The Experience Economy Arrives

In 1998 Joseph Pine and James Gilmore published their classic article Welcome to the Experience Economy in Harvard Business Review.  Their paper characterises the evolution of economies by describing four different stages:

Economists have typically lumped experiences in with services, but experiences are a distinct economic offering, as different from services as services are from goods. Today we can identify and describe this fourth economic offering because consumers unquestionably desire experiences, and more and more businesses are responding by explicitly designing and promoting them. As services, like goods before them, increasingly become commoditized—think of long-distance telephone services sold solely on price—experiences have emerged as the next step in what we call the progression of economic value. From now on, leading-edge companies—whether they sell to consumers or businesses—will find that the next competitive battleground lies in staging experiences.

This theory is shown in their simple model:

The Progression of Economic Value. Credit: Harvard Business Review July-Aug 1998

It is worth pointing out that Pine and Gilmour received much criticism from a number of differing camps, one of the principle ones being people from within the tourism, leisure and hospitality management sectors, pointing out that the notion of the value of the customer experience was already long established.

However, given these important caveats, it was therefore interesting to read today Simon Usborne’s article in The Guardian Just do it: the experience economy and how we turned our backs on ‘stuff’. This article points to research showing how people are continuing to spend less money on buying things, and more on doing things, and how businesses are rushing to adapt. The major difference between this article and the Harvard article from twenty years ago is the emergence of social media and the way in which people are sharing their experiences online.

There are some solid figures to back up the general concept of the experience economy. As Usborne writes:

The latest figures come from Barclaycard, which processes about half of all Britain’s credit and debit card transactions. Figures for April show a 20% increase in spending in pubs compared with the same month last year. Spending in restaurants went up 16%, while theatres and cinemas enjoyed a 13% rise. Meanwhile, department stores suffered a 1% drop, vehicle sales were down 11% and spending on household appliances fell by 2.5%.

Barclaycard says the trend began to emerge about a year ago. And retailers are feeling it. In March, Simon Wolfson, chief executive of Next, blamed the clothing chain’s first fall in profits for eight years on the move from buying things to doing things. More startlingly, Ikea, the world’s biggest furniture retailer, told a Guardian conference last year that consumption of many goods had reached a limit. “If we look on a global basis, in the west we have probably hit peak stuff,” said Steve Howard, the company’s head of sustainability.


While economic data very much does support the shift into an experience economy, further research is needed to examine the factors driving this. While Usborne points out that it is harder to compare experiences with others, younger people with less wealth are being driven into searching for experiences, and for others the experiences are still as much a status symbol as any physical possession:

If the experience economy has a levelling effect, research also suggests that part of the reason for its rise is its greater potential as a status booster. This supports the idea, questioned by some (and not backed up by Barclaycard, which does not account for age), that younger people – namely millennials – are driving the consumer shift. “It used to be that our car, or handbag or wallet showed our status. Now we post Facebook pictures from a chairlift in Chamonix or the latest music festival,” Wallman says. “Social media is supporting this change. Posting pictures of what you just bought is gauche; posting pictures of something you’re doing is fine.” Strong also thinks the “slightly impoverished nature of millennials” is compelling them to get out more.


With the service sector being the major beneficiary of this continuing trend, a focus on the quality of customer experience the organisation or enterprise offers has now becomes more critical than ever before. And for those seeking to offer more transcendental experiences from more enlightened and conscious consumers, the question is now becoming one of moving from great customer experiences to customer experiences with soul. Companies who are able to respond in an authentic manner and who do manage to develop genuine and deep relationships with their customers will be the ones who prosper in the new experience economy.

Oh, and just in case you were wondering about my own experience at Yosemite, I’m not one of life’s crazy selfie-obsessed thrill seekers. Here’s the rock I was standing on from a different angle 🙂

Photo: Simon Robinson

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