The Macroeconomic Drivers for CX Adoption: Ignore It At Your Peril!

There’s a macroeconomic shift that’s been emerging for quite some time, and it can no longer be ignored. The customer experience has evolved to become a monetized element of the economy. Companies are now focusing on their progression into human centered design offerings, where leaders are achieving a premium based on the experience associated with the consumption of their goods or services. Disney is a classic case that we all know and love. The Disney approach is to sell an enchanting memory, not a ticket to a day at the theme park. Apple doesn’t just sell you a computer or a phone, but an entire networked experience of productivity and personal choice. 

What I find so compelling about this economic offering is that many companies currently putting this strategy to use are literally beating the economy. Why is this? The answer is simple. They are leveraging the latent macroeconomic forces of the experience economy.

What is the experience economy?

We now understand that experiences create value and are therefore something that we should manage in order to extract and optimize that value (Pine & Gilmore, 2008). We see that in this experience economy, companies are able to construct events or series of touchpoints that in turn become the lasting and memorable “experience”.

This strategy seems to defy the simple laws of supply and demand, even in a struggling economy. How does Tesla demand outstrip supply over five years? How did Chipotle beat the market from 2010 through 2015 with a tenfold increase in value in a time when most fast-food restaurants were struggling? These experience oriented strategies challenge traditional theories of brand recognition and features based marketing. What this means is that people are choosing experience over price/feature comparisons and experience over brand.

There’s been a significant economic shift happening similar to the movement from agrarian to industrial economies. This new shift has elevated the process of economic value creation from process efficiency and scale, to human centered design, an approach which delivers greater personal or functional utility.

Economists have typically lumped experiences in with services, but experiences are a distinct economic offering, as different from services as services are from goods. Today we can identify and describe this fourth economic offering because consumers unquestionably desire experiences, and more and more businesses are responding by explicitly designing and promoting them. As services, like goods before them, increasingly become commoditized—think of long-distance telephone services sold solely on price—experiences have emerged as the next step in what we call the progression of economic value. (See the exhibit “The Progression of Economic Value.”) From now on, leading-edge companies—whether they sell to consumers or businesses—will find that the next competitive battleground lies in staging experiences.

A Couple of Persuasive Examples

Take Airbnb for instance. The average cost of booking a night with Airbnb is about $80/night, and you never really know what you’re going to get. The clientele ranges from tourists, to business travelers and professionals who could easily book at a nearby hotel or motel at a comparable price and not have to worry about it. If you’re worried about price, why wouldn’t you just go to a Travelodge? Instead, it’s not about the brand or the price, but looking for that unique experience. I myself have recently had an ‘epiphany’ of sorts. When looking for a simple 2-night stay in Charlottetown, P.E.I., we came across the opportunity to stay on a docked yacht all to ourselves. This kind of opportune experience just didn’t exist before, and now it’s a centerpiece of our vacation plans.

Another case worth considering is the Denver breakfast chain Snooze AM Eatery. Snooze provides a specific example which shows us what is happening at the macroeconomic level with respect to experience over traditional economic values. Everyone knows their local breakfast spots. You order some eggs and sausage, and we all know where to get the same meal for the best price. Snooze has reinvented breakfast to show consumers that it can be a memorable (and valuable) experience, the AM Eatery. They have injected enjoyment and satisfaction into a time slot that was reserved for cheap and predictable eggs and pancakes. They offer a variety of uniquely designed classics like the Eggs Benny. Then there’s the drink menu that ranges from the carrot smoothie for the health-conscious buyer, to the bacon infused Bloody Mary for the one looking for that Sunday morning cure! The remarkable part is that Snooze is not a one hit wonder, but a continuously growing machine that has expanded to 24 locations across 4 states since 2006.

Click here to read more compelling cases for CX adoption.

The New Economic Order provides an insightful model to understand the macro economic forces at play.

There’s a particular group of people that’s driving this experience economy. It’s naïve to say that experience is the primary motivator of every consumer. Norton and Honeywill coined the phrase New Economic Order (NEOs) which describes a new era of consumers that are not acting in the “Traditional” consumer model. NEOs treat the commodities of life as mandatory and focus their real spending and investing on what is known as elective consumption. For example, they’re spending less on traditional products and spending more on offerings that evoke emotional experiences. NEOs spend more money, more often than anyone else and make up 93% of the “Big Spender” categories. (Norton & Honeywill, 2012). NEOs will discover and define the value on their own terms and become much more loyal customers when that value is delivered with integrity.

There’s a particular group of people that’s driving this experience economy. It’s naïve to say that experience is the primary motivator of every consumer. Norton and Honeywill coined the phrase New Economic Order (NEOs) which describes a new era of consumers that are not acting in the “Traditional” consumer model. NEOs treat the commodities of life as mandatory and focus their real spending and investing on what is known as elective consumption. For example, they’re spending less on traditional products and spending more on offerings that evoke emotional experiences. NEOs spend more money, more often than anyone else and make up 93% of the “Big Spender” categories. (Norton & Honeywill, 2012). NEOs will discover and define the value on their own terms and become much more loyal customers when that value is delivered with integrity.

What is the engine of this economic shift?

This “NEO” group, and any other segmentation that considers the experience economy behaviors, is more prevalent in younger generations and will continue to become a larger share of the economy. NEOs comprise roughly 20% of the population but their peers the Evolving NEOs make up another 25% of the current population. The traditional consumer makes decisions based on price/feature comparisons, status brands and inertia which are classic advertising themes of traditional companies. As the macroeconomic implications of the experience economy become more evident, companies will be adjusting and offering new services, from subscription services on your phone to extreme experience based vacations.

Now more than ever we see a greater focus on customer experience. What this means is that every business is going to have to improve the staging of their experiences, or simply accept the slow decline of their customers. Traditional competitive differentiators of price, brand, and distribution remain as elements of the business model, but the competitive differentiation is becoming defined by superior experience, shared values, and customer impact.

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