Introduction: The Four Industries Through Time
Throughout history, we’ve seen three new industries emerge. We started by trading raw material - the Agricultural Revolution - then humans started making things out of said raw material and trading that. Then, as those products became more complex during the Industrial Revolution, we recognized the value in paying for someone else to fix these things for us - whether that be a phone operator, washing machine repairperson, or hairstylist - the Tertiary (or Service) Industry. Now, for the first time, we are willing to pay to immerse ourselves in those other peoples’ experiences. We can learn about them, watch them, try them. This is the Experience Economy.
The world is adopting more experience-based spending habits, and businesses that are able to evolve will surely reap the rewards. Our most recent generations are realizing that experiences matter more than material things - and they are willing to pay for them.
Is it time to adapt to the next level of industry? How can your business leverage this change, if it’s not part of the traditional experience industry, like recreation and tourism?
What's Your Economic Offering?
According to Joseph B. Pine and James H. Gilmore in The Experience Economy: Work Is Theatre and Every Business a Stage, there are four economic offerings. They coincide with the above mentioned industries (Agricultural, Industrial, Service, Experience). They are:
1. Commodities - extracted materials, fungible.
2. Goods - manufactured, tangible.
3. Services - executed, intangible.
4. Experiences - staged, memorable.
What’s interesting, if you noticed, is that each industry builds off of the previous. The authors assemble these offerings into a hierarchy. And as you move up the hierarchy, businesses become more unique, and priced higher. Check out the following charts to explain further.
We’re seeing even more businesses breakthrough into the Experience Economy. Could your business move up the hierarchy to secure more premium prices and a more unique offering?
How To Move Your Business Up The Hierarchy
It’s possible. In an article from Harvard Business Review, Pine and Gilmore of The Experience Economy discuss how grocery stores, which are a brick-and-mortar retail, use sensory input to transform their typical goods business into an experience. Pumping out irresistible bakery scents, for example, or simulating storms with thunder and lightning while misting their produce (those thunderstorms can be seen and heard at Safeway, by the way).
That’s great for retail - but what about service based businesses? That same article from 1998 also mentions Geek Squad, and this was before its massive buyout and integration into Best Buy. It talks about how Geek Squad created a theme by having its employees wear thin black ties, pocket protectors, and drive “geekmobiles”. The result? A service just became an experience.
Experience also encapsulates so much more than just sensory play and themes. Look no further than your phone apps - some of the biggest corporations have dug into the four quadrants of experience: Entertainment, Education, Esthetic and Escapism. Think YouTube, DuoLingo, Instagram and (at one time) Pokemon Go.
Entertainment is probably what we first think of when it comes to experience-based businesses: concerts, movie theatres, and the likes. But experience comes in many shapes and forms and according to Pine and Gilmore, there's a sweet spot to be found when you can hit all four.
Education could be offering classes or demonstrative videos. Esthetic gets customers to observe, or take in the scenery and appearance of your offering. Lastly, Escapism lets your customers really immerse themselves in your character and your business, by relief-seeking and distraction.
Your Homework: Openly Observing Experiences
Give it some thought - a helpful way to do this is by pretending your business charges admission. What would your customers see, feel, hear, taste or smell? Are they actively engaging with you and observing what you have to offer? Can you find a niche or theme, unique to you, that people would interact with?
And as you go about your day - take notice of the experiences that other businesses are offering you. Are you paying a premium for the value of the experience? What is it that makes experience so worthwhile?
Check out these articles for further reading:
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