The Experience Economy Is Alive & Kicking in Small Business

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One of the benefits of pre-choreographed classes that are purported by the various suppliers is that instructors do not need to think in the class, once they know their choreography. They can show their charismatic personality and perform on stage. If you like put on a show and create an experience for the participants. In fact way before pre-choreographed classes there was an instructor at Howzat in Newcastle, where I first worked. Martin was his name and in the 3 years I worked there he did not change his class ONCE! The participants knew what the next move was before he even cued. His class was high-intensity and I am sure contained many exercises that now days would be deemed contra-indicative. But he had 120+ people every week in the class. All he did at the front was cheer, support his class and maintain the enthusiasm & motivation in the room. People did his class for the pure experience of being in a fun and jam packed room! Last month, I was speaking with Laurie Cingle a US consultant in retention for clubs. She said she would run indoor triathlons, give away cars in a Lotto promotion, launch Commit to Get Fit every March and run her favourite Paws Walk for her members and their pets! The members of her Club would want to come to the Club, just to see what was new, different or happening. She believed this was all about creating an experience for the members of her club. Last week, I went to the club that I train at and the front desk girl was so engrossed in either completing the Suduko in the paper, that she didn’t even meet my eyes as I arrived. She reached up took my card logged me in and through I went. Compare the experiences? In recent months, there has been substantial research and reports that indicates that the global financial crisis could around our industry. It appears that many people will keep their gym memberships but what is apparent is that there is a greater need for us to create increased value when people interact with our business. And returning to Laurie Cingle for a moment, she asked why I thought clubs were reducing their commitment to programs in clubs to create experiences – my answer . . . “maybe it is a matter of priorities?!”

The concept of creating an experience when people walk into the club is not new. It has been around for the life time of our industry. And in 1998, Joseph Pine wrote a book called “The Experience Economy” with a tag line “Work is Theatre And Every Business a Stage” and ladies and gentleman it is my belief that more than ever before we must work harder to create experiences that our members TRUELY value when they walk through the door or when they interact with our business in the community or even on-line! Quoting from the first paragraph of the Experience Economy: Slide 3 “ Commoditized. No company wants that word applied to its goods or services. Merely mentioning commoditisation sends shivers down the spines of executives and entrepreneurs alike. Differentiation disappears, margins fall through the floor, and customers buy solely on the basis of price, price, price.” To explain the Experience Economy, the authors use the evolution of a birthday cake to help explain how the world has passed through various types of economies:

Slide 4 The agrarian economy – mothers made birthday cakes from scratch, mixing the farm commodities for a total cost to the household of just a few cents! The goods-based economy – where mothers or fathers paid a couple of dollars for pre-mixed ingredients to get the cake started and save them some time. The service economy – was where parents ordered cakes from the bakery at 4 or 5 times the cost of the basic ingredients. The experience economy – is where parents outsource the complete birthday party paying 1000 times the original cost for the cake in the agrarian economy but providing their kids an experience they will never forget! And hence we have seen the emergence of the experience economy! So following on from this dissection of the evolution of economies is looking at our goods and services. As you know, in our industry we offer services. When someone buys our service, he or she purchases a set of intangible activities that are to be carried out in the future However, when someone purchases an experience, they pay to spend time enjoying a series of memorable events that you can stage to engage them in a personal way. Companies then intentionally use the services as the stage and goods as props to engage their customers.

Slide 5 So goods are tangible, services are intangible, experiences are memorable. And I think the really cool thing is each experience is different! It derives from the interaction between the ‘staged’ event and your member’s state of mind. Therefore each experience can be different and adds to greater job satisfaction for your employees.

Slide 5 If you have not been there, then there is a good chance you have seen Disneyland on TV. Many parents from around the world take the kids there at least once in their lifetime not just for the overseas event but rather to enjoy the shared experience and make that part of their everyday family conversations for months. Guests to Disneyland are engaged on an emotional, physical, intellectual and even a spiritual level. No 2 people have the same experience as each experience is derived from the interaction between the staged event and the individual’s state of mind. While the experience lacks tangibility, people greatly value the offering because it lies within them, where it remains long after the visit. For even years to come! What do we learn from this . . . Fitness businesses that capture this economic concept will not only earn a place in the hearts of their customers but a share of their wallet!

I am a classic example of what I am talking about – where a company gets a share of my wallet because of the experience I enjoyed. Last month, on my visit to San Francisco, I checked in to my hotel and the first shop I entered was Niketown. Slide 6 I made a B-line there and was walking through the door within 15 minutes of checking in! I spent an hour just walking around and soaking up the experience and every day I did the same thing! That’s right I went into the shop every day! It was on my last day, I bought clothes – not because I needed them but felt compelled to buy something! They had done something for me for the past 4 days, so under the Law of Reciprocity, I felt I had to make a purchase. The Niketown experience is unique and would I pay for admission to Niketown . . . Not sure! I have been to the Niketown in London and Chicago and I would definitely pay to visit those stores. But studying my buying experiences doesn’t end there with just Niketown.

The second store I went into was the Apple store. Slide 7 This is the same as the one here in Sydney and if I owned a health club, I would be studying what these guys do! They have so many cool things happening within their store . . . all experiences to reinforce their brand and encourage purchases. For the record I don’t have an apple computer, the only Apple product I have is a 3 year old Shuffle. But I went in and out of this shop several times before I stopped myself. I forced myself to walk on the other side of the road, then around the block because I knew if I came to close to the front door, it would be like a vortex and I would be sucked in. Why would I be sucked into the store . . . to enjoy the experience of: The super helpful and cool stuff To see the genius bar at work To play with the Apple gadgets To listen to one of their free DIY seminars in their theatrette To soak up the atmosphere the Apple disciples create The end result . . . I knew I buy something that I didn’t need! More importantly, I knew I would say “Here is my credit card. Now give everything I need to convert my life to Apple!” I knew I would be swept up into the Apple brand just by being part of the experience. Would I pay admission to enter an Apple store . . . Yes I would! Anywhere in the world I would pay just to go in! What Niketown & Apple do has also been called ‘Shoppertainment’ or ‘entertailing.’ Which has proved super successful for many companies andothers are now replicating.

In Australia we have our own company attempting to create sales through experiences. In the past 2 years every Telstra shop has been rebranded and designed as they attempt to emulate the experiences you get when you go into the Apple store. You can now go into a store and play with all the phones and products. But they are missing a few ingredients in their experience – cool staff, the atmosphere of the devotees of the product, the ambience. In fact, I challenge you to visit the Apple store in Sydney and then Telstra store and see if you can identify some of the differences. But Telstra have not quite got it. I would not pay admission to their shop! However, no company or business sells experiences as its ‘product’ unless it charges for admission. But maybe we should be asking:

Slide 9 “ What would we do differently in our clubs if we were to charge admission?” “ What would our group exercise instructors do differently if at the end of their class, a collection bowl was passed around for members to donate to their wage?” “ What would our personal trainers do differently if they were paid a minimum wage but could keep 100% of tips from their clients?” When you have the answer to these questions, you have the answer to creating experiences that your members TRUELY value when they come into your club. But before you can charge for admission, you need to design an experience that your members or clients, judge to be worth the price! So let me help you think about this . . .

Experiences can be thought about across 2 dimensions – Customer participation and Connection. Slide 10 With customer participation , you can have passive participation, where your members don’t affect the performance at all, eg running on a treadmill, or you can have active participation, in which members play a key role in creating the event that yields the experience, eg a group fitness class with an interactive instructor.

The second dimension for the experience is connection or the environmental relationship that unites the members with the event. And one end of this we have absorption and the other end immersion. An example could occur within a group fitness class, where the people down the front are totally immersed in the class and the people in the back are absorbed. Our goal of course is to have every member immersed and that is the challenge for our group fitness instructors.

We can then sort experiences into 4 broad categories according to where they fall along our respective spectrums: Slide 12 We have the Entertainment ¼ - and watching TV is an example where people have passive participation and are absorbed more than immersed in their TV program; The Educational ¼ - encompasses experiences with more active participation and more absorption – for example today and the Filex convention. The Escapist ¼ - this experience does have some educational value and even amuse us, but the focus is immersion of the customer. In our industry, I would suggest a PT session is an example. The Aesthetic ¼ - is where your customers have little effect but are totally immersed. An immediate example from outside the industry was when i visited Iguazzu Falls – I was mezmorised by the power and the sound of the world’s best waterfalls just 1m from my hand!

Slide 13 The richest of all experiences are those that encompass all 4 realms – and this is called the sweet spot! This is the challenge for you in your business, where and what is the sweet spot?

But remember . . . experiences MUST meet the customer needs, they have to work, and they have to be deliverable consistently. Here is the 4 Step Plan to designing your memorable experiences: Slide 14 Theme the experience – the fitness industry has done this very well with Boot camp promotions and launch programs for new classes. In this area we can improve in our consistency as a en effective theme is concise & compelling. Your theme must drive all the design elements and staged events of the experience toward a unified story line that will captivate your members. Harmonise the impressions with positive cues – At the Rainforst Cafe, they used to say “Your adventure is about to begin.” In the O’Hare Airport in Chicago each level of the parking station is adorned with one of Chicago’s sporting franchises and also a signature song for that level – you never forget where you park! It is these small cues that make the big impression of the experience in a customer’s mind. Mix In Memorabilia – when our grand parents went on holidays they bought tea towels or spoons! When golf players play on an exclusive course they buy a cap or shirt to remember the experience! This is a physical reminder! And when I went to Top Gear Live earlier this year, I am sure they were selling t-shirts at least 50% more than what i would pay down at China Town! This is because the price points function less of goods than of the value the buyer attaches to remembering the experience! If you have no demand for any t-shirts, water bottles, towels, bags . . . then quite possibly you are not staging an engaging experience. Engage all 5 senses – There is now clear scientific research that shows the power of smell in determining brand recognition. It is clear that for a totally engaging experience we need to involve as many sensory stimulants as possible. Abercrombie & Fitch are currently using many senses to market their clothing in the US – up beat music; a distinct aroma or scent; black and white colours and real life models. Engaging in these 4 steps is no guarantee for success but they are to get you going on the journey of creating experiences for your members.

So where do you start? Go on an excursion or field trip annually – at least! You want to learn by experiencing experiences. And they maybe experiences with in our industry but also outside our industry. I encourage you to look for ‘Best Practices’ but don’t copy. As copying by definition never yields innovation. Rather examine what they are doing, extract out the principles they are applying to staging the engaging experiences and then apply these to your business.

Last month at IHRSA, Seth Godin spoke and he was looking at the fitness industry as an outsider and he compared our industry to tofu. I thought it was a long bow to draw too! He said years ago there was only one type of tofu. Now you can get 30+ varieties of tofu but it is all tofu! He said we have so much clutter in our lives it is easier not to choose than choose. And the fitness industry simply creates more clutter by opening the same thing over and over again. The only way to stand out from every variety of tofu is to be remarkable. If you were driving through the country side and saw green paddocks after green paddocks of cows the scenery would just blend in. You would feel bored and uninspired. But if out of the blue there was a purple cow, you would stop. Slide 16 You would stare. You would try and touch the cow. Maybe try and rub the purple out of the fur. You would certainly take photos with the cow. Godin’s defines this as remarkable. Purple cows stand out and are remarkable! Your purple cow for your business should be the experiences you create for your members as they walk into your facility. When they go to your website. When they see your brand in the community. When they see your staff in the shopping centre. Ladies and gentleman making your business remarkable through experiences will differentiate and allow you a greater share of your customer wallet and improve your retention. If you are wondering how easy it is to implement, I would like to finish with a short video . . .

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Hans Haugli, Director of Design and User Experience at Creuna, favorited this 3 weeks ago
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The Experience Economy Is Alive & Kicking in Small Business - Presentation Transcript

The Experience Economy is Alive & Kicking Are you? Filex 2009
- “ Commoditised. No company wants that word applied to its goods or services. Merely mentioning commoditisation sends shivers down the spines of executives and entrepreneurs alike. Differentiation disappears, margins fall through the floor, and customers buy solely on the basis of price, price, price.”
The Service Economy The Experience Economy The Goods-Based Economy The Agrarian Economy
- Goods = Tangible
- Services = Intangible
- Experiences = Memorable
- “ What would we do differently if you were to charge admission to enter your business?”
- “ In a gym, what would the group exercise instructors do differently if at the end of their class, a collection bowl was passed around for members to donate to their wage?”
- “ Or as a personal trainer, what we do differently if they were paid a minimum wage but could keep 100% of tips from their clients?”
- Customer Participation
Passive Active
- Customer Connection
Absorption Immersion
Absorption Immersion Passive Active Entertainment Educational Aesthetic Escapist
Absorption Immersion Passive Active Entertainment Educational Aesthetic Escapist The Sweet Spot
- 4 Step Plan
- Theme your experiences
- Harmonise the impressions with positive cues
- Mix in memorabilia
- Engage all 5 senses
- Where Now?
Justin Tamsett B.Ed (Phys & Health Education) For an email copy of the notes email Justin: [email_address] And for more information on Active Management go to: www.ActiveMgmt.com.au "What you leave behind is not what is engraved in stone monuments, but what is woven into the lives of others." Pericles