The Experience Economy

A weekend story in the New York Times offered validation with regard to one of the most important shifts in consumer behavior we’ve focused on during dozens of Elm Street Economics workshops over the past year: The renewed focus on experiences. The Great Recession caused an economic re-set in many households, during which family incomes declined (or heads-of-household feared such decline), and the use of credit was greatly reduced. Consumer spending went through a contraction, as people set-aside frivolous wants to preserve cash for those things that were perceived to be more important needs.

Just as nature abhors a vacuum, this cessation in the acquisition of “stuff” left a hole in the typical household that needed to be filled. In many homes, that hole was filled by things like a return to more frequent family dinners—around the family’s own table—and playing board games on Friday nights. Many folks became re-acquainted with simple pleasures… and quality time.

For many consumers, this led to an epiphany: What I have is not as important as what I have done.

Implications: Because the recession was so protracted—going from late 2007 deep into 2009—many companies have had the chance to analyze and adjust their inventories to meet changing demand. But it's not enough to consider what people will buy. Consider how and why they want to buy.

If “experiences” have become so important to the consumer…

• Beyond enhancing the product or service you sell, how can you improve the way you sell it? From the consumer’s point-of-view, what will make this purchase experience enjoyable? What issues could make the transaction frustrating (and how can you fix them)?
• Should your marketing place less emphasis on buying the product… and focus more on the ease/ enjoyment/satisfaction of owning it? (Buying is an incident. Owning is an experience.)
• After years of acquiring—much of it on credit—many consumers have come to the realization that their assets can become liabilities. What is your return policy? How likely are your products to retain their value over time? Why will the consumer still be happy with this purchase in a week? A year? Two years?

It is my observation/opinion that consumers have used the Great Recession to send a clear message to marketers: Experience wanted. (Not your experience as a provider. But my experience, as the consumer.)

If the experience and benefits of your product fail to distinguish you from other potential providers, the consumer has little choice but to decide based on price alone.

Mike Anderson