In the 1980s, there was no question that the accumulation of ‘stuff’ was everything, and the world of advertising and marketing helped drive that culture of conspicuous consumption. However, it was very much a generational thing, and the current generation most beloved of marketers and advertisers is a different beast with different aspirations. So much so, in fact, that a whole new term has been used to describe what they want.
So what is the experience economy then?
In simple terms, it’s the successor to the previous economic eras; the agrarian economy, the industrial economy and the service economy, and what makes it distinct is that people are paying for an ‘experience’ rather than a product. They’re wanting to do something memorable and take away the memory than a physical thing. It was first identified by a number of writers in the 1990s, but has really taken hold over the last decade.
The Harvard Business Review gave the definition of the experience economy as where: “a company intentionally uses services as the stage, and goods as props, to engage individual customers in a way that creates a memorable event.” That was back in 1998 and things have continued in that direction since, with Kevin Jenkins from Visa Europe telling the Daily Mail last year: “Eating out, booking holidays and discovering new experiences are all driving spending growth at a time when the lower cost of living is creating higher disposable incomes.”
So what examples are there of these ‘experiences’? Some of it is in the way brands like Starbucks have worked hard to make buying its coffee an experience for its customers in return for their loyalty, while Apple for many years was an expert at making people buy its products as part of an experience and lifestyle. In many ways, that user experience is what keeps it up at the top, deep into its post-Jobs era, where its products have been less revolutionary and market-leading in terms of quality.
The rise in importance of digital and social media has certainly helped to usher in the experience economy as – particularly younger generations – now often measure the success of a purchase based on their ability to share it with people on Facebook or Instagram. Holidays and days out certainly fit this criteria, while going to a gig or festival is much more of a shared – and shareable – experience than buying a CD, and you can see the importance of the experience economy in the way many products are sold in TV ads – as experiences.
A recent study by The Martini Report indicated that 80% of what it calls ‘affluent consumers’ would rather spend money on a luxury experience than a luxury item, and that can be seen in the way travel firms and holiday destinations try to offer something different to attract people. Novelty hotels and restaurants aren’t just found in Las Vegas these days and holidays are sold very much as once-in-a-lifetime experiences rather than just the chance to get away from the daily grind for some sun. Visiting locations of famous movies (like, say the New Zealand of the Lord Of The Rings saga) or living out fantasy lifestyles for the duration of the holiday are what we get sold now.
When it comes to giveaways, brands are focusing more on experiences as prizes rather than physical items. Giving away cars is old hat, especially when targeting millennials, who would rather have a week’s holiday in an exotic location where they can have a series of life-enhancing experiences, and this is how the giveaways are sold to them.
In a world where it’s increasingly hard to buy a first house, perhaps it’s no surprise that a generation is being turned off by the material possessions desired by their parents. Instead of building a vast CD collection that they own, most are happy to ‘rent’ music by streaming from Spotify, as long as that experience is a good one. On the flipside, many are going back to the world of buying physical records to enjoy that experience of ‘genuine’ music that vinyl has come to represent, and these two examples sum up the diversity of the experience economy, which can sometimes actually mean ‘buying stuff’..
Does that mean there’s a long future ahead for it? History suggests that it will eventually be replaced by something else, but there’s no sign of it slowing down anytime soon, so it is still an opportunity for marketers if it is done well. Brands can only capitalise on the experience economy if they truly understand their audience and work to build a relationship with them that genuinely runs both ways. Millennials are savvy consumers and know when they’re being lied to rather than given a genuinely good customer experience.
What is your opinion of the experience economy? What are your favourite examples of good experiences you have had with brands? Leave your thoughts in the comment section below or share your opinions with us on Twitter @mporiumgroup.