The Experience
Economy
****
- Work Is Theatre & Every Business a Stage
B Joseph Pine II & James H Gilmore, Harvard Business School Press, April
1999
Modern history has been classified into the agricultural revolution that
then gave way to (and sustained) the industrial revolution with it's
attendant migration to towns and the population explosion. The industrial
revolution was all about products and their mass production. So successful
has it been, that there is now a glut of similar offerings, of similar design
and quality and at a similar, and very competitive price. In the post-war
period, in many advanced western countries, services have supplemented or
substituted pure products. But even services have become commodities.What
is next? Many say we are entering an information revolution, where people
will value and trade information, but Joseph Pine thinks otherwise:
"Information is not the foundation of the "New Economy", for
information is not an economic offering."
In this book, Pine sets out to argue his case that experiences are a distinct
economic offering and the future to economic growth. His very first and opening
example is the humble coffee bean. Commoditised on the futures market but
sold as a cup of coffee for up to $5 when part of say an experience at a
top restaurant or served in the ambiance of a top class theatre. Chapter
1 is the Welcome where Pine sets out his stall: the need to engage customers
in a personal and memorable way; how economic data shows the shift to an
experience economy; how brands now typically emphasise experiences; and that
experiences provide premium prices and highly differentiated offerings.
In Chapter 2, Setting the Stage, Pine makes the important point that experiences
are not about entertaining customers but about engaging them and meeting
a combination of 4 needs: entertainment, education, escapism and
esthetics. Chapter 3 covers the need to theme an experience - i.e.
to script a participative story to incorporate time, space and matter such
that all customer's five senses are engaged. Pine suggests that whilst some
companies are to-day offering experiences (e.g. shopping malls) they
are usually free which devalues them. He foresees shops and malls charging
an entrance fee to fund enriching experiences.
Chapter 4, returns to the topic of Pine's previous book: Mass Customisation.
In the experience economy, goods and services must first be customised to
what customers exactly need and then charged for their value, not the cost
incurred. The measure is not customer satisfaction but customer sacrifice
- how short of their needs are the company's offering? Chapter 5 follows
this point in more detail, bringing in the One to One Marketing concept of
developing a learning relationship with individual customers and exploring
4 types of customer sacrifice linked to four approaches to customisation
of experiences.
A short intermission chapter uses British Airways as a case study before
moving on in Chapter 6 to look at the theatre, not as a metaphor but as a
model as to how companies can stage and deliver memorable experiences. Chapter
7 looks at performing using as a model 4 forms of theatre. Chapter 8 looks
at acting and introduces the Performance Model that looks at people, their
roles, the characterisations they take on, and the total ensemble. For example,
the role of the HR department is to stage real auditions. Chapter 9 is about
the customer is the product, for successful memorable experiences actually
change the individual, indeed they can transform them. In fact, Pine sees
an experience economy leading to a transformation economy where companies
help customers to realise their aspirations. [Having read this I thought
that next time my bank telephones me about investing money, I would challenge
them to first transform my life such that I had lots to invest!].
Chapter 10 continues to look at transformations and the need for wisdom.
Whereas successful experiences need knowledge about customers,
transformations need wisdom to distinguish real aspirations from false hopes,
lofty goals, and self-delusions. This chapter also considers the economic
value for companies of staging experiences and creating transformations.
And finally, in a short encore chapter, Pine suggests a religious or
philosophical offering whereby companies provide world views - ideologies
if you will - and that there can be no offering beyond transformations because
that would be perfecting people which is the province of God.
This was a very interesting book to read, one that I kept at until I
finished. There's certainly a logical and progressive argument to the theory,
no doubt helped by the various models. Whilst Pine is at pains to state that
entertainment is but just one element of experiences, it is this industry,
and I include leisure activities, that provide to-day's examples: Disney,
Benihana restaurants, Club Med and TGIF Birthday Parties are 4 personal
ones. It would therefore be easy to dismiss experiences as not being relevant
to many industries and companies but this would be to "throw the baby out
with the bath water".
There are other supporting arguments and ones own life experiences to suggest
that services are commodities and alone will be insufficient to meet many
customer's needs. A trend in western society is for a chasm between
those who have plenty and those that are living at a low, even subsistence,
level. Many of those with money will seek to have their senses engaged. They
will seek to have the ordinary made extra-ordinary. But whether they will
pay for it at an economic level is to my mind open to question. Just look
at how the internet has priced information to zero. Those with little,
will no doubt be needed to provide all the (low cost?) staff for the experience
economy companies. Whether they will truely be motivated (as opposed
to play acting) to really engage with customers is in my mind also debatable.
On the other hand, there could well be an industry opportunity to help these
people to be transformed and escape their rut - isn't that, for example,
what much of the education industry is about to-day?
Whether one buys the experience argument or not, there is sufficient material
in this book to make it a worth while purchase and read. In particular I
would highlight the middle sections where Pine explains the need to understand
customer's sacrifice, to think of the company's whole offering so that
it is greater than the sum of the parts, and to ensure that all employees
are working harmoniously together. After all, unless a customer's experience
is positively memorable, then they are unlikely to make further purchases
or to become advocates for our businesses. In closing, you might like to
skip the encore! |
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