Why the experience economy is an opportunity for product brands
As a marketer, you’ve probably heard of the ‘experience economy’. Coined in 1988 by Joseph Pine and James Gilmore, it describes an economy where “goods and services are sold by emphasizing the effect they have on people’s lives” – an economy, research suggests, we’re now living in.
So, what does it mean for product marketing? Perhaps you haven’t taken much notice of the experience economy, considering it largely irrelevant to your purpose. Well, we’re here to tell you that’s not the case. In fact, failing to position your product brand in the experience economy could be your biggest marketing mistake.
Here are 8 reasons why:
1. Modern consumers would rather buy experiences than material things
Seventy-six percent of consumers would now rather spend their money on experiences than material things, according to Momentum Worldwide’s 2019 research. The figure is slightly higher for millennials, with 78% choosing to spend on experiences over material things and 72% saying they’d like to increase this further in the next year. Indeed, since 1987 all US consumer spending on live experiences and events has increased by 70%.
Don’t be too quick to assume these stats are a death blow for product brands, though. In less than 200 years our economy has evolved from agrarian, to industrial, to service, to experience. Like others before it, the experience economy simply represents a shift in consumer expectations to which brands must respond to continue flourishing.
2. Experiences make people happier than material things
So, why the shift? Psychologists have discovered that experiential purchases make people happier for longer than material purchases. One reason is that we’re more prone to adapting to material possessions in a way we don’t with experiences. In fact, while our evaluation of material purchases is proven to decrease over time, our evaluation of experiential purchases actually increases.
Our tendency to reminisce about experiences with rose-tinted glasses is partly because they make for better stories than material things. This ties into two more reasons why experiences make people happier for longer: firstly, experiences comprise a more meaningful part of our identity. “In a very real way, we are the sum total of our experiences,” explain Pine and Gilmore. Secondly, they’re a better tool for fostering social relationships, which are essential to human health and happiness.
It goes without saying that making customers happy over time, thus increasing positive brand associations and benefitting from the halo effect, is the goal of any smart marketer. By creating experiences around your product you can escape the curse of adaptation and embed your product in your customers’ social currency.
3. Great service isn’t enough to give your brand the edge
Perhaps thanks to marketers’ strong focus on ‘customer experience’, you might misconstrue excellent service as sufficient to position your brand in the experience economy. But experiences are a distinct offering from services, requiring brands to use “services as the stage, and goods as props, to engage individual customers in a way that creates a memorable event.”
In fact, the only companies that will exist 10 years from now, believes co-founder and CEO of AnyRoad Jonathan Yaffe, “are those that create and nurture human experiences. This learning and growth will come from maximizing opportunities, including the reinvention of retail spaces, new models of engagement, and an understanding of experiences as perhaps the most important form of marketing.”
4. Consumers want brands to offer inspiration and meaning
Modern consumers seek “inspiration and meaning” from brands, a trait that’s seen a 200% increase in desirability since 2012. Meanwhile, utility has been toppled from its position as the most important brand trait in 2012, dropping a whopping 32%.
Utility is no longer the most important brand trait!
The message for product brands is clear: to stay relevant, your product must be more than useful – it must inspire consumers to live a particular kind of life, or help them find meaning in the life they already have. By creating experiences in which your product is a prop, marketers have the opportunity to create an inspiring, meaningful narrative that showcases the kind of life your product helps create.
> Find out how to create experiences around your product with experience rewards
5. Framing your product experientially makes your value proposition clearer
Way back in 1996, Intel chairman Andrew Grove had the right idea when he said, “We need to look at our business as more than simply the building and selling of personal computers. Our business is the delivery of information and lifelike interactive experiences.”
Taking the time to consider what inspiration and meaning your customers seek, as well as conceptualizing experiences that weave your product into that narrative, forces product marketers to be crystal clear on your value proposition. What do you really sell? A product… Or the lifestyle and opportunities it offers?
6. Experiences increase anticipation and offer an added reason to buy
We know experiences make people happier than material things. But experiential purchases have been proven to bring about more happiness even before the purchase has been made (or experienced) – the anticipation of a trip, for example, is more serotonin-inducing than the anticipation of buying a new mobile phone. Thus, creating experiences around your product could induce anticipatory happiness that becomes a reason to buy.
> Find out how experience rewards increase motivation to buy
7. Experiences lower barriers to purchase and reduce buyer remorse
With ever-increasing competition, products are in danger of being completely commoditized. But psychologists have found people are less likely to compare what they have with what others have if we’re thinking in experiential terms, and less likely to regret purchases framed experientially. Marketers who offer experiences around their product therefore place their brand outside the competition, lessening consumers’ propensity to compare theirs with other similar products on the market, and improving the likelihood of positive brand associations post-purchase.
8. Experiences trigger word-of mouth marketing
Psychologists have discovered part of the enjoyment of experiences is rooted in our ability to share our stories of them with others. Added to that, since experiences form a more meaningful part of our identity than material things, they make a more natural topic for social bonding. It follows that creating experiences around your product leads to free word-of-mouth marketing you won’t necessarily get from products alone.
Digging deeper into the subject of regret, it turns out we’re more likely to regret the things we have purchased, whereas we’re more likely to regret the experiences we haven’t had. Framing your product experientially not only weakens a potential barrier (anticipated regret of a material purchase), but also contributes another reason to buy (avoiding regret of an experience missed out on).
> Find out how experience rewards increase word-of-mouth marketing
A note on Covid-19
Experiences? At a time when much of the world is in lockdown? Sure, right now it might seem an unlikely approach for product brands. But any marketer worth their salt knows aspiration is the name of the game when it comes to effective selling.
If there’s one thing consumers need in 2020 and beyond, it’s hope. Something to dream about and look forward to. This is where experiences, which help people form social bonds and bring about happiness even before they’ve happened, come into play. Experiences can inspire consumers about the life they might lead, as well as helping them find meaning in the life they have now.
As with any marketing in a post-Covid world, you must choose your message wisely. And yes, the experiences you offer might not happen straightaway. But with deep consumer understanding and thoughtful execution, product brands can still survive and thrive in the experience economy.