Experience Economy and Analytics

With the passage of time there has been a fundamental change in the very fabric of economy where we have gone from the agrarian based economy of commodities to industrial economy based off of goods and further to service economy. What interestingly happened was goods became commoditized in the service economy meaning they were treated as commodities. As a result of which people did not care much about the brand, the only concern was price. In fact in present scenario, Internet is the greatest force of commoditization, as the customers can easily compare the prices with ease and eventually it pushes the customers to the lowest price. The services are also becoming commoditized these days for example if we look at financial services, buying or selling a block of shares used to cost a hundred dollars with a full service broker now costs only three to four dollars with an internet based broker. So, as goods and services are becoming mere commodities it is very important to move beyond goods and services to a new economic value, i.e. staging experiences for the customers. Experiences are distinct economic offerings, it’s basically using goods as props and services as stage to create a memory which is the hallmark of experiences. Starbucks creator Howard Schultz had a great coffee experience in Milan Italy and brought the same to USA and now increasingly spreading across the globe. Similarly Nespresso gives the emphasis on the fact that if they make the customers feel the coffee making experience then it becomes lot easier to sell and hence they have innovated the Nespresso boutiques where customers com and are exposed to various products. The staffs can make a coffee for the customers using the Nespresso machine with the idea of making the customers experience the product.

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Now if we analyse, the coffee beans for a cup of coffee cost only two to three cents and if we further roast them and further pack then the price ranges from five to fifteen cents. If the coffee is brewed for a customer in a café it will cost a dollar or dollar and half. But as the coffee is surrounded with the ambience of Starbucks we pay as much as six dollars for a cup of coffee having beans worth two to three cents!

 Experiences are distinct as mentioned and can be staged at various stages, US army does that in recruiting. They have designed a game which gives the experience of real time mission. The cost involved is one tenth of the traditional advertisement cost. On the other hand Whirlpool has a program called “The Real Whirled” where the Whirlpool employees stay in a house which they are not allowed to leave and the day to day activities have to be carried using whirlpool machineries. The idea is to let the sales person experience the product first hand before they actually sell to the customers.

 While most sales take place in person but with the internet coming into picture thousands of new customer experience are created that have a strong connection to the sales. According to research, around 84 percent of the customers use digital content at some point while buying an automobile. As a result there has been a significant drop in the customers visiting showrooms.

 Success in this era is all about evaluation of current data-points. This means keeping a track of methods by which customers interact with digital technologies which are changing quite drastically. Mobiles are slowly replacing the personal computers at the same time internet of things and autonomous chat devices are getting into the picture. Keyboards which gave ways to touchscreens and now presently the speech and gesture recognition today are the technologies in use. The crux of the matter is with every change a new demand is being created by the customers both in terms of the experience and interactions.

As per a latest research in UK, approximately 30 percent of consumers have said that they would actually stop visiting websites that were lacking personalization. And as much as 86 percent of consumers have said that personalization plays a crucial role in their purchasing decisions.

Various personalization channels offer the potential to increase revenues by 10-25 percent. In particular, personalization can be a strong lever for companies seeking to regain competitiveness versus market leaders. Take for example, a frequent business traveller searching for a trip to London might have his search results sorted which are prioritized for an airline on which he has status, automatically suggesting his preferred window seat and offering to book a white car pick-up at the airport and a hotel with river view with several business amenities that is opposite his office.

In a scenario, where each client contact point is an opportunity and a threat at the same time, the ability to analyse, interpret and value data has become the mantra to success. But the irony remains in the fact that this new oil of the economy, it is mostly untapped as yet. It is estimated that among all of the data generated in recent years all over the world, only about one percent has been analysed and valued. Collecting data is not the tough part in this era. The challenge is identifying the 20 percent of data that will eventually generate the biggest impact, the next part involves integration of the new data across multiple sources into existing business models, and converting the same into value. It is estimated that about two-thirds of the value of data today can be used to enhance customer experiences and increase personalization. In this data-driven world platforms like Facebook, Instagram, YouTube etc. are stages behaving as experience hub online. Nobody heard of Blendtech until the CEO Tom Dickson started putting videos in YouTube “Will it blend?” Since then the sales have increased by 700%.

There is no room to stand still in today’s rapidly shifting, unpredictable technology and consumer landscape. Focusing on experiences, personalization, and smart data are tools that can help all companies keep on dancing even as the music changes.

References:

https://www.forbes.com/sites/danielnewman/2015/11/24/what-is-the-experience-economy-should-your-business-care/#42aecdf01d0c

https://www.localist.com/blog/experience-economy/

by

Santanu Mitra

PGDM Core 2018-20

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