So, why are we in an ‘experience’ economy? Why not in a ‘super service’ economy or, in a
‘design’ economy? In other words, what has led several thinkers to agree that the term
‘experience’ best reflects the current customer–firm interaction environment? Schmitt (1999) offers some compelling reasons for the choice of this term. He argues that, among others, two major trends have shaped the characteristics of present day customer–firm interactions: (1) omnipresence of information technology, and (2) ubiquity of integrated communications and entertainment. The first trend, in Schmitt’s (1999) opinion, has facil-itated information transfer from customers to companies, thereby making companies more capable of developing offerings closer to the consumers’ ideal point. This trend, in conjunction with the second trend – the change in media towards entertaining rather than merely informing the customer (for example, consider the rising popularity of the Daily Show with Jon Stewart and the declining popularity of more traditional news programs) – has resulted in a new set of norms by which firms interact with customers. A core element of this norm is that firms seek to entertain customers in even the most functional domains of consumption, including laptops (for example, Apple), banks (for example, ING Bank), and retail stores (for example, Nike with Niketown); the term ‘experience’ thus appears well suited to capture the combination of emotional and functional benefits that the present day consumption offerings strive to provide.
A Customer-centric Perspective on the Experience Economy
Schmitt’s (1999) perspective is arguably a context-centric view of why we are in an expe-rience economy, since it builds on the idea that environment changes (technological advancements and changes in media) have resulted in the experience economy. There is yet another, more customer-centric, perspective that may be adopted to explain the same phenomenon. This view hinges on the following well accepted ideas in psychology: (1) the achievement of goals or needs2leads to the experience of emotional benefits (pleasure), and (2) goals are structured in a hierarchical fashion such that, once a lower order goal is met, emotional benefits can only be derived from the fulfillment of higher order goals.
Maslow’s (1962) needs hierarchy (depicted in Figure 10.2), provides perhaps the most commonly accepted view of how goals are typically structured. To elaborate, Maslow (1962) suggests that people (consumers) seek the fulfillment of physiological needs (such as those for food, water, clothing, and so on) first, and thereafter seek the fulfillment of security needs, and so on, until the only relevant goal that remains, when all else has been fulfilled, is the need for self-actualization.
Mapping from the Need Hierarchy to the Evolution of the Economies
Just as the status of an individual on the Maslow (1962) needs hierarchy provides a snap-shot of this individual’s primary concerns, the status of a society on the needs hierarchy may be thought to reflect this society’s primary concerns.3For example, a society could be thought to belong to the physiological stage when most of its members seek the fulfillment of the basic needs of food, shelter and clothing; one could characterize certain
economies (for example, third world countries) as being primarily concerned with the fulfillment of ‘physiological’ and ‘security’ needs. Likewise, one may characterize certain other economies (for example, Scandinavian countries) as being primarily concerned with the fulfillment of aesthetic or knowledge needs, and so on.
When most of the members in a society seek physiological needs, the offerings of that society will (naturally) consist largely of physical commodities such as food, building materials, clothing, and so forth. As such, the society can be conceptualized as belonging to a commodities economy. When a society’s members seek assurance that the consump-tion offerings live up to a certain expected standard, the society may be thought to be con-cerned about seeking security (through reducing uncertainty about the quality of that society’s consumption offerings). Because branding products/services is an important means of assuring quality, and because branding is thought to be an important element of a goods economy, a society that seeks security needs may be thought to belong to a goods economy. When a society has progressed beyond seeking security to seeking the fulfillment of the higher-order goals of love or self-esteem, the offerings in that society need to be of an intangible nature. Such a society may be thought to have progressed to a services economy. That is, one may draw a one-to-one mapping between the hierarchy of needs and the evolution of the economies from commodities to services, as depicted in Figure 10.3.
The question then is, which term best characterizes the needs of a society that has pro-gressed beyond seeking self-esteem and love? According to Maslow (1962), such a society would be primarily concerned with the fulfillment of both knowledge and aesthetic needs.
To the extent that knowledge and aesthetics are two separate categories of needs, it would appear that two separate terms are needed to characterize the concerns of such a society – unless one can think of an overarching term that captures the desire for both (knowledge and aesthetics).
Self-actualization
Aesthetic/Knowledge
Self-esteem
Love
Safety
Physiological
Source: Maslow (1962).
Figure 10.2 Maslow’s need hierarchy
Two terms readily lend themselves as appropriate for capturing knowledge needs:
‘knowledge economy’, and ‘information economy’. These terms have a tradition of use in economics and business. According to proponents of the knowledge economy (for example, Romer, 1990), economic systems that align their incentives towards rewarding producers of knowledge will stand to gain in the future. Likewise, according to propo-nents of the information economy (for example, Toffler, 1970), technological advance-ments shorten the time taken for information exchange (between organizations), facilitating faster turnover of money and ultimately resulting in more rapid economic growth; thus,firms that invest in the acquisition of systems that facilitate efficient infor-mation transfer would stand to gain most. Note that both conceptualizations offer a firm-centric, rather than a customer-centric, view of economic trends. That is, both perspectives theorize about what firms (rather than customers) value.4,5Maslow’s (1962) hierarchy, in contrast, is better suited as depicting the structure of customers’ needs. Thus, at least in its current from, neither the term knowledge economy nor the term informa-tion economy appear appropriate for capturing the needs of customers. Further, both terms suffer from the limitation of not capturing the aesthetic needs that customers in a society that has advanced beyond love and self-esteem would presumably seek.
The question is whether the term ‘experience economy’ is suitable, that is, whether it cap-tures the idea that customers in a society that has advanced beyond love and self-esteem seek knowledge and aesthetics. The term, onfirst blush, appears better suited to capture the desire for aesthetics than that for knowledge. In both the Pine and Gilmore (1997) and the Schmitt (1999, 2003) conceptualizations, the aesthetic elements are thought to be crucial to the exe-cution of a memorable experience. In Schmitt’s (1999) conceptualization, for example, the SENSE elements (sight, sound, taste, touch and smell) are considered the bedrock upon which experiential (emotional, cognitive, conative and relational) appeals rest.
A broader, more inclusive view of the term ‘experiences’, however, does allow for the inclusion of both knowledge and aesthetic needs. Experiences are not always just emo-tional in nature, but can also be of a thought-provoking nature. (For example, we may have a great experience attending a stimulating lecture on astrophysics.) Thus, to the extent that an experiential framework allows for the inclusion of knowledge, or thought-oriented, needs, the term ‘experience’ may be considered well suited to capture the twin desires of knowledge and aesthetics that characterize consumers in societies that have
Self-actualization Aesthetic/Knowledge Self-esteem
Love Safety Physiological
Experience
Service
Commodities
Goods
Figure 10.3 Mapping of the hierarchy of needs to the evolution of the economies
advanced beyond love and self-esteem needs. Consistent with this view, in both the Pine and Gilmore (1997) and the Schmitt (1999) frameworks, experiences are conceptualized as appealing not just to the senses and to feelings, but also to cognitions.
Nevertheless, to the extent that the term ‘experience’ connotes an affective (rather than a cognitive) appeal, the term may not be a perfect representative for capturing the primary consumption desires of societies that have advanced beyond love and self-esteem. Put differently, marketers who wish to pursue an experiential strategy need to explicitly rec-ognize that customers in an experience economy not only seek aesthetic needs, but also knowledge needs, and that creating thought-oriented appeals is a legitimate route to cre-ating memorable experiences.
Summary and Implications
In sum, I have presented an alternative (customer-centric) view of the underlying reasons for the evolution of the economies – from commodities to goods to services to experiences.
Building on Maslow’s (1962) hierarchy, I have suggested that customers who have advanced beyond seeking love and self-esteem seek knowledge and aesthetic needs, and that the term
‘experience’ appears well suited to capture this evolution in customer needs. Because the term ‘experiences’ better captures the aesthetic concerns (and de-emphasizes the knowledge concerns), practitioners need to recognize that a broader conceptualization of the term
‘experiences’ – one that explicitly incorporates cognitive elements – may be in order.
Relating the evolution of the economies to Maslow’s (1962) hierarchy permits mar-keters to assess whether a particular country or economic region is ready for the experi-ence economy. Since it is necessary to have progressed beyond the fulfillment of love and safety to seek the experiential needs of knowledge and aesthetics, it is unlikely that the third world countries (such as India or Indonesia) or even the ‘second world’ ones (such as Brazil or Russia) are ready for the experience economy. Careful monitoring of the progress of these economies can, however, provide indications of when they will be ready, therefore allowing firms to prepare for this potentiality.