and sauna, and more than a dozen shower heads2.

And Pike Place Fish Market in Seattle? “Pike Place has the best signature moment in the world,” says The Experience Economy author Joe Pine. “One person picks up your fish order and throws it across the counter for a fellow worker to catch it and complete the transaction.”

At present, many companies charge for food and service and give the experience for free. In the future, that will be reversed: UK-based coffee shop chain Ziferblat Cafes now charges for admission and gives the coffee for free.

At present, small firms are focused on competing through the quality of their products and services — as large firms once did. Inspired by data about the experience economy, and aware of the commoditisation not only of products but increasingly of services as well, many large firms are already shifting their attention to competing via the experiences they provide.

Consider the success of Apple. Of course, Apple turns out a lot of hardware. But Apple has a ruthless focus on experience. Think, for a moment, how easy it is to operate an Apple device, and how slim the operating manual is. How different is that to the manual that came with, say, your VHS recorder in the 1980s? Chief design officer Jonathan Ive and his designers at Apple do not only consider the experience of using their product though; they try to make everything pleasant, from the stores in which their products are sold to the very moment you open the box of your new product.

“Not only do the guys at Apple make sure their products are products people love to use,” says Joe Pine. “They even think about the packaging, about the ‘boxopening experience,’ so even that is unique and engaging.”

Another sign that this shift is happening is the success of Qualtrics, the US software firm which bills itself as “the experience management platform”. Launched in 2002, it is now worth around $2.5 billion, and is used by 8,500 of the world’s leading brands — from Kellogg’s to Mastercard and Microsoft — in order to measure, monitor and improve the experience they provide to their customers and employees.

In the early 2020s, as more signs emerge of the experience economy and it becomes orthodoxy, small firms will measure and monitor the experience their customers and employees have — and consider it as important as they now think of Net Promoter Score.

By the 2030s, as globalisation increases, goods and services will feel ever more commoditised. Then, in the experience economy, the only way left for brands to stand out will be through exceptional experience.

The most successful firms will focus on creating experiences that are so meaningful (and memorable) for their customers, they can’t help but become brand promoters, telling their friends about the story of the encounter they had with the firm. They will this digitally, using AR and VR. They will do this through the physical and the personal and the theatrical. And they will do this through a mix of all of the above.

There was a glimpse of this mix at Comic Con in San Diego in July 2017, when fans visited the world of TV show Mr Robot. On arrival, visitors sat on a seat in the hero’s flat and put on a VR headset. The first scene they saw? The hero’s flat — brilliantly syncing the real and virtual worlds. There will be a glimpse of the future in the UK in the first quarter of 2018, as a startup — that’s still in stealth so we are not able to mention the name — will launch an entertainment concept that fuses technology with theatrical with physical entertainment. Besides the cutting-edge VR, AR, MR, and AI, visitors will be wowed by magical sets, meet interactors, and be stimulated by touch, taste and temperature.

By the early 2030s, as Joe Pine and Jim Gilmore predicted in their seminal book, all work will be theatre and your business a stage — an opportunity to deliver a compelling experience.

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Future Gazers report

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1. Source: Exit Games,
2. Do Pirch’s efforts work? Their results suggest they do. At one store, cooking classes are booked up three months in advance. Shoppers spend an average of two hours and 11 minutes in Pirch’s stores. They’re not just browsing. Some of Pirch’s shops are posting sales greater than $3,000 per square foot, an honor that, according to eMarketer, is only surpassed by brands like Tiffany and Apple. Source: “Pirch lets you take a shower, cook a meal in its stores”, CNBC, 18 June 2015.