an introduction to experience

Lesson 1. An Introduction to Experience Economy Strategies

2

1.1 A Progression of Economic Value from Commodities to

Experience

1.2 Defining the Four Experiences (4Es)

Quick Links

3

Introduction

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).

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.

4

Introduction (continued)

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)

5


Adding value from positive, engaging, memorable experiences can

offer competitive advantage for a business that:

– Fully satisfies customers

– Builds loyal customers

– Increases customers’ willingness to pay more

– Encourages positive word-of-mouth

– Recruits new customers

– Enhances the business image

– Differentiates the business from its competitors

– Makes it difficult for competitors to copy the business

6


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.

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.

1.1 A Progression of Economic Value From Commodities to

Experience

8

1.1 A Progression of Economic Value From Commodities to Experience

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.

9


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.

Restaurant

Starbucks Coffee

The two sides of Starbucks: the interior and

the music

http://www.starbucks.com

http://www.starbucks.com/



http://www.starbucks.com/retail/hearmusic_jump.asp

10


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.

Pine and Gilmore’s Progression of Value

11


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.

http://www.cereality.com/main.php

12


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.

Restaurant

Cereality: Tempe, AZ

http://www.cereality.com

http://www.cereality.com/


13

Figure 1.1 Pine and Gilmore’s Progression of Value

14


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.

1.2 Defining the 4Es: Education, Esthetics, Escapism, and Entertainment

16


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 Educational, Esthetic, Escapist, and

Entertainment 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.

17


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).

18


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.

19

Figure 1.2 Pine and Gilmore’s Four Realms of Experience

20


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).

21

1.2.1 The 4Es: Educational Experiences

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.

22

1.2.1 Examples of Educational Experiences

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.

http://www.roundbarnfarm.com/attractions.htm

Restaurant

A local restaurant offers hands-on cooking classes, plus

special events such as wine tasting, entertaining, and

birthday parties.

http://www.thechoppingblock.net/





23

1.2.1 Examples of Educational Experiences

Retail

A fabric store sells traditional/contemporary quilting fabric

and supplies and teaches classes to customers.

http://

www.explorewisconsin.com/CowCountryFabricsandQuilts/

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://www.dutchvillage.com/park/activities.html

http://www.explorewisconsin.com/CowCountryFabricsandQuilts/





24

1.2.2 The 4Es: Esthetic Experiences

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.

25

1.2.2 Examples of Esthetic Experiences

Accommodation/ B&B

Landscape and interior design of this B&B offer an

Esthetic experience.

http://www.worldvacationrentals.net/detailed/1157.html

Restaurant

Art-lined walls and accent lighting create an Esthetic

experience in this otherwise understated restaurant.

http://www.roadfood.com/Reviews/Overview.aspx?RefID

=1900


http://www.roadfood.com/Reviews/Overview.aspx?RefID=1900



26

1.2.2 Examples of Esthetic Experiences

Retail

The picture-perfect exterior of this retailer along with

beautiful products displayed inside offers an Esthetic

experience.

http://www.roadfood.com/Reviews/Overview.aspx?RefID

=491

Rural Tourism

Brilliant rivers and mountains of orange pumpkins at this

festival offer an Esthetic experience.

http://www.sfc.ucdavis.edu/agritourism/agritour.html





27

1.2.3 The 4Es: Escapist Experiences

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.

28

1.2.3 Examples of Escapist Experiences

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://www.bbonline.com/ky/maplehill/murdermystery.html

Restaurant

A family-run restaurant offers a wide variety of activities for

its customers, which make them feel like ranchers by

bottle feeding cows.

http://www.flyingb.com/Calf%20Feeding.jpg




29

1.2.3 Examples of Escapist Experiences

Retail

Bike shop customers can try out demo mountain bikes on

the mountain trail, thus, escaping from their routine life.

http://www.beautifulvista.com/Recent_Photos/Bike_Ride_Photos/Bob_Mountain_Biking.JPG

Rural Tourism

A small farmhouse offers a mini maze for little kids to

wonder through alongside a cornfield maze adventure for

adults.

http://www.scottszellwoodsweetcorn.com/cornmaze.htm





30

1.2.4 The 4Es: Entertainment Experiences

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.

31

1.2.4 Examples of Entertainment Experiences

Accommodation/ B&B

A B&B owner, dressed in colonial garb, shares recipes,

cooking secrets and narratives from the 18th century. She

always has a story to tell before the roaring fire of the

cooking hearth.

http://www.eliaschildhouse.com/hearthcooking.htm

Restaurant

Servers entertain by singing to the customers during their supper at the restaurant.

http://www.flyingt.com/





32

1.2.4 Examples of Entertainment Experiences

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.

http://www.metropawlis.com/setrecommend.htm

Rural Tourism

Spectators cheer on their favorite pig at the World-Class

Pig Races held on a farm.

http://www.oldmacsfarm.blackhills.com/Info/pr0402.jpg



33

1.3 Summary of Lesson 1

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: Educational, Esthetic, Escapist, and Entertainment

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.

34

References

Drucker, P. F. (1985). Innovation and entrepreneurship: Practice and

principles. New York: HarperCollins.

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.

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.

Morris, M. (1998). Entrepreneurial Intensity: Sustainable advantages

for individuals and organizations. Westport, CT: Quorum.

35

References (continued)

Pine, B. J. II & Gilmore, J. H. (1999). Experience economy: Work is

theater and every business a stage. Boston: Harvard Business

School.

Images

http://www.starbucks.com/hearmusic/inourstores

.asp?category_name=In+Our+Stores

http://www.cereality.com

Education





http://www.starbucks.com/hearmusic/inourstores.asp?category_name=In+Our+Stores










36


Esthetics





Escapism



http://www.beautifulvista.com/Recent_Photos/Bike_Ride_Photos/

Bob_Mountain_Biking.JPG


37


Entertainment





an introduction to experience

Business

progression of economic

value frompositive

gilmores progression

importance of customer

engaging experience

important source of

unique experience

small business operator