- Joe gave a talk for the launch for the 3rd edition of his and Jim Gilmore’s seminal work, The Experience Economy
- The most precious resource we have today is time
- Your biggest competitor? The time people spend on their smartphone
- Your greatest problem? Commoditization
- How to avoid commoditization? Move your business up the value chain, from services to experiences, from experiences to transformations
In late 2019, Harvard Business Press released a 20th anniversary, third edition of Jim Gilmore and Joe Pine’s The Experience Economy. Pine conducted a book tour. In the UK, this included a talk at Blooloop, and one at an event named ‘HBR Live: The Experience Economy’ at Warwick Business School in London, on Level 17 of The Shard.
Here’s some key notes from his inspiring, funny keynote.
Pine began with a stark statement that showed how things have changed in the 20 years since the first edition was published.
‘The most precious resource on the planet,’ he said, ‘is time of individual human beings. And the number one competitor to their time is the smartphone.’
‘When Jim and I wrote the book in 1999, the market was emerging, but we now live in an experience economy.’
What is an ‘experience’?
A few useful introductory comments on experiences:
- Experiences are what customers today want, ahead of things, ahead of services.
- Experiences are a distinct economic offering.
- The hallmark of an experience is that it creates a memory.
- Experiences are the way to compete today, because all other economic offerings have been commoditized.
- With experiences, you want to spend time doing something.
Every business’s arch enemy: commoditization
You know your business has become commoditized when you don’t control your price, your price is controlled by the marketplace. ‘And when your customers care about only three things: price, price, and price.’
Goods and services have now been commoditized. The only way out of this commoditization trap is by through experiences.
Briefly, an observation on how best to think about the other economic offerings:
- Experiences are not necessarily separate from commodities, goods, and services: they exist at the top of the pile.
- We should think of goods as props on a stage.
Coffee is one of Pine’s typical ways to show how the relationship the progression of economic value works.
- Commodity: 1 pound of coffee beans sells as commodity for $0.75 – which is around $0.01-0.02 cents per cup
- Good: instant coffee sells for around $0.05–0.25
- Service: coffee in a diner sells for $0.50-1.00
- Experience: at Starbucks coffee sells for $2-5
3 key currencies of the experience economy
The currencies of the experience economy are time, attention and money – and of those three, time is the key currency.
4 ways to think about time
Pine has 3 key observations about time:
- It’s limited
- It’s scarce
- It’s consumable: once it’s gone, it’s gone.
[Suggestion: use image, revert order]
There are 4 ways to think about the time someone spends with you and your company:
- Time wasted
- Time well saved
- Time well spent
- Time invested
Services deliver time well saved. Think food delivery services, cleaners etc. What we’re searching for is the cheapest and most convenient. We’re looking to spend as little time as possible.
Experiences are the opposite: we want to spend time, doing this thing, creating this memory. (Side note: that doesn’t mean it has to go on for a long time, of course. Think roller coasters and weekends away.)
Smart experience economy firms try to turn time that could be wasted into time well spent. Example: how Disney manages its queues. If a sign says it’ll take you 25 minutes, it really means 15 minutes. Because that makes people lining up feel good. They also heighten anticipation, and entertain people.
5 frameworks for thinking about experience design
Pine recommends five ways of thinking about and approaching experience design:
- The 4 E approach
- THEME – to create cohesive experiences
- Personal experiences
- Dramatic experiences
The 4 E Approach – for robust experiences
With this approach, you begin by asking: ‘what is the natural realm of your experience?’
There are a few ways to think about the answer.
Where does it sit on the continuum between passive and active?
Where does it sit on the continuum between absorption and immersion?
Once you have this, you can define which of the four quadrants is the ‘natural realm’ of your experience: Entertainment, Education, Escapist, or Esthetic?
Pine notes that the ‘sweet spot’ for experiences is towards the middle of the graph. So he advocates for hybrid experiences with complex portmanteau names: ‘edutainment’, ‘eduscapist’, ‘ecasthetic’, ‘entersthetic’ etc.
If this seems a verbal stretch too far, don’t worry. The aim here is to help you create more robust experiences. And the usefulness of the framework lies in its ability that the ultimate aim is to give your customers such a good time that this becomes a memory.
The THEME approach: for cohesive experiences
In order to build experiences that make sense from start to finish, use the THEME approach:
- Theme the experience around an organising principle
- Harmonize impressions with positive cues
- Eliminate negative cues
- Mix in memorabilia and media
- Engage all 5 senses
Experiences are inherently personal. ‘They happen inside of us,’ says Pine.
Customisation is key for differentiation, and creating value for consumers. When you customise something, Pine believes, you move it one stage up the progression of economic value.
If you personalise a good, that becomes a service.
If you personalise a service, that becomes an experience. Consider Carnival Cruises, the cruise operator that is now ‘mass customising’ the service it provides its guests.
Through 7,000 on-board sensors and a data-profiling system that builds an individualised ‘guest genome’ for each passenger, Carnival creates ‘experience intelligence tags’ that match passenger with experience.
‘There are no markets, there are only customers,’ says Pine. ‘So now we believe we’re moving from marketing to “customering”.’
The 5 Es of Dramatic Experiences
Good experiences, Pine believes, follow the arc of dramatic story telling, as described by Gustav Freitag.
[Joe – do you have the image?]
In Freitag’s schema, the order runs:
- Rising tension
- Falling action
Pine’s 5E version is similar:
Or you could shorten this into 3 steps:
- Pre show
And then you should ask yourself: what’s our ‘signature moment’?
Even experiences can become commoditised. As heard in the phrase, ‘Been there, done that.’
But it is possible to customise experiences and therefore raise them to the next and, so Pine and Gilmore believe, final economic offering: transformations.
Two examples of organisations who offer these: business schools, and the new Transformational Travel Council (TTC), which is a collective of travel firms offering experiences designed to transform customers, and encouraging others to make the experiences they offer transformational.
You are what you charge for
During the time of the manufacturing economy, firms sold things, and offered the services for free so that their customers would continue to buy their things. The true service economy began when firms started charging for the service. IBM is the quintessential example: the firm rose to prominence as a creator and seller of mainframes, PCs, and other hardware. They would offer their services for free to help their clients install and maintain the equipment – in order to keep them buying their stuff. By the 1990s, it had divested all its manufacturing and become a services firm.
At present, many firms still charge for things and services. Most don’t charge for experiences. This is a mistake, Pine believes. He believe firms should ask the question: ‘what would you do differently if you charged admission?’
Examples of firms which charge:
- Zipferblat – the cafe chain that charges for time. All the drinks are free.
- Guiness Storehouse in Dublin
- Wingtip – a clothing store and member’s club in San Francisco. Charging membership fees is a great way to charge for time.
Once you start thinking about charging for time, and what people will pay for a good time, Pine believes we need a new metric, and proposes MVT, the ‘money value of time’.
Here’s some examples:
|Experience||MVT (US $ per minute)|
|Walt Disney World||$0.23|
|Museum of Ice Cream||$0.42|
($38 per 1.5 hours)
|Escape rooms||$0.64($25-30 per hour)|
(But if you win a lottery ticket, $0.06)
|iFly (indoor skydiving)||$43|
|The first space tourist||$1750(Dennis Tito paid $20m for 8 days in space)|
Advertising is dead
When your lens on the world becomes time, whether it’s wasted, well spent, or invested –that has an impact on an industry is principally based on interruption: advertising.
Advertising, as Pine points out, is a ‘phoniness generating machine’. Far better to let customers experience your brand, ideally through a for-fee experience. And then the ‘experience is the marketing’.
‘The best way to generate demand is through an experience that customers can’t help but want to spend their time, attention and money on,’ says Pine.
ROX – return on experience
At present, firms worry about the ROI of their investments.
For the experience economy, Pine proposes a new measure: return on experience (ROX), where:
ROX = incremental increase in revenue / cost
ROX = incremental increase in revenue / cost – admission fee
Pine points out an interesting idea. If you can reduce your cost to zero, by ensuring that admission fee – or at least, admission fee plus add-ons you make, eg, marginal revenue from a food, beverage or gift outlet – is equal to cost, then your experience can have infinite ROI.
Examples of great brand experiences that do this:
- Land Rover Experiences, which generates revenue and sales
- Guiness Storehouse, which receives 1.8m visitors per month, and people buy memorabilia
If these notes feel too short at times, that’s because Pine shared so much in his lecture. We would advise you to get a copy, and get one for everyone on your team too.