The Experience Economy is on high drive and many companies are struggling to meet the rising consumer expectations. More than just providing products and information, retailers are required to create valuable customer experiences. Because today’s brand interactions have become digital, nonlinear and flow across numerous touchpoints. Retailers need to embrace an Omnichannel strategy today if they want to stay in business tomorrow. But without understanding why, going omnichannel is a tough challenge to face. So why is The Experience Economy so relevant?
Getting a fine cup of coffee quick and efficient is considered a service. As Joseph Pine, co-author of the book the Experience Economy explains: “Only when it becomes memorable, that’s when it becomes an experience.” Together with James Gilmore, he describes an evolutionary stage in the process of creating economic value. From commodities in the agrarian economy, to the trade of goods in the industrial economy, to the rise of the service economy in the 20th century. And now as companies are starting to create memorable customer experiences across all channels in order to set themselves apart from the competition – the Experience Economy is emerging.
The pricey cup of Starbucks coffee is justified by the entire experience of easy ordering, a menu with a wide selection of options, quick picking up, high service, no-cue paying and being rewarded loyalty points. These make it a lifestyle brand that gives a deeper meaning to drinking coffee. A local coffee shop may offer cheaper coffee, but this service is now seen as a commodity, not an experience. We know this to be true, but why did we change our preference to experiences?
What Consumers Want: the Drivers of the Experience Economy
Thanks to 4G internet, consumers today have the ability to access any source from any location at any time. They are always on and every bit of information is always available. The main driver behind our behaviour is technology. Besides fast speed internet and smartphones, the development of cloud platforms play a major role. It enables people to connect, share experiences together and create new tribes around personal interests and services.
This in turn led to global markets opening, niche markets emerging and a reshape of the way we interact and communicate. A massive flood of interactions followed, that changed the way consumers relate to brands. With the competition only a click away, brand relationships changed from being transaction based to customer based. Not only does your proposition needs to be matching the customer’s needs, but it has to be contextual in order to be relevant. This means identifying your customer, knowing his behaviour and offering a memorable, differentiating impression across all channels: The Omnichannel experience. And for millennials, that experience has become more important than ownership. This preference for experiences is fueled by factors such as craving for recognition on social media and the fear of missing out (FOMO). It’s not about what you are wearing or driving, but what you are you doing.
Follow the Money: Spending on Experiences
When was the last time you bought something because of the awesome customer experience without considering price or competition? If that was quite recently, then you’re are certainly not alone, Deloitte confirms. 89 percent of customers in the US and UK said they made decisions based more on customer experience than on price or product. Six years ago this was 12 percent.
According to research by the Harris Group, 72 percent of millennials prefer to spend their money on experiences rather than on material things. Not cars, houses, TV’s and watches, but festivals, events, travelling and living the full life. The share of consumer spending on live experiences relative to the total American consumer spending, increased with 70 percent. Also in the UK, consumer spending is now accelerating away from retail, and is rising on recreation and culture and communication.
Consumer spending in the UK on retainsumer spending in the UK on retail in percentage. Source: ONS, Retail Economics analysis
Impact for Companies: Go Omnichannel or Go Home
Everything has changed in the Experience Economy: more channels that are mostly digital, different consumer behaviour, higher consumer expectations and also what consumers value has changed. Going omnichannel is the only way your company can survive in the Experience Economy, because it impacts the two main factors that define your business: your customer relationship and your value creation. In the omnichannel world, new dogmas have appeared:
- The customer is in control. Customers of today don’t buy any more like they used to because they have all the information in their hand. Also on a product level, the internet is leveling the playing field: everything that can go digital, will eventually go digital. And when your proposition is digital, the whole world can be your competition. But also your customer. You need to differentiate.
- Every customer interaction counts. Not only do you need to be present on every channel your customers use – each interaction is also experienced as part of your proposition. You differentiate by offering memorable experiences. Customers don’t see channels, they experience only one brand. They have no understanding for your silo’s and the crooked way that your company may have grown over the years. Any company – big or small – that can offer a better experience, wins the customer.
- Increase Customer Experience with data. Awesome experiences are created by knowing your customers history, interests, preferences and behaviour and match that with the best possible offer. The next phase of e-commerce will be fueled by A.I. driven algorithms. This means embracing a data driven view on predicting customer behavior. Not adopting these technologies today will make your customers walk away tomorrow.
Going Omnichannel Starts with Understanding Your Customer
In the Experience Economy, customers and companies are more apart than ever before. Extreme customer focus is the key to stay in business. It will force you to get a digital mindset, think in experiences instead of transactions and to continuously wanting to figure out what your customers appreciate and value. Going Omnichannel means understanding your customer, and it is the way forward to reshape your customer relationship as needed in the Experience Economy.