January 28, 2012

The experience economy by B. Joseph Pine II & James H. Gilmore

The experience economy by B. Joseph Pine II & James H. Gilmore
Work is theater and every business a stage.

[Wonderful book that explains correlations between artistic world & transformation business and categorically states the importance of experience in any business, if it wants to succeed]

Economist Tibor Scitovsky notes that ‘man’s main response to increasing affluence seems to be an increase in the frequency of festive meals.; he adds to the number of special occasions and holidays considered worthy of them and ultimately, he makes them routine - in the form, say, of Sunday dinners. The same is true of experience we pay for. We are going out to eat more frequently at increasingly experimental venues.

Companies stage an experience whenever they engage customers, connecting with them in personal, memorable way. Experiences are events that engage individuals in a personal way. Staging experience is not about entertaining customers, it is about engaging them.

Economic Distinctions:

Economic Offerings: Commodities: Goods: Services: Experiences: Transformations

Economy: Agrarian: Industrial: Service: Experience: Transformation
Economic function: Extract: Make: Deliver: Stage: Guide
Nature of Offering: Fungible: Tangible: Intangible: Memorable: Effectual
Key Attribute: Natural: Standardized: Customized: Personal: Individual
Method of Supply: Stored in Bulk: Inventoried after production: Delivered on Demand: Revealed over a duration: Sustained through time
Seller: Trader: Manufacturer: Provider: Stager: Elicitor
Buyer: Market: Customer: Client: Guest: Aspirant
Factors of Demand: Characteristics: Features: Benefits: Sensations: Traits

By definition, commodities are fungible - they are what they are. Because commodities cannot be differentiated. “The best thing in life are not things”, says Rebecca Pine.

Experience Realms:
It is a four quadrant with four axis (Passive Participation, Immersion, Active Participation & Absorption) - horizontal axis (passive to active participation - Guest Participation) & vertical axis(absorption to immersion- experience -kind of connection or environmental relationship)

Between Passive participation Immersion - It is Esthetic
Between Immersion & Active Participation - it is Escapist
Between Active Participation & Absorption - it is Educational
Between Absorption & Passive Participation - it is entertainment.

Entertainment Experience: The kind of experience most people think of as entertainment occur when they passively absorb the experiences through their senses as generally occurs when viewing a performance or reading for pleasure. As the experience economy gears up, people will look in new and different directions for more unusual experiences.

Educational Experience: With education experience a guest absorbs the events unfolding before him while actively participating. Stan Davis & Jim Botkin mentioned in ‘The Monster Under the Bed’: “In the new learning marketplace, customers, employees and students are all active listeners or even accurately, interactively learners”.

Escapist Experience: involve much greater immersion than entertainment or education experience. (e.g. theme parks, casinos, chat rooms). The guest if the escapist experience is completely immersed in it, an actively involved participant.

Esthetic experience: In such experience, individuals immerse themselves in an event or environment but themselves have little or no effect on it, leaving the environment essentially untouched. (E.g. standing on the rim of the Grand Canyon, visiting art gallery, )

The richest experience encompass aspects of all four realms these center around the ‘sweet spot’ in the middle of the framework. Set the stage by exploring the possibilities of each realm.

While designing your experience, you should consider the following questions.
1. What can be done to improve the aesthetic of the experience? You want to create an atmosphere in which your guests feel free ‘to be’.
2. Once there, what should your guests do? Focus on what you should encourage guest ‘to do’, if they are to become active participants in the experience.
3. The educational aspect of an experience, like the escapist, is essentially active. What do you want your guest ‘to learn’ from the experience? What information or activates will help to engage them in the exploration of knowledge and skills?
4. What can you do by way of entertainment to get your guests ‘to stay’? How can you make the experience more fun and more enjoyable? Professional speakers lace their speeches with jokes to hold the attention of their audience to get them to listen to the ideas.

(The idea of Disneyland is simple one. It will be a place for people to find happiness and knowledge). In his insightful book ‘The Themeing of America’ sociology professor Mark Gottdinener identifies ten themes that often materialist in the ‘built environments’ that the calls stages experience and these are:

Status, Tropical Paradise, Wild West, Classical civilization, Nostalgia, Arabian fantasy, Urban motif, fortress architecture and surveillance, modernism and progress, representations of unrepresentable(Vietnam veterans memorial wall)

Marketing professors Bernd Schmitt and Alex Simonson in their instructive book ‘Marketing Aesthetics’ offers nine domains:

History, religion, fashion, politics, psychology, philosophy, the physical world, popular culture and the arts.

Five principles are paramount in developing such a theme.
1. An engaging theme must alter a guest’s sense of reality
2.The richness venues posses themes that fully alter one’s sense of reality by affecting the experience of space, time and matter
3. Engaging themes integrate space, time and matter into a cohesive realistic whole. Dr. Henry M. Morris states, “It is not that the universe is a triad of three distinct entities (time, space & matter) whihc, when added together comprises the whole”
4. Themes are strengthened by creating multiple places within a place.
5. A theme should fit the character of the enterprise staging the experience.

While the theme forms the foundation of an experience, the experience must be rendered with indelible impressions (take always). Professor Schmitt and Simonson again provide a useful list, this one delineating six dimensions of overall impression:
1. Time - traditional, contemporary, or futuristic representation of the theme
2. Space - City/Country, West/East, Indoor/Outdoor, House/Business representations
3. Technology - hand-made/machine -made, natural/artificial representations
4. Authenticity - original or imitative representations
5. Sophistication - Yielding refined/unrefined or luxurious/cheap representations
6. Scale: Representing the theme as grand or small.

The experience must leave indelible impressions. A theme should fit the character of the enterprise staging the experience. Companies must introduce cues affirming the nature of the experience. Different kinds of experience rely on different kinds of impressions. Experience stagers eliminate anything that distracts from the theme. Too many haphazard cues can ruin an experience. People purchase memorabilia as tangible artifacts or experience. The price point is a function of the value of remembering the experience. The more sensory an experience, the more memorable it will be.

Among the numerous categories of activities in which guests delight and that could apply to any experience are the following.

· Period demonstrations (glass making, book binding etc)
· Crafts that guests perform themselves (candle-making, brass rubbing)
· Games, contests and other challenges for which prizes are awarded
· Human and animal powered rides
· Food
· Drinks
· Shows, ceremonies and parades.

Companies should use it to create customer-unique value, the portal through which expedience reach individual customers. An economic offering confers customers-unique value at its ideal, when it is:

  • Specific to individual customers- brought into being at a particular moment for this precise customer
  • Particular in its characteristics - designed to meet this customer’s individual needs
  • Singular in its purpose to benefit this customer - not trying to be any more or less than, but rather only and exactly what customer desires.
Customers don’t want choice; they just want exactly what they want. All customers deserve to have exactly what they want at a price they are willing to pay.

Mass customization and one-to-one marketing enable learning relationships and the advantage of this approach are:
Premium price, reduced discounts, greater revenue per customer, higher number of customers, increased customer retention.

Four types of customer sacrifice leading to your approaches to customization.
  • Adaptive customization offer one product designed to let users alter it themselves
  • cosmetic customization, present a standard good or service differently to different customers
  • transparent customization provide a tailored offering without customers knowing that it is customized for them
  • collaborative customization, work with their customers to determine what they need and then produce it for them.
Employee in an enterprise is a performer and his/her work is theater and hence, acts accordingly. Acting is taking deliberate steps to connect with an audience.

Four forms of theater:
1. Platform theater allows for little variations and use Platform Theater when workers do not directly interact with customers.

2. Matching theater, integrated portions of work into a unified whole and scripts in matching theater are always dynamic. Use matching theater when the same customers and the same performers interact over and over.

3. Street theater performers draw people in amaze them and then ask for money (sales people)

4. Improve theatre involves new-to the world performance. If you are winging it, you are doing improv. Improvisation involves imagination, creativity. (New offer intro to the market)
You must determine what forms of theater to perform.

Staging business performances: the act of acting differentiates memorable experience from ordinary activity.

Drama = Strategy; Script=process; theater=work; performance=offering
cast=people; role=responsibilities; characterization =representations; ensemble=organization to engage guests in memorable ways.

When you customize an experience, you change the individual. Transformation offerings will emerge across almost every part of the service sector. Transformations are as distinct from experiences as experiences are from services. The individual buyer of the transformation essentially says ’change me’.

For example, see the insurance industry successive economic offerings.
  • Service - Insure - secure payment in the event of loss
  • Experience - assure - secure confidence, encouragement, trust or feeling of satisfaction
  • Transformation - Ensure - Secure event, situation or outcome.
Transformations cannot be extracted, made, delivered, or even staged: they can only be guided. As the old saying goes, “You can lead a horse to water, but you can’t make it drink” No one can force someone to change. Employees themselves who make sure they have the resources for a competence boost as soon as they feel it is needed. Transformation elicitors can, at best, bring about the right situation under which the proper change can occur, meaning staging the right experiences that involve the right services.

Three phases of guiding transformations.

1. Diagnosing aspirations. Without proper diagnosis, customers cannot achieve their aspirations. Essential to every transformation, is the understanding what the customer truly needs to become and how far way he is from fulfilling those needs within himself., even if the customer does not realize it or deludes himself about the direction or magnitude of the change required.

2. Staging transforming experiences. Elicitors may use any one of the four realms of experience for a transformation. Entertainment experience can alter our view of the world, while educational experiences can make us rethink how we fit into that world. Escapist experiences can boost our personal capabilitie4s and characteristics to new levels, while esthetic experiences can imbue a sense of wonder, beauty and appreciation.

3. Following through. It is not truly transformation unless it is sustained.

The ServiceMaster Company reminds us, ‘The spirit and souls of people can be enriched by what they do as they server and work. And they can grow in the process of who they are becoming”. The very idea of transforming people(companies) demands that we think about and apply a world little used in business today: Wisdom (the quality of being wise, esp. in relation to conduct and the choice of means and ends; the combination of experience and knowledge with the ability to apply them judiciously; sound judgment, prudence, practical sense”.

When the offering becomes more intangible the value becomes more tangible. Nothing is more important than the wisdom required to transform customers. Being in the transformation business means charging for the demonstrated outcome.

Consider the business of consulting and if consulting truly viewed themselves as being in the business of transformation, they would, spend much more time in the up-front diagnose phase, identifying clients, strategic needs as well as their capacity for change. They would stop writing analytical docs and start staging memorable events that would enable the client first to experience what it would be like to live and work in a world where the strategy has been achieved and then to actually create that future world.

If you charge for the demonstrated outcome the customer achieves, then and only then are you in the transformation business. In this transformation phase, following are happening,

· Organization: new aims are determined - Work that generates value from something new

· Execution: Guiding is the core activity of the elicitor - work that generates value from something done.

· Correction: A relapse triggers stronger resolve - work that generates value from something improved

· Application: Preserving connects with aspirants - work that generates value from something used.

Business needs a strategy for managing these four dimensions of value creation: Determine new aims, guiding the individual, strengthening resolve, preserving with the aspirant.

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