Back in the golden age of 1999, I had the good fortune to find a book by the name of The Experience Economy, which quickly became and remains to this day one of my all time favorites. The main premise of the book is that experiences have emerged as the 4th stage (thus the name of this site) in what the authors call the progression of economic value. Just as the “service economy” replaced the goods-based industrial age before it, experiences are now replacing services as a method by which companies can distinguish themselves from competitors.
To illustrate concept of the experience economy in the real world, the authors discuss the progression of coffee through the economic ages. In an agrarian economy, coffee beans were harvested and traded or sold as market prices dictated. As the industrial age arrived, coffee beans were ground, packaged, inventoried and shipped to a wide variety of grocery stores and other locations. The manufacturers could charge more for the same amount of raw beans. The next economic age, the service economy, allowed yet a higher premium to be charged for the same raw materials as coffee beans were brewed, customized and served up on demand in a wide variety of locations including restaurants and vending machines. In the experience economy, companies such as Starbucks creating a culture of coffee. Run-of-the-mill coffee shops have been replaced by warm comfortable environments in which you choose from an insanely large variety of totally customized coffee-based beverages, hang out in living room type environments, and even discover new music. Customers are willing to pay a premium for this new coffee experience, and Starbucks (at least for the first few years) is uniquely differentiated from “competitors” who sell coffee.
Notice that in each of these four stages, commodities, goods, services, and experiences, the raw materials (coffee beans) do not change. However, at each of these stages customers value the offerings differently. By creating a distinctive coffee experience, Starbucks was able to increase the value and the price it charges for those same raw materials by at least two orders of magnitude over the market price of the commodity.
There is much written and discussed on the subject of creating good user experiences on the web. Researching, designing, and delivering good experiences online is the subject of my day job, which I absolutely love. Of course, good and bad experiences are making and breaking products and services in the offline world all the time too. I’m more convinced every day that the Experience Economy is still just getting started. I intend to write more on this site about the experiences (both good and bad) that are all around us every day and how the most successful and best loved companies are actively staging experiences to win loyalty and praise for their products and services.
If this is a subject of interest to you, please stop back here from time to time. Or better yet, leave a comment or drop me an email to share your own examples of defining experiences.
