The importance of innovating for the experience economy

30-second summary:

• In 1998, the term “experience economy” entered the business lexicon as a way to define the commoditization of experiences, differentiating them from goods and services as crucial consumer-driven offerings.
• Innovating for experiences is critical for businesses who are navigating a changed experience landscape post-COVID. Companies must learn how to identify products and services that are ripe for innovation and can meet the changing needs and preferences of their customers.
• Capgemini’s Adam Rubin provides some insight on how businesses can leverage technology and data to keep customers engaged.
• Rubin notes that technology will play a pivotal role in shaping the future of the experience economy, particularly in a post-pandemic world.

The term experience economy is a phrase that describes a shift in the way consumers interact with businesses, and encapsulates how this shift is forcing (or inspiring) companies to innovate their product and service offerings to accommodate a different set of consumer expectations.

The transformation of a goods-based economy to a service-based economy to an experience-based economy has been occurring for over twenty years.

A 1998 article in Harvard Business Review by authors B. Joseph Pine II and James H. Gilmore notes that the commoditization of experiences is a result of the progression of perceived economic value (e.g., instead of baking a birthday cake from scratch, parents look for a place to host a birthday party that includes the entertainment, the party favors, and the cake).

The progression of economic value—Source: Harvard Business Review

Pine and Gilmore write, “An experience is not an amorphous construct; it is as real an offering as any service, good, or commodity. In today’s service economy, many companies simply wrap experiences around their traditional offerings to sell them better.”

Now, twenty-two years later, the experience economy has fully taken hold thanks to a combination of technology, data, consumer demand and, most recently, the rapidly changing needs of consumers due to the coronavirus.

Leveraging technology and data

We asked Adam Rubin, the Head of Innovation and Enablement at Capgemini, to weigh in on how businesses can leverage technology and data to keep customers engaged.

Headquartered in France, Capgemini is a global technology consulting firm that works with companies to help innovate, automate, and embrace digital transformation.

“The experience economy is about B2C and B2B interactions that are elevated and customized to individuals and organizations, going beyond products and services into deeper, longer, more personalized engagements,” writes Rubin.

“You’re not drinking coffee; you’re going to Starbucks. You’re not waiting at the airport gate, you’re in the SkyClub Lounge. You’re not buying a phone; you’re happily hanging out in the Apple Store for the afternoon. Experiences are memorable and emotional, and customers seek them out because they deliver disproportionate value over the commoditized alternatives.”

This year has posed a challenge to the experience economy, with businesses that thrive on the promise of good experiences (amusement parks, restaurants, events, and hotels/destinations) all but shut down because of the virus.

A July report from PwC found that the accommodation and food sectors were the hardest hit in the UK due to the pandemic, with arts, entertainment, and recreation following closely behind.

These industries rely on traditional experiences to thrive—that is, people congregating in a shared environment creates the experience.

COVID-19 has forced businesses in all industries, but particularly these sectors, to be innovative. For example, many restaurants and retailers have created curbside pickup models using apps, websites, and other technology to facilitate the process.

Businesses who want to survive (and thrive) during the pandemic—and beyond—absolutely must learn how to create and identify products and services that prioritize experiences.

Identifying products and services that create great experiences

Identifying products and services that are ripe for innovation and can meet the changing needs and preferences of consumers is an incredible opportunity for businesses. To be successful at this, businesses need to put experience first, designing their offerings so that the experience is inherently part of the offering.

“Experience-design is an avenue to escape the undifferentiated abyss of commoditization,” explains Rubin. “So, to the extent that there’s a product or service area that companies want to preserve or grow, innovation through experience-design is a good tactic.”

To embrace this approach, Rubin recommends identifying the products and services that occupy people and businesses’ time without delivering value. Ask the question: What drains people’s time?

“Waiting rooms in doctors’ offices. Commuting for suburbanites. These are places and spaces that people are constantly trying to ‘pass the time.’ These are opportunities for companies to engage people, stimulate their senses, enrich their lives, overdeliver, and exceed expectations,” writes Rubin.

Rubin also recommends looking at areas of life where people construct their own solutions from disparate products and services, weaving them into solutions that work better for them.

What are some common hacks? When and where are people finding ways to compensate for a partial-solutions offered by companies? These are places to find opportunities to elevate goods and services to meaningful experiences.

When innovating for modern experiences, it’s important to understand what consumers value.

In a recent article in The Conversation, writer and marketing professor Brendan Canavan notes a new tourism trend that revolves around people’s desire for attention. The ability to share and gain attention from your travels equals a good experience.

Canavan writes, “It may be time to add a new layer to Pine and Gilmore’s progression of economic development, in which value is added by facilitating performances. People are now willing to pay for goods, services and experiences that support their gaining of attention.”

The future of the experience economy

The future of the experience economy will unquestionably involve data and technology. It will also likely support the gaining of attention. These days, sharing experiences has never been easier thanks to social media, mobile connectivity, and the fact that pretty much everyone carries a camera in their pocket.

Rubin agrees that technology will play a pivotal role in shaping the future of the experience economy, particularly in a post-pandemic world.

“I’m the millionth person to remark that the virus has accelerated the adoption of digital technologies and in mere months, it has driven more transformation within business and for customers than what was expected over multiple years,” writes Rubin.

With assets and resources being reworked and redeployed through digital channels, it’s not just nice to have products and services provide optimal digital experiences, it’s essential.

“As an example, prior to the pandemic, video collaboration tools had a set of standard, ubiquitous features. It didn’t matter what you used, you just used what your company gave you. But now that we’re all literally dependent on these services, we’re noticing the differences and its pretty easy to imagine the ways in which they can be finely-tuned to deliver rich experiences, not just delivering a video conference service,” writes Rubin.

“Imagine how good a virtual doctor’s visit could be if the user experience was tailored for the physician-patient interaction. Or the teacher-student interaction. Or the coach-athlete interaction. The experience economy will leverage digital technologies to further customize to niche needs, where the marginal cost of delivering customizations is zero, and where the impact on people’s lives will be greatly felt.”

source https://www.clickz.com/the-importance-of-innovating-for-the-experience-economy/264158/