The Experience Economy – The New Life of the Old Phenomena

Economy is usually defined as an area of the production, distribution, or trade, and consumption of goods and services by different agents.

Behind that fancy but yet, somewhat simple definition – lies one very much alive and always changing phenomena. So really, how do economies change? How can the entire history of economic progress be recapitulated?

We’ll try to explain it using the cake metaphor and a 4-stage categorization.

  1. Let’s say that the first stage was during the agrarian economy. The cake had to be made from scratch. By mom herself.
  2. The second stage is the very beginning of the goods-based economy. Mom could supply herself with some premixed ingredients but still had to do most of the work by herself.
  3. The next stage is the service economy – and, luckily, busy moms could order a cake from the bakery or grocery store. Of course, the price of the cake was almost 10 times higher than the total ingredients cost, but – who cares, right?
  4. And then, the fourth stage came along, changing the game rules forever. We are talking about the ’90s. Most moms weren’t making or ordering a cake, instead – a grand majority of parents “outsourced” the entire event that was previously known as birthday, spend with the closest family members by then.

And that, my friend, was the very beginning of so-called experience economy.

With the internet boom that came along, most of the industries have commoditized.

Whatever you need is at your fingertips – you won’t be calling a travel agent or a mattress salesman. No. You will, as most of the people do, simply go to the Internet and get all the necessary info.

So, we welcome you to the experience economy, as the Harvard Business Review so eloquently described it:

“A company intentionally uses services as the stage, and goods as props, to engage individual customers in a way that creates a memorable event.”

This term was first used in a 1998 article by B. Joseph Pine II and James H. Gilmore.

They were describing the experience economy as the next economy following the agrarian economy, the industrial economy, and the most recent service economy. The concept had been previously researched by many authors.

A duo claimed the theory that businesses need to output extraordinary events for the customers. This way, the memory of that experience itself becomes the product!

For Pine and Gilmore, this was nothing more but a natural progression in the value added by the business over and above its inputs.

In time, the concept of the experience economy expanded from the business sphere to tourism, architecture, nursing, urban planning, and many, many, many other fields.

Where are we today?

Not many companies and organization escaped this growing trend. Most of them today provide a personalized solution that is customized to exactly what the client needs; and what is equally important: when the client needs it!

This way, organization are creating an experience so memorable and personalized that we can talk here about deeper relationship clients are developing. And the main goal is to “keep ‘em coming back”.

This type of experience, designed and tailored to the needs and interests of the person, is all about time well spent. And we all know that time is the most powerful currency.

Now is the time to categorize this experience economy, giving it even more importance.

We can distinguish two types of experiences: Customer Participation and Connection. Both are interfaces a consumer can have with a brand.

Customer Participation

It’s simple. Customers can participate actively or passively in an experience.

When it comes to active participation – it all sums up to the customer. He is playing a key role in interaction with a brand.

Let’s put it this way, so you have it clear.

Let’s imagine an event. For example, an extravagant theater dinner. With the audience interaction.

You can participate or you can just show up and participate passively. That is the main difference between the two and that is the beauty of the experience economy. It is completely and utterly dedicated to your needs.

Whether you prefer active or passive consumer participation, you’re still getting exactly the experience you want.


Physical and mental connectivity determine experience levels. And when it comes to the connection spectrum – its two ends are absorption and immersion.

We can best illustrate it with using a school lecture as a metaphor.

You can either read it at home alone (that would be a mere immersion) or you can go to the class and take some notes. You are guessing – that is the absorption.

And mind you, one type of connection to experience is not telling more of consumer behavior than the other.

Examples of the Experience Economy

When we are talking about the experience economy, we are saying that the products and services can compete further by creating an experience that the customer value. Let’s see some of the experience examples.

  • Usability (pleasing and beneficial product)
  • Well-being
  • Luxury (superior services)
  • Peak Experiences (the ones that the client sees it as accomplishments or events important to their life (wedding or traveling)
  • Transformative Experiences (the ones that are making the individual better, in their own opinion)
  • Status (symbol of wealth or membership in a group – using the same camera lenses as your favorite photographer)
  • Culture (concert or a food)

So, are you in?

If not – what on Earth are you waiting for?


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