The Experience Economy

B. JOSEPH PINE II AND JAMES H. GILMORE

Reviewed by Todd

The Hard Rock Cafe, Disney World, and Starbucks all deliver more than food and drink. These establishments create theatre—the script, the props, and the actors all synced to create memorable experiences. The $3 latte or $75 park admission is just a sampling of what customers will pay for help in creating memories.

Consider the evolution of the birthday party. There was a time when birthday cakes were made from scratch by mothers using flour, eggs, sugar, and milk. But I grew up in the seventies and I remember my mom making cakes from inexpensive, time-saving packaged mixes bought at the grocery store. For the couple of big gatherings in my teenage years, it was a trip to the bakery to pick up the yellow sheet cake with “Happy Birthday, Todd” in custom frosting. When my son Ethan turned four, we gathered his friends at Chuck E. Cheese’s for pizza, cake, and electronic games. For the next year, whenever anyone asked him his age, he would say, “I’m four years old and I had my birthday party at Chuck E. Cheese’s.” Could there be a better commercial? There was no question about the dramatic effect it had on him (or the expectations it created for subsequent celebrations).

Joseph Pine and James Gilmore use the birthday party example in The Experience Economy to illustrate a progression of economic value from commodities to goods and services, and now to experiences. The cost of ingredients for a cake might be a few dollars, but purchase a birthday experience and the receipt will be twenty to fifty times that amount. And parents are willing to pay that premium because they receive huge perceived value in providing a fun and flawless party for their child. Companies are also able to maintain premium pricing because of the ease of creating experiences distinctive from their competitors’. The authors’ analysis of gross domestic product and employment bears this out, showing experiences growing faster in both categories than goods or services in the overall economy.

Like all good consultants, Pine and Gilmore provide a 2 2 matrix for evaluating experiences. On one axis is the level of guest participation and on the other is the connection the guest has with the event or performance. Entertainment is the oldest and most familiar of the four “experience realms,” where the audience is watching passively, absorbing the performance. A similar level of absorption but higher level of participation creates an educational experience, like one provided by the hands-on exhibits at a children’s museum. An escapist experience describes a visit to a Las Vegas casino or an Internet chat room, where the participant is completely immersed and actively participating. The esthetic experience is also familiar, whether it’s a visit to the Guggenheim or outdoor retailer Cabela’s for high immersion and low physical involvement. The goal is to incorporate all four realms and eliminate activities that don’t fit within any of them.

“Those businesses that relegate themselves to the diminishing world of goods and services will be rendered irrelevant. To avoid this fate, you must learn to stage a rich, compelling experience.”

Creating experiences is not a new endeavor. The authors draw on the arts—in particular theatre—as a model for business. The performance itself is the offering, the value created. The model grows as human resources become the casting department and the director’s role resembles a more dynamic version of the typical project manager. Disney has long borrowed this language to convey to its “cast” what their role is in making memorable experiences for their “guests.”

Published in 1999, the book captured early on the trend of customers demanding more experiences. Consider our industry of bookselling. Barnes & Noble’s CEO Leonard Riggio is quoted in The Experience Economy describing his superstores as theatres for social experiences. Amazon has experienced tremendous growth by creating its own unique experience, using personalized recommendations based on past purchases, customer participation in the form of reviews and wish lists, and unparalleled product selection impossible to replicate in retail. And today, digital book readers and tablets such as Apple’s iPad now compete for which provides the best reading experience.

Maybe your business needs a new script; The Experience Economy—now in 2011 with an Updated Edition with new ideas, new frameworks, and many, many new exemplars—will show you there is a stage waiting. TS

The Experience Economy: Work Is Theatre and Every Business a Stage, Harvard Business School Press, Hardcover 1999, ISBN 9780875848198

WHERE TO NEXT? Here for creating experiences Here for a company that’s all about experiences Here for experiences we recommend | EVEN MORE: Improv Wisdom by Patricia Ryan Madson; On Caring by Milton Mayeroff; Performance Theory by Richard Schechner