The Experience Economy Revisited

There are some books which stand the test of time. At least the test of five or ten years. Despite this, the oncoming rush of new titles buries them, and younger readers often never hear about them. To my mind, one such book is The Experience Economy by B. Joseph Pine II and James H. Gilmore (Harvard Business School Press, 1999). For those who understand, and believe in, the “experience economy,” this is THE defining text.


The idea is quite simple. As our society becomes wealthier and wealthier, we move from buying more things to buying experiences. I realize that today may be a strange time to claim that our society is becoming wealthier and wealthier. But in fact, if you look at things over any decent length of time – 10 years, 20 years, 30 years – most of the people in the world are becoming wealthier. Even the great depression, a horrible thing, did not permanently stop this upward march – people were a lot better off in 1950 than they were in 1929. 


This idea that people are getting wealthier is even more significant if you think of wealth in the broadest terms – life expectancy, child mortality, literacy. Increases in wealth are not just monetary, not even primarily monetary. Even economists have trouble taking into account the role of improvements in products and services. Television may not be totally free anymore, but the choices have skyrocketed. Cars last longer and require fewer repairs. Anyone who loves to take long driving trips like I do remembers how many roadside breakdowns one saw in the 50s or 60s, compared with how few one sees today in a rich nation like the US. And what about cell phones versus princess phones which kept you wired to the wall?


If you have “covered” your basic needs for food, shelter, and clothing, if you have your transportation needs met, you are less likely to be satisfied with just more baubles and bangles. For many of us, doing things, engaging in activities, and learning become more central to our lives. Instead of buying more cars, we go on cruises, learn yoga or tango, re-enact civil war battles, go to museums and symphonies, and take up golf, gardening, or photography.  


I believe that the aging of the population – especially the baby boom – also drives us towards wanting experiences. People in their 50s, 60s, and 70s are more interested in doing things with their families, in growing personally, in acquiring memories.


In economic terms, the rise in demand for experiences parallels the rise of services while manufacturing and products represent a smaller and smaller share of our spending and the overall economy.


Pine and Gilmore’s basic example is about coffee. You used to buy Maxwell House or Folger’s at the grocery store, and it cost just pennies a cup. Then we got in a bigger hurry and splurged, spending 50 cents at 7-11. Along comes Starbucks to engage us in a broader experience, and we pay up for it. Next thing, we are taking classes about how to make coffee and buying a nice home espresso machine. Next time you are at Target or Bed Bath & Beyond, look at what has evolved in the “Mr. Coffee” department!


I imagine some of you are saying “but look at Starbucks closing stores and people cutting back on spending.” Starbucks built one of the largest retail chains on earth, based on the number of stores, in a very few years. Even if they close thousands of stores, they will still be a significant social and economic phenomenon. The same goes for Whole Foods Market, which is not closing lots of stores but has slowed its growth. Nothing in the present economic troubles indicates to me that the long-term trend toward experiences will be reversed, at least not for long.


And experiences do not have to be expensive ones. Every business has the chance to make transactions more engaging. If some of our big companies just killed off their automated telephone so-called “service and support” systems, they’d be taking a step in the right direction.


The subtitle of this book is “Work is Theatre and Every Business a Stage.” Perhaps these hard times are the ideal time for your enterprise to pick up market share by connecting more strongly with your customers than your competitors do.


I think everyone in any type of enterprise – even government or non-profit – would benefit by rereading this excellent, ground-breaking book.