Experience Economy, Economy Of Experiences, Or..

A couple of days ago Joe Pine tweeted on how the new European Union needed ‚my’ (and your) help on the Public Consultation about the „Experience Economy” as an emerging industry.

Industry?
What triggered me most was the last two words: „emerging industry”. Since when did a platform of thoughts develop into an emerging industry, other than the army of consultants that make money with it? Or to put it differently: aren’t all industries, in all parts of the world, involved in the co-creation of experiences with their Customers and other stakeholders? The EU seems to think differently though, and unfortunately she is not alone.

Digging more deeply revealed more of how the EU currently defines the „Experience Economy”. In this document, referred to as a reference document on the website of the Public Consultation, they define Experience Industries as the combination of six sub-sectors: Accommodation and tours, Food and drink, Gambling, Museums and parks, Sports and leisure, and Arts.

Of course there is nothing wrong with the EU wanting to support and bring together all kinds of stakeholders to develop an (infra)structure to stimulate the advancement of economic sub-sectors that show similar characteristics. Whether it makes sense to do this for these sub-sectors is not the topic of this post.

Customer Experience Thinking
But its question does bring me to discuss the different kind of viewpoints on „Customer Experience (Management)” and try to spark some debate around them, since I believe the prevailing opinion(s) on the topic have some (significant) room for improvement.

Without trying or claiming to be academic about this and likely not complete either, I believe there are roughly three dominant lines of thought with regard to Customer Experiences:

  1. First there is the original line of thought from Pine and Gilmore that believes we have evolved (and need to evolve) from simply providing value through producing products to providing value by delivering experiences that are distinctive (their thoughts have evolved since). This line of thought thinks of „The Experience Economy” as a level of maturity, much in line with Maslow’s pyramid. Some have taken it a step further claiming that entertainment is the key differentiator. This is probably the dominant line of thought within the EU departments.
  2. The second line of thought evolves around „staging (or designing) experiences” that are meaningful, authentic and/or ‚wow-ing’. This line of thought strongly believes that experiences can and should be designed – with intent of (positive) emotions to be generated – in detail. The peak-end rule is one of the well-known aspects of this ‚school’.
  3. Thirdly there is a line of thought that focuses on the role of the Customer in the process of value (co-)creation. Some even include the notion that Customers completely create their own experiences. This line of thought seems to be less bothered with the actual value created and more drawn to the HOW value is co-created. One of the major arteries of thought in this line is the practice of Mass-Customization which relates to the personalization of experiences.

And of course the lines between these three are blurred or strangled when practices by both scholars and practitioners.

Or economy of experiences?
In their book „Economy of Experiences” Boswijk, Peelen and Olthof seem to take a hybrid point of view, with elements of all three lines of thought, in which „staging of entertaining experiences” has evolved into the (intentional) creation of emotionally engaging, thematized and meaningful stories or experiences with Customers. Where ‚meaningful’ is interpreted as ‚adding (life-changing) meaning’ to their lives and where ‚with Customers’ is mainly used in a context of designing value-propositions together with Customers or improvement thereof based on their input/feedback. (Even if you do not fully agree with the point of view of Boswijk, Peelen and Olthof, like me, you should read the book, for it provides a good overview of the development of Customer Experience thinking and carries some excellent contemporary use-cases and case-studies. And you obviously already know my view on its limitations since you have come this far on my post already;)

I’m of the opinion that all three dominant lines if thinking have great ideas and methods to offer, yet they all seem to concentrate (too much, imho) on the upper part of Maslow’s pyramid and on the emotions evoked by or during the Customer’s experience.

So, what are these limitations, besides the obvious shortsighted scoping in six economic sub-sectors like I already made clear above, I see in the current thinking on Customer Experience Management and/or Economy of Experiences?

Where’s the functional job?
My main caveat is the absence of thinking about functional jobs-to-be-done the Customer hires your product or service for. With a focus on more hedonistic, sensory and emotional outcomes, it appears as if Customer Experience is something separate from fulfilling functional needs and associated desired outcomes. And this whilst most Customer’s frustrations seem to find their source in the inability to meet their functional goals of getting things done.

As a consequence of this omission many professionals (and consultants alike) taking cues from Customer Experience thinking are trying to improve or build Customer experiences by adding wow-ing features or characteristics. Also marketeers seem to focus their engagement strategies on the creation of entertaining experiences that are likeable or relate to some kind of general „good cause” or „symbol of authenticity”. This in an attempt to draw attention, appeal to an emerging ‚need’ for so-called shared values and by doing so drive vitality of their „stories”. The result? Everyone is trying to satisfy hedonistic outcomes by adding and experience layer to the product or service, whilst most of the Customer’s experience lies in using the product (or service). In fact I believe we are creating the next level of commoditized products and services.

Biased assumptions?
Secondly I believe the above lines of thinking tend to pre-fill the needs Customers have, thus adding to the large base of assumptions and biases around Customer’s needs. By doing so it may look like there is no further need for companies to do proper research, or that it can be replaced my involving (emerging) Customers in the design process. Both are dangerous thoughts in my humble opinion, but unfortunately main-stream in my experience (if only for reasons not to have to spend a lot of money on research).

Top of the Pyramid only?
Another downside of the dominant line of thinking is that it might lead to the understanding that Customer Experience thinking is not useful in economies in which most consumers are still struggling to satisfy needs at the bottom of the pyramid, whilst there are plenty of cases proving the opposite.

Waste generating
Last but not least I believe this „additive” line of thinking is resulting in complexity and waste for both Customer and company. Adding memorable, entertaining, compelling and meaningful experiences could be important elements for specific Customers and industries, but it’s hardly applicable to all Customers for all products. Most of the times making things easy to find, compare and buy is the best way to go and requires reducing layers and complexity, not adding to the clutter.

To conclude
All in all I think the limitative prevailing opinion of what Customer Experience is about, and where it is evolving to, is ignoring opportunities for companies to really develop a differentiating offering, a compelling service and profit generating experience that helps Customers get their jobs done in a way that she can live the life she wants, not the one you think she needs or wants.

A promise
I think the third line of thought “experience co-creation” holds the greatest promise, although it should make a more conscious effort to evolve thinking of co-creation in line with the Service Dominant Logic view on value co-creation. “Secondly it should stay away as far as it possibly can from maslow’s hierarchy of needs thinking and integrate the jobs-to-be-done framework/thinking and practice to avoid making easily misunderstood assumptions about Customer needs in the age of the “Consumernet of Things“. This should also help Customer Experience thinking to let go of the touch-point and channel centric approach. Although that could be a topic for an entire post in itself, and since I’ve already exceeded the six minute reading time, I will not elaborate further.

Experience Economy, Economy of Experiences, or…? Let me know what you think?

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9 responses to “Experience Economy, Economy Of Experiences, Or..

  1. Hi Wim,
    Please don’t get me started on the EU. But have you seen this book – http://dl.dropboxusercontent.com/u/4382602/387.pdf – It’s from a British perspective. I found it both fascinating and frightening.

    Earlier today I published on my blog an explanation as to why you won’t find InfoQuest attending any conferences dedicated to new trends in customer satisfaction surveys (http://www.infoquestcrm.co.uk/2013/07/latest-trends-and-new-technology-for-customer-satisfaction-surveys/) – luckily we are all about customer relationships and not consumer experiences!

    Did you manage to find a way to tell the public consultation people at the EU to go away?

    Keep up the good work Wim.

    Regards

    John

  2. Hi John,

    Unlike you I’m in favor of the EU, although I do see huge challenges as to what their core function should be. This post is not about the EU though, it’s about the way the body of thought on Customer Experience is developing, in the wrong way.

    And I’m hoping that the consultation people will pick this up. I’ll just wait and see.

    Thx for your support,
    Wim

  3. Have you ever been to a large summer fair or carnival? The constant bombardment of “memorable, entertaining, and compelling experiences” (I purposefully excluded “meaningful”) eventually overwhelms even the most novelty-seeking among us. ;)

    “Experience economy” presupposes that the masses are driven to spend more for experience-infused value across professional services, business-to-business and consumer products. I think the data clearly shows this not to be the case.

    Should people work to make the experience of discovery, engagement, information gathering, purchase and use as valuable and meaningful as possible? That goes without saying. But to define an entire economy based on that pursuit would be like calling planet Earth the “Love world.”

    • Hi Tom,

      Apology for the late response to your comment. Glad you did and I like how you put it.. :)

      We may have to discuss ‘meaningful’ though.. If ‘meaningful’ is defined as “in the eye of the beholder” I can probably live with it. I’m just not so much a person who can find any other meaning in many products (or services for that matter) beyond its mere functional purpose to me. if that qualifies as ‘meaningful’ to me, we’re aligned..

      But what if not….? ;)

      Thx again for sharing and showing up. Much appreciated.
      Wim

  4. I’ve just completed the consultation form.
    The final question is “Do you have any other comments or own recommendations on how to support the development of the “Experience Economy” as an emerging industry ?”
    I responded “Outside interference tends to distort the truth for the consumer – see any example of state regulated thought – for example 1984, Russia, China etc. ”
    You are quite right Wim, I don’t support the EU. I prefer democracy.

  5. The EU consultation ignores all the work that is done by knowledge institutions like University of Roskilde, University of Aarhus, University of Aalborg, University of Amsterdam, and the European Centre for the Experience Economy and so on. In the past 15 years the Knowledge Centre’s developed a substantial body of knowledge about the Experience Economy. Soon there will be published the handbook of Experience Economy with prof Jon Sunbo( Roskilde University) as chief editor.
    29 Chapters of fresh knowledge about the Experience Economy.
    The EU would have been wise to first consult these knowledge Centres and inventarise the promotional studies that have been undertaken by these organizations instead of starting a crowdsourcing action.
    Our economy dematerializes in an enormous pace. We define the Economy of Experience as that part of the economy where the intangible aspect is the key denominator for the final transaction. We prefer to speak about new ways of value creation.
    The Experience economy is not an emerging industry . It is a way of looking at- and defining new structural societal developments. To reduce the Experience economy to Tourism in its broadest sense is underestimating the value of teh Economy of Experiences. Also reducing the Economy of Experiences to Customer experience is to much a simplification of teh reality.
    We differentiate three stages of the Economy of Experiences along the dimension of who is in control
    1) staged experiences
    2) experierence co-creation
    3) self directed experiences.
    The EU’s interest and approach is mainly focused toward the traditional view on experience economy stage 1.
    The society is already moving towards stage 2. The new collaborative economies are still under the radar but are now clashing with the old economy ( like AirBNB)

    My main concern is that all initiatives that are undertaken are not coordinated,neither shared nor communicated. We need urgently a shared calendar for research for instance on the emerging collaborative economy.

    • Hi Albert,

      Thank you very much for taking the time to read and comment. I very much agree with your remark about the missed opportunity of the EU to involve the knowledge centers first.

      I’d like to discuss one part of your further comment in more detail. The part:

      “We define the Economy of Experience as that part of the economy where the intangible aspect is the key denominator for the final transaction. We prefer to speak about new ways of value creation.”

      From your definition I take that you really define the Economy of Experience as a “market” since it is defined by transactions. From this short sentence it is not completely clear then if “new ways of value creation” are then new ways of getting people to transact, or that we are talking new ways to creating value for Customers. I fear it is the first.

      I don’t see the Economy of Experience as Customer Experience (Management) for the same reasons you don’t. Altogether though I really do not see much value in defining a subset of “the markets” by carving out the “tangibles”. I don’t even think it is possible to do this. How do you carve out Itunes music transactions from Ipod sales? Of course this can be done from a transactional point of view, but from a value (to firm) perspective this is nearly impossible. What if the Ipod wasn’t there anymore? Or was never there in the first place. What would be the value of Itunes? Impossible to tell if you ask me, let alone to define the value of the “intangible economy” to society.

      I see the world through a Service Dominant lense. In this world both tangibles and intangibles (products and services if you will) are hired by users to get a (function, emotional, social) job done. There is no fundamental difference between the two. In this world value is not created by transactions but co-created in use. And in this world all firms are service firms.

      Please don’t take this the wrong way, as I’m aware it is not black and white, yet as it appears to me the Economy of Experience is grounded in Goods Dominant Logic. And since this is the dominant logic our (Western?) society has been built upon over the past two centuries, I think it’s highly unlikely it will produce truly new ways of value creation.

      Let me know what you think.

      With highest regards,

      Wim Rampen

  6. Dear Wim
    You are taking this right to the core. I like that. I will reframe our definition;
    “We define the Economy of Experience as that part of the economy where the intangible aspect is the key denominator for the value that can be of will be exchanged”. We do speak about new ways of value creation like co-created value.
    We do not mean to encourage to transact more. The innovation lies in developing new ways of value exchange. The key concept is in our approach is shared value and we observe a democratization of society and dematerialization of economic value propositions.
    I understand the view you take on the service perspective, which can be staged, co- created and self directed, depending who is in control.(‘ It takes two to tang’).
    I doubt if all firms are service firms….
    To be continued… with pleasure

    Albert Boswijk

    • It surely is a grey-scale, not black and white :)

      I’m interested to understand what you mean with Shared Value. If it is the concept introduced by Porter two years ago, I have to admit I’m not too fond about putting that in relation to an experience economy.. This is because the Shared Value concept is about connecting or integrating societal value with economic value to the firm.

      Value co-creation is a completely different concept, albeit both concepts likely share similar mindsets.

      In a Service Dominant Logic value is always co-created by the Customers (with the help of other parties/resources) in the experience (or: in use). And Firms apply skills and knowledge for the benefit of another (=service) regardless if they sell products or services. And this is (also) why I believe it does not make sense to separate the intangible aspects from the tangible aspects. From a marketing perspective there is no difference, so why create one?

      There is no “services economy/market” nor a “product economy/market”, nor an “experience economy/market”. There is THE (entire) economy/market. It may best be defined as a/the Service Economy, but since this will cause confusion with ‘services’, it is best to just name it The Economy.

      Or, in short: I don’t see the Experience economy as a part of the economy, it is the entire economy, and therefor no reason to give the ‘experience’ prefix.

      And to avoid any confusion: it has been like that forever..

      Agree?

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