In today’s economy, experiences and transformations are more valuable than goods and services.
Acclaimed author and management advisor B. Joseph Pine II is cofounder of Strategic Horizons LLP, a thinking studio dedicated to helping businesses conceive and design new ways of adding value to their economic offerings. In 2020 Mr. Pine and his partner James H. Gilmore re-released in hardcover “The Experience Economy: Competing for Customer Time, Attention, and Money” featuring an all-new preview to their best-selling 1999 book “The Experience Economy: Work Is Theatre & Every Business a Stage.”
Each year, our SPDR® MasterClass program draws on the expertise of forward thinkers like Mr. Pine to help advisors grow their businesses, keep pace with change, and better satisfy clients’ evolving needs.
How can advisors create maximum value for their clients? It’s a complex but important question — and a better understanding of the experience economy can help illuminate an answer.
During a recent MasterClass, B. Joseph Pine II shared his perspective on how the experience economy is shaping customer expectations, and offered three key takeaways for advisors.
In the past, our economy was driven by goods and services. Over time, though, goods and services have become commoditized. Because their features and benefits are largely the same, customers only care about three things: price, price, and price.
As goods and services become mere commodities, we’ve shifted to a new level of economic value where experiences are the predominant economic offering. Importantly, experiences are a distinct economic offering, as different from services as services are from goods. We use goods as props, and services as the stage, to engage each person in an inherently personal way, thereby creating a memory — and that is the hallmark of the experience.
Fundamentally, goods and services represent time well saved. This creates a great service, but not an experience; experiences are about time well spent. Customers commoditize goods and services to spend their hard-earned money and their harder-earned time on the experiences they value.
Coffee exemplifies the progression of economic value. Plain coffee beans are a commodity. If you grind and roast the beans and then put them on a grocery store shelf, you turn them into a good, allowing you to extract more economic value. If you then perform the service of brewing coffee for a customer, there’s even more value. And if you surround the brewing of coffee with the experiential theatre of a coffee shop, now customers will pay quite a bit more for the coffee. Think of the coffee-drinking experience at Starbucks or a landmark café in Venice — it goes far beyond getting the basic cup of coffee.
What happens when you customize the experience? When you design an experience that’s so appropriate for a particular person that it changes them in some way, then you’ve reached the final step of economic progression: transformation. Transformations use experiences as the raw material to guide people to change and help them achieve their aspirations. Transformations represent time well invested.
Since Mr. Pine and his partner originally published their work on the experience economy in the late 1990s, the business community has made a big move toward customer experience (CX). In many cases, however, CX devolves into measuring whether interactions with customers are nice, easy, and convenient. For advisors seeking to add economic value by staging truly distinctive experiences, these criteria fall short.
First, “nice” rarely rises to a level of memorability. If your clients don’t remember the interaction, then it wasn't a truly distinctive experience. Similarly, when we make things easy, we often routinize things for our team to make it easy to serve customers. This gets in the way of being personal — yet experiences are inherently personal. We must engage customers in personal ways to create valuable experiences.
Finally, convenience is the antithesis of distinctive experiences. Convenience says, "Let's spend as little time with customers as possible.” Truly distinctive experiences are memorable, personal, and valuable in terms of the time — time very well spent — with the customer.
The best way to generate demand for your offering is with an experience so engaging, customers can’t help but spend time with you, give you their attention, and buy as a result.
Think about Steinway, the maker of pricey grand pianos. If you buy a grand piano from Steinway, company representatives may ask if they can host a concert in your home for your friends and neighbors. The evening of the concert, they bring a valet parking service, offer wine and appetizers, and send a professional concert pianist to play your new piano.
People who have attended these in-home concerts say Steinway does a wonderful job and the pianists are magnificent — and, after the concert, several attendees buy pianos for their own homes. Steinway knows the experience is the marketing. Steinway motivates customers to sell their friends and neighbors through an experience, not just a simple recommendation.
The final economic offering is perhaps most important for the finance industry: transformations.
Money is a means to an end (at least for most people). If you can sell the end — the aspirations for which clients invest their money — rather than the means, you can gain much more economic value. This involves understanding clients' individual hopes, aims, and ambitions and then using offerings to take them from where they are today to what they aspire to become. Any business that helps people become healthy, wealthy, or wise is truly in the transformation business.
Lastly, advisors can consider Mr. Pine’s equation for value created: Value created = Functionality provided + Net value of time. The value you create for each individual client — which is directly correlated to the amount you can charge or earn — is equal to the core functionality you provide plus the net value of time. Net value of time is negative if you waste the customer’s time, zero if you provide time well saved, and positive if you provide time well spent or time well invested.
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