1. Experience Economy
History of Economic Progress
1. Commodity Economy-
Cakes baked from
scratch
2. Good-based Economy
– Use premixed
ingredients
3. Service Economy –
Order whole cake
4. Experience Economy -
Buy a memorable event

2. Experience Economy
1. Indicator of Maturity of service economy
 IBM no longer gives service away for free.
2. Indicator of Immaturity of experience economy
 The geek squad etc. don’t charge for the
experience economy
3. What has to be done if business are to charge for experience?
① Carefully design offerings with more engaging events
② Wrap offerings with experiences for higher levels of
differentiation and profits

3. Good Experience – Personal, Memorable
Designing Memorable Experiences
1. Theme the experience - the Forum Shops in Las Vegas, a mall that displays its distinctive theme
- an ancient Roman marketplace - in every detail.
2. Harmonize impressions with positive cues. – Cues that affirm the nature of the experience can
aid the creation of a unique experience. "Your table is ready," no particular cue is given. But
when a Rainforest Cafe host declares, "Your adventure is about to begin," it sets the stage for
something special.
3. Eliminate negative cues -For example, trash bins at fast-food facilities typically display a
"Thank You" sign which is a cue to customers to bus their own trays, but "No service here," is a
negative reminder. Experience stagers can turn the trash bin into a talking, garbage eating
character that shows a gratitude when the lid swings open. Customer’s self-busing becomes a
positive part of the eating experience.
4. Offer memorabilia - A Rolling Stones concert-goer, for example, will pay a premium for an
official T-shirt emblazoned with the date and city of the concert. That's because the price is less
important factor than the value the buyer wants to remember.
5. Engage all five senses - The sensory stimulants that accompany an experience should support
and enhance its theme. The more senses an experience engages, the more effective and
memorable it can be.

4. The Experience Realms
Passive Absorption: Active Absorption:
Watching TV, Attending classes
To Sense To Learn
Passive Immersion: Active Immersion:
Visiting art gallery Acting in a play
To Be To Do

5. Entering the Experience Economy
1. Provide consistently engaging experience
2. Don’t overprice or overbuild
3. Periodically refresh
① The Rainforest Cafe and Planet Hollywood have
encountered trouble because they have failed to
refresh their experiences.
② Disney avoids staleness by frequently adding new
attractions and even whole parks such as the Animal
Kingdom, which opened in the spring of 19 9 8.

6. Net Promoter Score
1. The best predictor in a single survey question: Would you recommend this
company to a friend? -Customers as references put their own reputations
on the line.
2. NPS links the responses with
① Actual customer behavior - purchasing patterns and Referrals
② Ultimately company growth - It predicts company’s future outcome.
3. The goal of the NPS is to find a future customer loyalty with creating more
promoters and fewer detractors.
① Customer satisfaction is not the best indication of customer
royalty. –
② Plenty of satisfied customers defect from businesses every day
4. Taylor cites the linking of customer feedback to employee rewards as one
of the most important reasons that Enterprise has continued to grow,
even as the business became bigger and, arguably, more mature.

7. A Net-Promoter Primer
① Put simply, the net promoter score is the result achieved when companies survey their customers
with the “would you recommend” question.
② Customer referral and repurchase behaviors of three logical clusters.
a. “Promoters,” the customers with the highest rates of repurchase and referral, gave ratings of
nine or ten to the question.
b. The “passively satisfied” logged a seven or an eight, and
c. “detractors” scored from zero to six.
③ Subtract the percentage of 0s to 6s from percentage of 9s to 10s and that gives you the NPS.
④ Resist the urge to let survey questions multiply; more questions diminish response rates along with
the reliability of your sample.
⑤ Improve your score. The companies with the most enthusiastic customer referrals, including eBay,
Amazon, and USAA, receive net promoter scores of 75% to more than 80%. Firms with the highest
net-promoter scores consistently garner the lion’s share of industry growth.

8. PUTTING ‘SERVICE-PROFIT CHAIN’ TO WORK 1
 What drives growth and profitability in a service business? Highly satisfied
customer. And to keep those customers profitable, the service profit chain needs
to managed.
 Here’s how the service profit chain works:
① Employ satisfaction soars when enhance internal service quality(equipping
employees with the skills and power to save customers).
② Employee satisfaction in turn fuels employee royalty, which raises employee
productivity.
③ Higher productivity means greater external service value for customer-which
enhances customer satisfaction and loyalty. A mere 5% jump in customer
loyalty can boost profits 25%-85%.
 To maximize profits, strengthen all the links in service profit chain.
 For example, fast food giant Taco Bell found that
a. its stores with low workforce turnover (a key marker of employee loyalty)
enjoyed double the sales and 55% higher profits than stores with high
turnover.
b. To boost profitability across stores, it enhanced internal service quality-for
instance, by giving employees more latitude for on-the-job decision making.

9. 1. Internal service quality to employee satisfaction-
Financial-service company USAA
① equips its employees with state-of-the-art information systems
② offers more than 200 courses in its employee development program.
2. Employee satisfaction to employee loyalty-
Southwest airlines,
① Employee satisfaction levels are so high
② At some locations, turnover rates are lower than 5% per year.
3. Employee loyalty to Employee productivity-
 An experienced broker who stays with securities firm for 5 or more years may account for
$2+million in revenue over several years.
4. Employee productivity to External service value-
 Southwest employees’ unusual productivity(including rapid deplaning and reloading), explains
high customer perceptions of service value .
5. Service value to Customer satisfaction-
Insurance provider Progressive creates service value for customers, and enhances customer satisfaction
① By sending teams to the scene of major accidents and providing support services like transportation
and housing.
② By processing and paying claims quickly and reducing policyholder effort.
6. Customer satisfaction to Customer royalty
 Xerox found that customers who rated their satisfaction level with a 5 (very satisfied) - on a scale of 1 to
5 - were 6 times of repurchasing xerox equipment as compared to level 4(satisfied).
7. Customer royalty to growth and profitability-
 Banc One achieved a return on assets more than double by regularly taking steps to improve loyalty.