In July 1998, Harvard Business Review published an article from Joseph B. Pine II and James H. Gilmore titled Welcome to the Experience Economy. It described experience as the fourth economic offering and a natural evolution from a service-driven economy. Twenty years later, we are in the midst of the experience economy, where ‘doing’ beats ‘buying’. Meanwhile, the ‘retail apocalypse’ – a phenomenon that saw over 4,000 American stores close since 2016 – just got its own Wikipedia page.
So, what’s the disconnect between what brands and retailers are offering us today and what consumers now seek?
The Experience Economy, Pine & Gilmore’s follow-up to the HBR paper, suggested that brands should look to offer us a layer beyond experience, something they called “guiding transformations” – the ultimate in differentiation and customisation.
Guided transformation is essentially a series of experiences resulting in the improvement of our physical or emotional well-being. So this puts the consumer at the centre of the transaction, with the ultimate goal of enabling their personal transformation or self-actualisation.
Looking beyond the experience economy is the key to leveraging this, because it removes the marketing buzz around experience and emphasises the need to understand the consumer beyond who they are to who they want to be. This will do two things for brands:
- Enable anticipation of future customer aspirations
- Test their agility, as many businesses will have to make seismic shifts in the way they approach product, retail, marketing and communication in the long term
The magic, and challenge, of the transformation economy is that it’s a truly individual process. Shifting consumer aspirations, driven by anti-hedonistic millennials and ageing boomers, are already impacting the health, wellness and travel industries – demonstrating the potential to take experience to a transformative level.
Earlier this year, Skift revealed that 54.3% of travellers[1] ranked the importance of transformative experiences as 7 out of 10 or higher. Meanwhile, the Transformative Travel Council, created in 2016, demonstrates how travel can create meaningful change in people’s lives. Its ethos is built on providing guidance and recommendations that enable people to undertake “the hero’s journey” and have a truly transformative travel experience.
Earlier this year, Skift revealed that 54.3% of travellers[1] ranked the importance of transformative experiences as 7 out of 10 or higher.
While the travel industry has a natural affinity to provide the customer with a sense of physical or mental self-betterment, the real challenge lies in industries rooted in product-driven transactions that lack a sense of purpose. This is where progress falters, as brands need to look beyond their product offer to develop a meaningful dialogue with consumers in order to understand what they’d like to improve about their lifestyle, community and self.
Ikea’s Live Lagom initiative encourages its customers to become better environmental citizens, helping them save energy, reduce waste and promote a healthy lifestyle through workshops and community support. It’s a great example of a brand positively aligning with its customers. It also recognises the fact that transformative experiences are unlikely to work with short-term marketing aims – Live Lagom is a three-year commitment.
With many brands and retailers still to master an experiential offering, looking to understand consumers at such a deep level as to enable transformative self-betterment is a big ask. However, many industries (not least fashion) are relying on an outdated perception that products make people feel better simply through the act of purchasing them. There’s a reason why sportswear is predicted to overtake the luxury market in China in 2020 – change is happening and consumers have a different outlook for the future, one where they are at the centre.
Brands and retailers must consider how they will expand beyond current product offer, whether in-house or through collaborations.
The transformation economy will be the culmination of all that has come before, whether it’s the trend for lifestyle, personalisation or experience, presenting a future that is entirely focused on the consumer. Brands and retailers must consider how they will expand beyond current product offer, whether in-house or through collaborations. This provides the opportunity to create brand activations and to satisfy a different area of the consumer’s life, enabling them to grow. Monetising this can be a pain point, so brands should base this on time (the experience) and outcome (self-betterment), beyond a product transaction – although this can still feature. And lastly, a long term meaningful relationship should be developed with the consumer, through a collaborative dialogue where the consumer provides insights into their aspirations and the brand evolves with them.
[1] Skift research in February 2017, polling 1,350 upscale travellers