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Lesson 1. An Introduction to Experience Economy Strategies

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Title: Lesson 1. An Introduction to Experience Economy Strategies


1
Lesson 1. An Introduction to Experience Economy
Strategies
2
Quick Links
  • 1.1 A Progression of Economic Value from
    Commodities to Experience
  • 1.2 Defining the Four Experiences (4Es)

3
Introduction
  • Successful small businesses have demonstrated
    qualities such as vision, innovation, opportunity
    recognition, a passion for change, exceptional
    staffing, and extraordinary service (Morris,
    1998). Exceptional staffing and extraordinary
    service reflect a customer-focused strategy,
    which remains a key competitive strategy for
    small businesses (McGee Love, 1999).
  • Successful small businesses are keenly aware of
    the importance of customer value and emphasize a
    quality image for their store through
    customer-service (McGee Love, 1999), but
    customer value today is more than quality
    products and superior customer-service. Value for
    todays customer is also coming from positive,
    engaging, memorable experiences.

4
Introduction (continued)
  • Creating these positive, memorable experiences is
    where qualities of vision, innovation,
    opportunity recognition, and a passion for change
    come into play for the small business operator.
    These positive, engaging, memorable experiences
    (experiential value) result in differentiation
    from competitors, large and small (Pine
    Gilmore, 1999)

5
Introduction (continued)
  • Adding value from positive, engaging, memorable
    experiences can offer competitive advantage for a
    business that
  • Fully satisfies customers
  • Builds loyal customers
  • Increases customers willingness to pay more
  • Encourages positive word-of-mouth
  • Recruits new customers
  • Enhances the business image
  • Differentiates the business from its competitors
  • Makes it difficult for competitors to copy the
    business

6
Introduction (continued)
  • Small businesses must develop opportunities that
    create value through innovation (Drucker, 1985).
    In the following lessons we present Pine and
    Gilmores (1999) Experience Economy strategies
    that help an operator innovate his/her business
    by creating experiential value for the customer.
  • These lessons a) outline Pine and Gilmores
    perspective and four types of strategies for
    creating experiential value with examples of each
    found in small businesses, b) provide tools for
    the operator to assess experiential value of a
    business, c) outline how to communicate the
    experiential value of the business in the firms
    Web site, and d) provide tools to assess
    experiential value of the web site.

7
1.1 A Progression of Economic Value From
Commodities to Experience
8
1.1 A Progression of Economic Value From
Commodities to Experience
  • According to the Experience Economy (Pine
    Gilmore, 1999) framework, todays customers want
    more than just high quality goods and services.
    They want value from positive, engaging,
    memorable experiences along with high quality
    goods and services. Value refers to the benefits
    the customer perceives he/she gets not only from
    the goods and service, but also from interactions
    with people and places, which help shape the
    experience.

9
1.1 A Progression of Economic Value From
Commodities to Experience
  • Consider the idea behind the once small business
    of Starbucks that has burgeoned into a successful
    public company. The focus on design with the
    shops rich warm colors, contemporary
    furnishings, stylized graphics, and carefully
    selected music makes it stand apart from other
    coffee shops and creates a memorable experience.
    Some Starbucks have added Hear Music media bars
    where customers can explore the music (including
    the music programmed for their stores), get
    recommendations, and burn selections from a vast
    library of songs. This is the way Starbucks has
    innovated its unique experience to add value for
    its customers.

10
1.1 A Progression of Economic Value From
Commodities to Experience
  • In their Experience Economy framework, Pine and
    Gilmore (1999) explain that sources of economic
    growth in the U.S. have shifted from extracting
    raw materials, called commodities, to processing
    the commodities to making goods, then to offering
    services, and now to staging positive, engaging
    memorable experiences.
  • Pine and Gilmores Progression of Value

11
1.1 A Progression of Economic Value From
Commodities to Experience
  • An example, using the commodity of corn,
    illustrates how this progression of value has
    resulted in an innovative small business. Value
    is added to corn when the commodity is processed
    and boxed as breakfast cereal shown in Figure
    1.1. The local diner that brings the cereal in a
    bowl with milk to the customer is adding value
    through service. But how do you make cornflakes
    memorable? The small business, Cereality has
    changed breakfast cereal into an engaging
    experience through mass customization. In mass
    customization, consumers engage in creating a
    unique product to their individual specification
    by selecting from an array of options offered by
    the business.

12
1.1 A Progression of Economic Value From
Commodities to Experience
  • The creative process becomes an important source
    of value for the consumers in mass customization
    (Fiore, Lee, Kunz, 2004). Cereality customers
    creatively combine two cereals, a milk, and a
    topping, including malted milk balls, and eat
    from a traditional take-out container.

13
Figure 1.1 Pine and Gilmores Progression of Value
14
1.1 A Progression of Economic Value From
Commodities to Experience
  • Movement to experiences as a source of economic
    growth reflects expansion, not substitution, of
    customer expectations. Customer expectations for
    high quality goods and services are consistently
    met, so now their expectations have expanded to
    include positive experiences. Consistency in
    quality goods and services means that businesses
    need to add value in a new way to differentiate
    themselves from the pack of competitors.

15
1.2 Defining the 4Es Education, Esthetics,
Escapism, and Entertainment
16
1.2 Defining the 4Es Education, Esthetics,
Escapism, and Entertainment
  • The experience economy offers four realms of
    experiential value to add to a business. Pine and
    Gilmore (1999) termed these realms, the 4Es. The
    4Es consist of adding Educational, Esthetic,
    Escapist, and Entertainment experiences to the
    business. The four experiences vary based on the
    customers active or passive participation and on
    absorption or immersion in the experience. Active
    passive participation entails the level of
    customer involvement in creation of the
    experience.

17
1.2 Defining the 4Es Education, Esthetics,
Escapism, and Entertainment
  • For instance, the customer can actively
    participate in a product trial or passively watch
    a product demonstration performed by a staff
    member. Absorption is occupying customers
    attention by bringing the experience into the
    mind and immersion is becoming physically or
    virtually a part of the experience itself (Pine
    Gilmore, 1999, p. 31).

18
1.2 Defining the 4Es Education, Esthetics,
Escapism, and Entertainment
  • The 4Es are differentiated by the form of
    customer involvement as shown in Figure 1.2.
    Passive participation of the customer in an
    experience offered by the business characterizes
    the Entertainment and Esthetic dimensions, while
    active participation characterizes Educational
    and Escapist experiences. The customer who
    passively participates in an experiential
    activity or setting does not directly affect or
    influence these experiential offerings, whereas
    an active participant will personally affect
    these activities and settings. The customer
    typically absorbs Entertainment and Educational
    experiences and immerses in Esthetic and
    Escapist experiences.

19
Figure 1.2 Pine and Gilmores Four Realms of
Experience
20
1.2 Defining the 4Es Education, Esthetics,
Escapism, and Entertainment
  • A small business may focus on creating one
    experience or a medley of all 4Es. The Blue Bell
    Inn Bed Breakfast (BB) in Iowa, for instance,
    offers all 4Es. Customers actively participate in
    cooking classes where they learn about various
    cooking techniques and recipes (Education). The
    Inn offers music recitals inviting local
    musicians here customers passively absorb the
    performance (Entertainment). Customers actively
    immerse themselves in a murder mystery by taking
    on a character or role in the setting (Escapism)
    that is, they engage in solving the murder not as
    an audience member but as a character in the
    mystery. Customers passively immerse themselves
    in the homey, creative interior of the house
    designed by the Inns owner (Esthetics).

21
1.2.1 The 4Es Educational Experiences
  • Educational experiences increase the customer's
    skills and enhance his/her knowledge through
    active participation in the experience. The
    Educational experiences offered by four different
    types of small businesses (Accommodation/BB,
    Restaurant, Retail, and Rural Tourism) are shown
    in the next slide.

22
1.2.1 Examples of Educational Experiences
23
1.2.1 Examples of Educational Experiences
24
1.2.2 The 4Es Esthetic Experiences
  • Esthetic experiences entail customer enjoyment of
    an enriched, unique physical design. The customer
    enjoys passively appreciating or just being in a
    setting of the business.

25
1.2.2 Examples of Esthetic Experiences
26
1.2.2 Examples of Esthetic Experiences
27
1.2.3 The 4Es Escapist Experiences
  • Escapist experiences require that the customer
    actively participate in the events of a real or
    virtual environment. The customer shapes or
    contributes to the experience, which offers the
    customer a way of taking on a new persona.

28
1.2.3 Examples of Escapist Experiences
29
1.2.3 Examples of Escapist Experiences
30
1.2.4 The 4Es Entertainment Experiences
  • Entertainment experiences entail watching the
    activities and/or performances of others. The
    customer is not actively involved in the creation
    of the entertainment, but the mind is actively
    engaged during appreciation of the event.

31
1.2.4 Examples of Entertainment Experiences
32
1.2.4 Examples of Entertainment Experiences
33
1.3 Summary of Lesson 1
  • This lesson introduced concepts of Pine and
    Gilmores experience economy and reviewed how
    economic value has evolved from commodities, to
    goods, services, and experiences. The four realms
    of experience (4Es Educational, Esthetic,
    Escapist, and Entertainment experiences) were
    discussed as a means for adding value and unique
    competitive advantages for rural businesses. Each
    of the 4Es was defined and appropriate
    experiential Website examples provided for four
    types of business settings including
    accommodation/BB, restaurant, retail, and rural
    tourism.

34
References
  • Drucker, P. F. (1985). Innovation and
    entrepreneurship Practice and principles. New
    York HarperCollins.
  • Fiore, A. M., Lee, S-E, Kunz, G. (2004).
    Individual differences, motivations, and
    willingness to use mass customization options of
    fashion products. European Journal of Marketing,
    38, 835-849.
  • McGee, J.E. Love, L. G. (1999, March).
    Competitive advantage and the small independent
    retailer The role of distinctive competencies.
    Journal of Business and Entrepreneurship, 11(1),
    85-98.
  • Morris, M. (1998). Entrepreneurial Intensity
    Sustainable advantages for individuals and
    organizations. Westport, CT Quorum.

35
References (continued)
  • Pine, B. J. II Gilmore, J. H. (1999).
    Experience economy Work is theater and every
    business a stage. Boston Harvard Business
    School.
  • Images
  • http//www.starbucks.com/hearmusic/inourstores.asp
    ?category_nameInOurStores
  • http//www.cereality.com
  • Education
  • http//www.roundbarnfarm.com/attractions.htm
  • http//www.thechoppingblock.net/
  • http//www.explorewisconsin.com/CowCountryFabricsa
    ndQuilts/
  • http//www.dutchvillage.com/park/activities.html

36
References (continued)
  • Esthetics
  • http//www.worldvacationrentals.net/detailed/1157.
    html
  • http//www.roadfood.com/Reviews/Overview.aspx?RefI
    D1900
  • http//www.roadfood.com/Reviews/Overview.aspx?RefI
    D491
  • http//www.sfc.ucdavis.edu/agritourism/agritour.ht
    ml
  • Escapism
  • http//www.bbonline.com/ky/maplehill/murdermystery
    .html
  • http//www.flyingb.com/Calf20Feeding.jpg
  • http//www.beautifulvista.com/Recent_Photos/Bike_R
    ide_Photos/Bob_Mountain_Biking.JPG
  • http//www.scottszellwoodsweetcorn.com/cornmaze.ht
    m

37
References (continued)
  • Entertainment
  • http//www.eliaschildhouse.com/hearthcooking.htm
  • http//www.flyingt.com/
  • http//www.metropawlis.com/setrecommend.htm
  • http//www.oldmacsfarm.blackhills.com/Info/pr0402.
    jpg
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