The experience economy is a natural evolution of a transactional economy. It’s an offering that is distinctly different from a product or service, but often these are lumped together with services. But selling an experience… that is a horse of a different colour and cannot be approached the same way as other offerings.
A Brief History of Economic Offerings
When we talk about an economic offering, we mean the value proposition that exists between the buyer and seller. On the one hand, you will always have the seller offering something of value, which is exchanged for payment. This valuable offering can be further divided into four categories: commodities, products, services and experiences.
Commodities: These are usually tangible items in their most basic form, such as raw agricultural products or minerals.
Products: Products are items that are formed from raw materials and can take on many stages within a value chain. Examples range from flour milled from grain, a commodity, to the cake that is baked from various other products.
Services: Services have also grown beyond the standard definition of using a skill to generate an income, like a plumber or hairdresser. Instead, it is a multifaceted definition that includes a variety of offerings that span across industries such as legal, technology and even education. If you are still wondering if you should offer a product or service, ask yourself if the process of creating the final result is tangible or not.
Experience: Selling an experience means that you rely on a variety of products and services to create a moment of interaction where the value that the customer buys is more about the overall combination and context, rather than the individual parts of the experience.
The Experience Economy is Older than You Think
Theme parks and adventure tourism have been at the forefront of the experience economy. These examples show how businesses deliberately create engaging experiences that require a customer to pay a fee to participate in the experience.
Here are some characteristics of this type of business:
- Attention to detail is visible in the design, marketing and delivery of the experience. There should be a clear journey that can be traced from the initial design of the experience to the final experience. Think of an escape room, for instance. In this case, the attention to detail from the initial design is integral to the final experience. Each puzzle, prop and aesthetic choice was careful and deliberate to ensure the best possible experience for customers. It’s also important to communicate this expected outcome in all marketing efforts to generate interest from potential customers.
- Participation is inherent, regardless of which dimension it is approached from: Passive and active participation. Passive participation demands very little from the customer, except for attention. It’s usually found in experiences such as concerts or sporting events (some sources disagree on this point), where the attendee only observes and listens.
On the other hand, active participation requires the customers to make a certain contribution in order to complete the experience. This can be a person who is enjoying a zipline tour, a team member in the escape room, or the person who is attending a sip-and-paint event. - The participant’s connection to the experience. This characteristic notes that the participant has some form of connection to it, either by absorbing the moment or being immersed in it. On the one side of the spectrum is the immersion, like customers in the escape room being “contained” within the experience, but absorption on the other side has people “taking in” their surroundings like tourists visiting Vilakazi Street’s museums.
Experiences can be categorised into four realms, according to Harvard Business School.
- Entertainment, such as concerts, comedy shows, films or attending a play, is attended simply for being enjoyable.
- Educational events, such as learning a new skill like a boxing class, listening to a TED talk or attending a webinar.
- Escapism, a word that is usually associated with “escaping from daily life”, relies heavily on both immersion and active participation to transport the person’s mind to another state of being. Meditation classes, participating in plays, escape rooms, gaming halls, or even attending themed fairs fall into this category.
- Aesthetic experiences occur simply for the visual, artistic pleasure thereof. It includes walking through art galleries, or sculpture parks, or visiting the magnificent Drakensberg.
Experience Business Versus Selling and Experience
A clear distinction is made between businesses based on the experience business model and those that sell an experience.
While the former is clear-cut, with the “experience” being the element that generates an income, businesses that sell an experience are those that traditionally sell a product or service, but their value addition is that the product, such as coffee, is the enabler for the experience.
Examples of businesses that sell experience products that don’t use the experience business model include Apple, that position its products as an experience to be had, not just technology, as well as Plato Coffee, which leads with community building around their product.
However, this article focuses more on the experience economy business model and how it can be used in South Africa. Often referred to as the experience selling business model, the business is highly customer-centric, often focusing on personalised experiences rather than generic ones, although this is necessary for all businesses using this model. Yet, the personalised, customer-centric approach is effective because customers are being more decisive in spending their money. They choose to spend their hard-earned money where they feel valued and seen. What this type of business does is allow customers to connect and derive meaning from the experience in which they are participating, and shifts the focus away from transactional to almost reciprocal.
Tips for your Experience Selling Business
Experts believe that designing a memorable experience is key to setting a business apart from other transactional, product and service-based businesses. In fact, there are a few ways you can go about making a lasting impression.
Theme the experience. This means that you build your business around a particular theme – and a theme doesn’t have to be unique or popular, just authentic. A great example of this is the Soweto Creamery, where extravagant dairy creations are the theme that binds a traditional product together with memorable moments.
First impressions last. Every step of what you do in your business should build towards the key takeaway that you want your customers to take home. Introduce cues in your business that reinforce positive impressions.
Replace negative cues with positive ones. You can reframe negative elements with positive elements to reinforce what you want your customers to remember.
Engage all five senses. People are sensory beings. Introducing elements that engage the senses transforms an everyday event into an experience.
What Does this Mean for SMEs?
Adheesh Ori, Consumer Goods Services Retail and Automotive lead for Accenture Song South Africa, recently explained that product alone is no longer a differentiator; experience has become the strategy.
Consumers are reassessing how easily a brand fits into their lives, weighing convenience, clarity and consistency as much as quality or price. What now stands out is the intuitiveness and responsiveness of brands.
He noted that in consumers’ deliberate, more research-driven approach, the old belief that cheapest wins is fading away, making room for value ahead of price.
So, where does this leave SMEs?
For most, this means refocusing on what customer experience means to their businesses. They need to understand how they draw in the vital characteristics of the experience economy to deliver one collective result that binds their traditional product or service with the je ne sais qoui that makes it an experience.
For others, it gets their gears turning. What experience selling a business can they create? Dive into the wide array of business ideas we have and see what resonates with you.
The experience economy is a natural evolution of a transactional economy. It’s an offering that is distinctly different from a product or service, but often… Read More
