An Introduction To Experience


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An Introduction To Experience

  1. 1. Lesson 1. An Introduction to Experience Economy Strategies
  2. 2. <ul><li>1.1 A Progression of Economic Value from Commodities to Experience </li></ul><ul><li>1.2 Defining the Four Experiences (4Es) </li></ul>Quick Links
  3. 3. Introduction <ul><li>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). </li></ul><ul><li>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 today’s customer is also coming from positive, engaging, memorable experiences. </li></ul>
  4. 4. Introduction (continued) <ul><li>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) </li></ul>
  5. 5. Introduction (continued) <ul><li>Adding value from positive, engaging, memorable experiences can offer competitive advantage for a business that: </li></ul><ul><ul><li>Fully satisfies customers </li></ul></ul><ul><ul><li>Builds loyal customers </li></ul></ul><ul><ul><li>Increases customers’ willingness to pay more </li></ul></ul><ul><ul><li>Encourages positive word-of-mouth </li></ul></ul><ul><ul><li>Recruits new customers </li></ul></ul><ul><ul><li>Enhances the business image </li></ul></ul><ul><ul><li>Differentiates the business from its competitors </li></ul></ul><ul><ul><li>Makes it difficult for competitors to copy the business </li></ul></ul>
  6. 6. Introduction (continued) <ul><li>Small businesses must develop opportunities that create value through innovation (Drucker, 1985). In the following lessons we present Pine and Gilmore’s (1999) Experience Economy strategies that help an operator innovate his/her business by creating experiential value for the customer. </li></ul><ul><li>These lessons a) outline Pine and Gilmore’s 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 firm’s Web site, and d) provide tools to assess experiential value of the web site. </li></ul>
  7. 7. 1.1 A Progression of Economic Value From Commodities to Experience
  8. 8. 1.1 A Progression of Economic Value From Commodities to Experience <ul><li>According to the Experience Economy (Pine & Gilmore, 1999) framework, today’s 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. </li></ul>
  9. 9. 1.1 A Progression of Economic Value From Commodities to Experience <ul><li>Consider the idea behind the once small business of Starbucks that has burgeoned into a successful public company. The focus on design with the shop’s 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. </li></ul>Restaurant Starbucks Coffee The two sides of Starbucks: the interior and the music http://
  10. 10. 1.1 A Progression of Economic Value From Commodities to Experience <ul><li>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. </li></ul><ul><li>Pine and Gilmore’s Progression of Value </li></ul>
  11. 11. 1.1 A Progression of Economic Value From Commodities to Experience <ul><li>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. </li></ul>
  12. 12. 1.1 A Progression of Economic Value From Commodities to Experience <ul><li>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. </li></ul>Restaurant Cereality: Tempe, AZ http://
  13. 13. Figure 1.1 Pine and Gilmore’s Progression of Value
  14. 14. 1.1 A Progression of Economic Value From Commodities to Experience <ul><li>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. </li></ul>
  15. 15. 1.2 Defining the 4Es: Education, Esthetics, Escapism, and Entertainment
  16. 16. 1.2 Defining the 4Es: Education, Esthetics, Escapism, and Entertainment <ul><li>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 E ducational, E sthetic, E scapist, and E ntertainment experiences to the business. The four experiences vary based on the customer’s 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. </li></ul>
  17. 17. 1.2 Defining the 4Es: Education, Esthetics, Escapism, and Entertainment <ul><li>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). </li></ul>
  18. 18. 1.2 Defining the 4Es: Education, Esthetics, Escapism, and Entertainment <ul><li>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. </li></ul>
  19. 19. Figure 1.2 Pine and Gilmore’s Four Realms of Experience
  20. 20. 1.2 Defining the 4Es: Education, Esthetics, Escapism, and Entertainment <ul><li>A small business may focus on creating one experience or a medley of all 4Es. The Blue Bell Inn Bed &Breakfast (B&B) 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 Inn’s owner (Esthetics). </li></ul>
  21. 21. 1.2.1 The 4Es: Educational Experiences <ul><li>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/B&B, Restaurant, Retail, and Rural Tourism) are shown in the next slide. </li></ul>
  22. 22. 1.2.1 Examples of Educational Experiences Restaurant A local restaurant offers hands-on cooking classes, plus special events such as wine tasting, entertaining, and birthday parties. http:// / Accommodation/ B&B A B&B provides seasonal Educational experiences from traditional Minnesota farm life, such as bread baking in outdoor oven, making homemade applesauce, and berry picking.
  23. 23. 1.2.1 Examples of Educational Experiences Rural Tourism A Dutch tourism attraction retail store and factory provides an opportunity for patrons to observe traditional wooden shoe carving. Visitors can also talk with artisans as they create wooden shoes and delftware in the old world. http:// Retail A fabric store sells traditional/contemporary quilting fabric and supplies and teaches classes to customers. http:// /
  24. 24. 1.2.2 The 4Es: Esthetic Experiences <ul><li>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. </li></ul>
  25. 25. 1.2.2 Examples of Esthetic Experiences Restaurant Art-lined walls and accent lighting create an Esthetic experience in this otherwise understated restaurant. http:// =1900 Accommodation/ B&B Landscape and interior design of this B&B offer an Esthetic experience .
  26. 26. 1.2.2 Examples of Esthetic Experiences Rural Tourism Brilliant rivers and mountains of orange pumpkins at this festival offer an Esthetic experience. Retail The picture-perfect exterior of this retailer along with beautiful products displayed inside offer s an Esthetic experience. http:// =491
  27. 27. 1.2.3 The 4Es: Escapist Experiences <ul><li>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. </li></ul>
  28. 28. 1.2.3 Examples of Escapist Experiences Restaurant A family-run restaurant offers a wide variety of activities for its customers, which make them feel like ranchers by bottle feeding cows. Accommodation/ B&B Murder mystery dinners held in a B&B provide an evening of mystery and intrigue. Each guest plays a character and attempts to solve the murder while being served a delicious gourmet meal. http://
  29. 29. 1.2.3 Examples of Escapist Experiences Rural Tourism A small farmhouse offers a mini maze for little kids to wonder through alongside a cornfield maze adventure for adults. http:// Retail Bike shop customers can try out demo mountain bikes on the mountain trail , thus, escaping from their routine life .
  30. 30. 1.2.4 The 4Es: Entertainment Experiences <ul><li>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. </li></ul>
  31. 31. 1.2.4 Examples of Entertainment Experiences Restaurant Servers entertain by singing to the customers during their supper at the restaurant . http:// / Accommodation/ B&B A B&B owner , dressed in colonial garb, share s recipes, cooking secrets and narratives from the 18th century. She always has a story to tell before the roaring fire of the cooking hearth.
  32. 32. 1.2.4 Examples of Entertainment Experiences Rural Tourism Spectators cheer on their favorite pig at the World-Class Pig Races held on a farm. Retail A boutique pet store offers a unique private birthday party for a pet, with the store’s owner providing birthday cake and entertaining music .
  33. 33. 1.3 Summary of Lesson 1 <ul><li>This lesson introduced concepts of Pine and Gilmore’s experience economy and reviewed how economic value has evolved from commodities, to goods, services, and experiences. The four realms of experience (4Es: E ducational, E sthetic, E scapist, and E ntertainment 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/B&B, restaurant, retail, and rural tourism. </li></ul>
  34. 34. References <ul><li>Drucker, P. F. (1985). Innovation and entrepreneurship: Practice and principles . New York: HarperCollins. </li></ul><ul><li>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. </li></ul><ul><li>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. </li></ul><ul><li>Morris, M. (1998). Entrepreneurial Intensity: Sustainable advantages for individuals and organizations . Westport, CT: Quorum. </li></ul>
  35. 35. References (continued) <ul><li>Pine, B. J. II & Gilmore, J. H. (1999). Experience economy: Work is theater and every business a stage. Boston: Harvard Business School. </li></ul><ul><li>Images </li></ul><ul><ul><li>http://www. starbucks .com/ hearmusic / inourstores .asp?category_name=In+Our+Stores </li></ul></ul><ul><ul><li>http://www. cereality .com </li></ul></ul><ul><ul><li>Education </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul>
  36. 36. References (continued) <ul><ul><li>Esthetics </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li>Escapism </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li>http://www. beautifulvista .com/Recent_Photos/Bike_Ride_Photos/Bob_Mountain_Biking.JPG </li></ul></ul><ul><ul><li> </li></ul></ul>
  37. 37. References (continued) <ul><ul><li>Entertainment </li></ul></ul><ul><ul><li>http://www. eliaschildhouse .com/ hearthcooking . htm </li></ul></ul><ul><ul><li>http://www. flyingt .com/ </li></ul></ul><ul><ul><li>http://www. metropawlis .com/ setrecommend . htm </li></ul></ul><ul><ul><li>http://www. oldmacsfarm . blackhills .com/Info/pr0402.jpg </li></ul></ul>