Experience economy

Page 1

WILL EXPERIENCES SHAPE THE FUTURE OF THE ECONOMY?


CONTENTS

INTRODUCTION

#1

Aim Methodology

#2

THE EXPERIENCE ECONOMY

#3

THE FOOD & DRINK INDUSTRY

Origin and Evolution Impacts on Society

Multi-sensory experiences Virtual Reality Social Media

THE TRAVEL INDUSTRY:

#4 Jazmin Chima N0638839 Word Count: 3,298

Social Media Personalisation Experiential Marketing


#5 #6 #7

THE LUXURY INDUSTRY Retail Experience Technology

CONCLUSION Key Insights Future Implications?

References Bibliography List of Illustrations


AIM This report will critically analyse and asses how the experience economy is impacting society today and how it is modifying consumer needs and desires. An insight into what the experience economy is, where it originated from and how it has evolved will be investigated. Evidence will be provided from a range of sources including; marketing reports, books, journals and theories to support this concept. Furthermore this report shall provide an insight into how the experience economy is affecting different industry sectors, in particular; travel, luxury and food. Whilst investigating how both companies and consumers are responding to this and the key facets driving this trend. Moreover, research and findings in relation to what the future of the trend may entail will also be discussed. The term ‘Experience Economy’ was first developed in 1998 by Joseph Pine and James Gilmore. They highlight that ‘Commodities are fungible, goods tangible, services intangible, and experiences memorable.’ (Pine and Gilmore, 1988) This trend is shaping a number of industries and transforming the way brands interact with their consumers.


METHODOLOGY

To support the concepts discussed throughout the report a coherent body of secondary research has been utilised. This included a range of academic journals, marketing reports, blogs and books. Books and journals have been highly useful, for example Pine and Gilmore’s ‘Welcome to the experience economy’ both first and second editions have provided in depth information on the history of the trend. This has been helpful as the information provided is credible and is checked by a publisher. On the other hand, a limitation would be that although there are two editions of this book the information is not entirely current and up to date. Industry news has proven to be a valuable source of information. Publications from broadsheet newspapers such as The Guardian and The Independent have provided current and up to date information, which has been highly relevant to this topic of research. Nevertheless, newspaper articles are limited because the information may be biased to the author’s opinions. The credibility of this source can be questioned, therefore when taking information from news sources it is essential to question both sides of the argument. Online trend reports from sites such as Mintel, WGSN and Trendwatching have aided in secondary research. These reports have provided accurate, in depth and up to date information covering specific topics. In addition, they have provided a vast range of figures and statistics to back up the statements made.


THE EXPERIENCE ECONOMY


ORIGIN & EVOLUTION The history of the experience economy derives from Pine and Gilmore’s theory in 1988. They summarize this concept by proclaiming that ‘An experience occurs when a company intentionally uses services as the stage, and goods as props, to engage individual customers in a way that creates a memorable event.’ (Pine and Gilmore, 1988). They explained the theory using the example of a birthday cake, in the past mothers made a birthday cake for their child on their birthday using few low cost ingredients. This then shifted to buying cakes from specialist bakeries. Today mothers spend money on a birthday party in order to create a more memorable and exciting experience for their children. The experience economy is understood by delving deep into the minds of consumers and understanding that they predominantly desire unique, immersive and memorable experiences, therefore consumers are openly welcoming this trend. Pine and Gilmore use four realms in order to bring together the key elements that create a memorable experience. These consist of; entertainment, educational, esthetic and escapist. Furthermore, participation is broken down into active and passive. Passive is defined by experiences where consumers do not directly take part, for example watching a fashion show. On the other hand the active dimension would include activities where consumers create their own experience, as the diagram across displays climbing a mountain as an example. When all four realms come together this is described as a ‘sweet spot.’ This is achieved through engaging in rich and immersive experiences that tap into all of our senses. Pine and Gilmore use the examples of going to Disney world or gambling at a Las Vegas casino. In relation to the evolution of the experience economy it is detrimental for brands to consider what type of experience their business will offer.


IMPACTS ON SOCIETY The expansion of the experience economy is presently one of the most important and recognized macro trends in marketing and in society today. The experience economy has had the biggest impact on millennials, they are currently driving the trend. Millennials are much more opposed to creating memories and engaging in fun experiences. They are not interested in buying a car or owning a home, true value for this generation is about experiencing, not possessing. (Eventbrite, 2014). This is supported by a survey carried out by Eventbrite in the US from June 27-July 1, 2014 among 2,083 adults ages 18 and older. The survey found ‘78% would choose to spend money on a desirable experience over buying something desirable.’ (Eventbrite, 2014). This highlights the differentiation of millennial attitudes from previous generations and highlights the growing importance of the experience economy. One key facet explaining how the trend is impacting society is due to the changing attitudes of consumers. Millennials are driving this consumer shift. Secondary research signifies that millennials now more than ever desire experiences over purchasing tangible objects. Social media is also supporting the evolution of this trend, as almost everything individuals are doing is shared via a form of social media. The concept of ‘live streaming’ on digital platforms such as Facebook, Snapchat and Instagram is also prompting the idea that everything consumers immerse themselves in is for the purpose of sharing this content online. However, the experience economy is not just confined to millennials. Secondary research has illustrated that the over sixties demographic is also just as keen as spending their accumulation of hard-earned money on experiences, particularly on travel. (The Economist, 2016).


#1 THE FOOD & DRINK INDUSTRY


MULTI-SENSORY EXPERIENCES A multi-sensory experience engages a humans senses: Sight, sound, touch and smell. Food and drink sampling for example, has been at the core of sensory experiences for many years. Sampling still proves to be highly powerful as it intrigues consumers into wanting more. The experience economy is driving the way that individuals are spending their money, figures from Barclaycard illustrate a 16% increase in spending in restaurants. The industry is expanding and consumers are constantly on the lookout for somewhere new and exciting to dine. Therefore it is essential for brands to adhere to this and understand the value of providing an immersive, memorable experience for consumers. Consumers seek more than just somewhere to eat and get together and socialise. A number of high end restaurants have submerged themselves into this concept. Heston Blumenthal’s The Fat Duck restaurant offers consumers a seafood dish which features a conch shell equipped with an iPad that plays sound effects of the sea as individuals dine. The concept behind this is that consumers eat the fish whilst listening to the sounds of the waves, which takes them back to a childhood trip at the beach. Heston’s restaurant is a prime example of this industry tapping into the idea of creating a tailored, unique experience catered to each consumer that also successfully manages to tap into the five senses. However, in order to dine at this restaurants consumers must be prepared to pay a large amount of money. Therefore many individuals are excluded from being able to experience such an immersive and nostalgic dining experience. On the other hand this is an example of multi-sensory dining being taken to the extreme. This particular restaurant has been criticized for ‘making the experience less about the incredible cooking, and more about a session on the psychiatrist’s’ couch.’ (Wallop, 2016). This a point businesses in the food industry may need to take into consideration as providing a highly unique experience like this one may distract consumers from the purpose of the restaurant, which is of course the food.





VIRTUAL REALITY Virtual reality noun The computer-generated simulation of a three-dimensional image or environment that can be interacted with in a seemingly real or physical way by a person using special electronic equipment. (Oxforddictonary.com, 2017).

Similar to the approach of companies providing multi-sensory experiences, virtual reality is also becoming increasingly popular. In relation to the experience economy, virtual reality enables consumers to have their sense heighted when engaging with content. The fast food industry has recently used virtual reality as a marketing strategy. In 2016, Taco Bell teamed up with Sony PlayStation and created a pop up virtual reality arcade in Soho. The room was decorated with pink and blue neon and consumers experienced a shark attack whilst they dined at Taco Bell. There was also a gif making station where consumers had the opportunity to make their own. This is a prime example of brands responding to the consumer desire for immersive and unique experiences within the food industry. Virtual reality is also having an effect on how consumers taste food. For example French cheese producer ‘Boursin’ create a CGI video, virtually taking users into a fridge and educating them on which specific foods go well with their product. Virtual reality is proving to be an extremely interesting platform in relation to how brands are communicating with their consumer. The use of virtual reality in combination with the food industry is highly likely to increase and become more common in the future, due to the growth in technology.



SOCIAL MEDIA The restaurant industry is booming. Growing 8% from 2015 in the US and 3.7% in Mexico. (WGSN, 2016). As discussed earlier in the report, individuals, especially millennials are seeking unique and entertaining dining experiences. Ones that divulge into more than just one of the senses. This concept has been labelled ‘eatertainment’ and it is being fuelled by social media. Moreover, it has increasingly become the norm for consumers to share images, videos and boomerangs of their dining experiences on social media. Interestingly, ‘30% of millennials would avoid a restaurant if its social media presence was weak.’ (Hosie, 2017). Attitudes towards the dining industry have evolved and will continue to do so. Consumers are no longer eating out solely for the taste of a restaurants food and drink they now desire food and drink that is aesthetically pleasing, that they can take photographs of and share with their followers. Especially among the millennial generation social media sites such as Instagram, Facebook and Snapchat aid individuals in creating an online persona for themselves. Visiting cool, quirky cafes, bars and restaurants creates the ideology of being cool. This creates the perception that you are having a wonderful time and are knowledgeable on the most fashionable places to go. Brands are also adapting to this idea, especially if their core target market is millennials. They are understanding the needs of consumers wanting them to be ‘Instagramable,’ an experience they can share with their friends and followers. For example, restaurant chain Bills highlight that, ‘We've seen Instagram play an increasingly important role in our comms strategy as both the channel itself and our Instagram profile has grown in popularity.’ (Carey, 2017). Brands are increasingly creating their visual presence with the same amount of thought put into their food and drink. Aesthetics play a key role in this industry and Instagram in particular is proving to be an extremely effective marketing strategy for food and drink companies. Overall the culture of eating at restaurant or going out for a coffee has significantly changed. Before emerging in their food and drink consumers are reaching for their smartphones. Evidently social media is changing marketing strategies within a range of industry sectors.


#INSTAGRAMMABLE


#2 THE TRAVEL INDUSTRY



SOCIAL MEDIA Social media has created huge opportunities for brands in relation to their marketing strategies. Social media is shaping a number of industries, for example the travel industry. As millennials are valuing experiences over purchasing things, this industry is expanding. ‘Travellers now have the privilege of instantaneous access to information across the web in the form of TripAdvisor reviews, and travelers’ Instagram photos’ (Brown, 2017). Evidently, social media plays a huge part in the travel experience. Everything is now available at the consumer’s fingertips. For example on Instagram with the touch of a button users can search for a particular location and view images that others have tagged. Therefore, users are able to gain greater insight on a place before they decide to visit. Social media offers access to a wide library of information, which may have an impact on consumer decisions on where they decide to travel. ‘Instagram is like a vacation menu these days.’ (Vidal, 2017). Word of mouth has always been one of the most powerful marketing techniques around. However, in our digitally saturated world Instagram, Facebook and Snapchat pose as virtual replacements of this. Consumers can now see the amazing trips and experiences their friends are immersing themselves in all by a scroll through their timeline. The increasing popularity to use social media as a tool to show off all the amazing experiences and holidays millennials are having has resulted in creating a concept named ‘FOMO’ the fear of missing out. This is characterised by the obsession of constantly checking what everyone else is doing and distressing about them having a better time. Research suggests that this has the possibility to cause stress and anxiety among younger people as they feel that their friends are engaging in more fulfilling and exhilarating experiences than they are. This theory highlights on of the negative impacts of the experience economy in relation to social media.


‘WE CRAVE UNCHARTERED DESTINATIONS, UNIQUE EXPERIENCES AND AUTHENTIC CULTURAL INTERACTIONS.’(Macdonald, WGSN, 2015).


PERSONALISATION Providing consumers with a personalised experience in relation to the travel industry has, has become increasingly popular due to consumer needs. A recent example includes Expedia’s partnership with The Hawaii Tourism Authority. They joined forces to encourage more travel to the island especially among millennials. The site features a video that user’s watch, which measures their facial recognition through their webcam in response to this. Subsequently, the user receives a set amount of tailored recommendations. These include various activities tailored to the user’s response, for example, snorkelling, swimming with dolphins or a jungle expedition. This was set to appeal to the millennial generation as they generally feel that brands do not understand them. Therefore, by offering such a unique and personalised approach to travel this method has proved to be extremely personalised and tailored to this market. Furthermore, many other apps and websites successfully provide a similar service to this. Another example includes ‘pack up and go.’ This site plans threeday trips around the US. Users simply select their budget, fill in an online survey and off they go. The concept of personalisation is making travel much easier and efficient especially among the millennials generation. The advancement of technology has made travelling available at the touch of the consumer’s fingertips.



EXPERIENTIAL MARKETING ‘As consumers continue to value experiences over products, retailers are turning to travel-related initiatives to drive growth and resonate with shoppers.’ (Saunter, 2016). To remain relevant in the experience economy, retail brands must adopt unique ways of selling to consumers, in order to keep and maintain a loyal consumer base. Retailers are connecting with travel companies. For example, online retailer Gilt.com collaborated with celebrity cruises and opened a pop up store on board two of their cruise ships. Enabling consumers to shop from a range of curated content, which related to holiday styling. This offers consumers an immersive and unique shopping experience. On the other hand, the tourism industry is also engaging in experiential marketing to get more consumers to visit. An example being ‘hosting a cultural celebration.’ Columbia wanted to express that it was reinventing itself and show off business and leisure potentials. They New York City’s Times Square into a carnival of Columbian experiences; this featured a billboard with a QR code that consumers could scan in order to win an all-expenses paid for trip to Columbia. Clearly experiential marketing is an extremely useful marketing strategy, as it is unique and immersive, enabling consumers to get involved. The QR code feature is also useful as consumers are already engaging with the company and the culture of the destination. This also provides an outlet for brands to contact consumers in the future.



#3 THE LUXURY INDUSTRY



RETAIL EXPERIENCE

The experience economy is changing the retail industry for luxury brands. ‘Luxury has traditionally been associated with exclusivity, status and quality.’ (Atwal, Williams, 2008). This is most definitely still the case, luxury brands must do much more than simply sell a product to the consumer. They are inclined to create a memorable experience. Luxury consumers expect high-end customer service and exclusivity; it is a brands job to create an emotional connection with them. The Harvey Nichol’s store in Birmingham has adapted to this trend. They have created a secret VIP entrance for their most exclusive customers. In relation to experiences, the store has taken inspiration from the hospitality industry as they offer concierge services including valet parking and a cloakroom; essentially, they want their shoppers to have a relaxing and enjoyable shopping experience. This highlights the concept of brands engaging with consumers and adapting to the idea of experiential marketing.



TECHNOLOGY Luxury brands are also becoming aware of how technology has the power to improve the experience of shopping. As noted previously in the report it is essential for luxury brands to take extra measures in order to connect with their consumer. Luxury brands must work harder in order to engage their consumer, the introduction of experiential marketing in increasingly becoming a key strategy within the luxury industry. Burberry, for example is one of the most digitally advanced luxury brands. Burberry is using technology to their advantage in relation to the retail industry. The digital POS system they use in store pulls up customer details, purchase history and buying habits. Therefore, immediately when a customer enters the store they receive a curated and personalised experience due to the aid of technology. This enables sales assistants to provide a high quality service as instantly they can make recommendations and suggestions based on the consumers previous buying habits. Burberry makes further use of technology in their stores using screens that project live catwalk shows for entertainment. Their fitting rooms are equipped with technology that provides consumers with styling, size and fashion suggestions. Evidently, the Burberry in store experience is extremely immersive and personalised to each consumer; this is a key example of how all brands can use the advancement of technology in order to improve their consumer experiences.



WHAT’S NEXT?


CONCLUSION Overall, research has identified a number of key insights in relation to the experience economy. Evidently, the growing desire for unique and immersive experiences is shaping the way the economy is running. This concept has transformed a number of industries as discussed in the report for example food and drink, the luxury industry and the travel industry. A number of drivers that are encouraging consumers to immerse in experiences over buying have been identified. These include the advancement of technology, the increase in use of social media and the growing consumer desire for personalisation. The millennial generation is also fuelling the experience economy as their desires are constantly changing mainly due to influences from social media. Millennials have adapted to this trend more than any other generation, concepts such as ‘fomo’ fear of missing out and the idea of wanting to share everything they do on social media is also a key concept fuelling the experience economy. Furthermore, the experience economy has been around for years and this report has identified that the trend is still growing and evolving. Technology and social media pose huge implications for the future of our society and this is constantly changing the definition of the experience economy. As millennial attitudes have changed and the value of experiences has become irreplaceable, ‘78% would choose to spend money on a desirable experience over buying something desirable.’ (Eventbrite, 2014). This displays clear findings that this generation is not as inclined to buying tangible items as previous generations. On the other hand, the key insights taken from this report suggest that there is further scope for research into millennial attitudes and the experience economy. A detrimental piece of research would be to discover why millennials have this viewpoint and how social media in particular is playing a role in influencing this. For example in relation to the travel and food industry, it is clear that millennials are engaging in these experiences for the sole purpose of photographing what they are doing and sharing this content online with their followers. They want everyone to see what they are doing, where they are and how much of a great time they are having. This poses the question, is the practice of sharing experiences via social media creating narcissistic qualities among millennials?


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List of illustrations 33) Wgsn (2017). Hermes store. [image] Available at: https://www.wgsn.com/content/image_viewer/#/image.27435148/ [Accessed 4 Nov 2017]. 34) LSN (2015). Harvey Nichols Concierge. [image] Available at: https://www.lsnglobal.com/briefing/article/18001/concierge-concept [Accessed 4 Nov 2017]. 35) Birmingham Mail (2017). Harvey Nichols VIP entrance. [image] Available at: http://www. birminghammail.co.uk/whats-on/shopping/harvey-nichols-birmingham-secret-vip-9681907 [Accessed 4 Nov 2017]. 36) Williams, E. (2012). Burberry flagship store. [image] Available at: https://www.creativereview. co.uk/heritage-meets-digital-in-new-flagship-burberry-store/ [Accessed 9 Nov 2017]. 37) Aliberti, D. (2016). Burberry store. [image] Available at: http://damianaliberti.com/2016/08/15/ creating-a-narrative-beyond-media-and-format/ [Accessed 9 Nov 2017].


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