online-business-in-experience-economy

In the 90s, when clouds were nothing more than condensed water in the sky and “What’s up” only had one correct spelling, B. J. Pine II and J. H. Gilmore shared their theory about the rise of the experience economy trend in the Harvard Business Review.

Two decades later, we find ourselves in the reality of their calculated predictions. The experience seized being some amorphous construct and acquired a form and shape of a real offering equal to any good, service or commodity.

Yet, many online businesses lag behind answering consumer thirst for experience.

Why?

The reasons are usually one of the two:

  1. They fail to see how the experience economy concept translates into the digital world.
  2. Their attempt for creating better digital experience fell into a bottomless trap of novelty technologies.

If one of these sounds familiar, stick around to learn about the workings and implications of the experience economy trend and how they reshaped the challenges of online business.

What is Experience Economy?

Society started off with an Agrarian economy. We harvested, mined and traded raw materials. Our economy was driven by supply and demand for these commodities for millennia. That is until the Industrial Revolution came along and we used those commodities to manufacture goods for which we were willing to pay more.

Soon after, the Service economy took off.

To understand the process, let’s look at this evolution of pizza. We went from buying raw ingredients such as flour and tomatoes (commodities) to buying oven-ready pizza dough and canned tomato sauce (goods), to picking up the phone and calling a local restaurant to deliver a freshly baked pizza to our doorstep (services). Each time, we were willing to pay more.

The term “Experience Economy” was coined in the aforementioned article by Pine and Gilmore published in 1998. They caught the emerging trend long before it came to define our every choice. They argued that “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… [… ] experiences have emerged as the next step in what we call the progression of economic value.”

They were not wrong.

Today, more than ever before, we are willing to travel to Naples to taste the authentic stonebaked pizza Napoletana in a rustic local pizza place. More importantly, we are willing to pay for it.

While the other economic offerings (commodities, goods, and services) are external to our existence, experiences are, by nature, personal. They can only exist in the mind of an individual affecting him or her on a physical, emotional, intellectual or spiritual level. Experiences are by default unique and to many of us, simply priceless.

Why the Shift in Consumer Behavior?

Indeed, why the sudden obsession with experiences?

Why the need for deeper connection?

What changed?

1. Economic Hardship of the Millennial Generation

It’s impossible to talk about the experience economy without making Millennials (people born between 1980 and 2000) part of the conversation. Studies confirm that Millennials are much more likely to spend their money on experiences than the previous generations, hence fueling the whole trend.

One of the popular and valid explanations for this behavioral shift is the combination of stagnant wages, the 2008 crash and skyrocketing prices of education and realities. In fact, Millenials are the first generation in modern history to end up poorer than their parents. These developments gave way to trends such as sharing economy, rent-not-buy approach and popularity of minimalist lifestyle.

Previous generations could judge the quality of their life based on the things they own (house, car, etc). Millennials adapted to the economic predicament judging the quality of their lives by quality of experiences.

2. Social Media and FOMO

Another popular theory behind the rise of the Experience Economy seems to be closely correlated with on-the-go social media becoming part of the mainstream culture. Social media culture includes the possibility to inform anyone and everyone just how great our lives are. Many people believe that it is precisely this phenomenon that perpetuates experience economy trend as it forces us to compare and keep up.

A recent study by Eventbrite found that, on average, 7 out of 10 millennials experience the fear of missing out (FOMO) – identified by the Oxford dictionary as anxiety often fueled by social media – which drives their appetite for experiences.

3. Time Poverty, Peak Stuff and Attention Economy

Digging deeper into the roots of the Experience economy, you are likely to come across notions of time poverty, peak stuff, and attention economy. While these concepts are not backed by studies, they form a significant part of the “hunger for experience” debates.

The time poverty premise suggests that people in modern societies suffer from a severe lack of time, therefore they care more about how they spend it. For instance, an article in the Financial Review points attention towards the effect of time poverty in Japan on the leisure industry and the subsequent rise of experience-driven business models.

On the other hand, in 2016, IKEA executive, Steve Howard, speculated that the change in spending habits can be due to the Western world finally reaching its “peak stuff” moment. This claim drew the attention of major publications such as The Independent, The Times and The Guardian towards the shift in spending habits from goods to services and experiences and its consequences for the world economy.

Last but not least, there is a war for attention argument. In 1971, a valued economist and psychologist Herbert A. Simon wrote:

“What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention and a need to allocate that attention efficiently among the overabundance of information sources that might consume it.”

The premise is simple. If attention is one of our most precious resources, wasting someone’s attention on negative or unremarkable experiences becomes unforgivable.

Why Should You Care?

Yes, the vast majority of articles and studies regarding the experience economy trend talk about and examine the more straightforward offline examples.

However, that doesn’t mean the digital world is unaffected.

To the contrary!

Whether you sell goods or services, the fact that you can’t enchant your prospects face to face makes the customer experience matter all the more.

In the experience economy, the quality of your product doesn’t guarantee success. The web is riddled with businesses that sell the same products and services and compete for the attention of the same target audience. Many of them disappear before anyone notices they existed.

How can you stand out?

Decision making is no longer confined to the price factor. Being the cheapest doesn’t have the impact it once used to have. Plus the array of choices enabled by digital delivery gives consumers a great deal of power to switch brands with incredible ease.

The question is:

➡️ Why should anyone pay attention to you? ⬅️

 

The harsh reality is that consumers demand goods, answers, services – immediately, if possible. Plus, they want the experience and personal connection to sweeten the deal.

In this context, “experiences” are a composition of multiple touchpoints, exposures, and interactions that a consumer has with a company/brand and its product/service as well as employees, and market messages distributed across multiple channels over the entire duration of the relationship. According to Jenny Sussin, vice president at Gartner, “A superior CX (customer experience) is one of the few remaining means of sustainable competitive differentiation.”

The silver lining?

A compelling experience with a lasting impression sparks emotional affinity and equity for the brand. It has the power to dictate future buying behaviors and, more importantly, inspire customer loyalty. If customers feel emotionally connected, they are less likely to listen to your competitors. And vice versa, if your competitors neglect customer experience, it makes it so much easier to steal away their customers regardless of your prices.

customer-willing-to-pay-for-better-experience

Source: Capgemini Digital Transformation Institute analysis

According to Scot Henney (SAP SE’s global vice president of sales and general business) in the IBM Think 2019 interview, 80% of customers have changed brands because of poor CX.

What are the practical implications?

Whether your business centers around selling shoes, subscription for online photo editing tool or lead generating services, it is necessary to start treating customer experience as an intrinsic part of that product. What happens and how it happens before and after the purchase is as important as the product or service being purchased.

This is not a simple question of B2C or B2B. This is a question of overall value regardless of your business model.

All in all, the competitive position of any business depends on its capacity to generate impressive experiences through innovative channels and formats.

Where to Begin?

In a hyper-competitive CX driven economy with digitally empowered, time-starved consumers at its center, you need to, before anything else, make a fundamental choice about your customer experience strategy.

Is your goal to save or seize customer attention? In other words, do you want to save customers’ time with a frictionless process or provide them with a unique/personalized/entertaining experience that is worthy of the time it’s taking to complete?

The answer to this question can vary from stage to stage but the challenge is always the same.

Failing to do either is wasting attention. That is a crime Experience Economy is not ready to forgive and thus, presents online retailers and business owners with the biggest challenge the era of experiences has conjured up.

New Technologies: Opportunities or Traps?

The pressing need for superior experiences and ever-more innovative formats of communication have many companies chasing after the latest technologies. Frankly, the world of online business and digital marketing doesn’t need the “impending menace” of the Experience economy to revolve around the latest trends, it’s always been so. Still, it adds to the pressure and puts innovative digital experience transformation on the top of the priority list

Nobody wants to be left behind.

Hence, deciding which type of experiences to develop is often subject to industry hype. It gets many companies thinking that technologies like gesture, or voice-based interactions and AI are the FUTURE and worthy investments. The issue is… when exactly the FUTURE actually comes around to be useful?

Yes, the hype around these technologies can be very well founded but only years or decades later. Though, most of the time, it’s not worthy or applicable now.

The 2019 CX Industry Report by Usertesting pointed out the staggering difference between what the companies identified as the most influential trends and what they actually focused on that year.

technology-trends

While virtual/augmented reality, AI and voice interaction won the CX importance contest in the future category, in reality, “down-to-earth” CX improvements such as smartphones, accessibility and design thinking were actually considered more important in the present.

Why?

The “down-to-earth” improvements can affect and improve CX now.

Hence, what the businesses and consumers find exciting about the future is often markedly different from they need in the present. While people can’t wait to discuss complex issues with AI assistants the likes of those in the movie HER, the reality is the AI chatbot interactions often end in malfunction, frustration or even outright AI scandals and remain largely inaccessible to the vast majority of businesses.

What is the right thing to do, then?

Customers are the Top Trend to Watch

The 2019 CX Industry Report points our attention to the customer.

Both B2B and B2C consumers are exposed to better, more personalized and frictionless experiences. Each new memorable experience sets the bar a bit higher. Hence, to stay relevant today and in the coming future, businesses must keep their eyes peeled on their customers’ ever-fluctuating needs and optimize the CX strategy accordingly.

Regardless of market research studies, you should focus on what matters to your clients. What are they really after?

So, if customer feedback is not part of your product and experience development process, incorporate it now. It will allow you to keep your feet on the ground as you get bombarded by newer trends as well as make informed decisions about what to build or what tools to use and when.

On the other hand, ignoring customer experience preferences is like inviting your competitors to feast on your target audience.

As Scot Henney said in the IBM Think 2019 interview: “Feedback is now golden.”

Not All Feedbacks Are Equal

The importance of collecting customer feedback brings us to the challenge of asking the right questions.

According to a study conducted by Capgemini found that 75% of companies believe they put customers at the center of their strategy. However, only 30% of consumers seem to agree. Breaking it down geographically, the discrepancy is the highest in the US and the UK.

customer-centricity-perception-graphImpressive 81% of companies in the UK and the US believe themselves to be customer-centric. However, just 40% of consumers agree that is the case. Furthermore, only 26% and 31% of consumers, in the UK and the US respectively, believe that businesses listen and understand their needs.

Many companies do ask for customer feedback but ask questions that don’t let customers address the real issues or make the feedback process frustrating so customers don’t bother to participate.

Capgemini claims that for digital businesses to succeed in the experience economy, they need to redefine the ways they try to understand their customers and employees. They call for changing the language from “personas” to “people” and forming deeper relationships and trust.

Customers’ high expectations demand brands and companies to anticipate their individual needs and just respond but respond immediately.

But how?

How can entrepreneurs and small/medium businesses with limited budgets and limited access to personalized tech solutions deal with individual experiences, feelings and issues, immediately?

Conversational Interface: Experience Economy’s Secret Weapon?

Innovation is not exclusive to innovative technologies.

It’s easy to forget that when sci-fi-like digital solutions are popping up like mushrooms after rain.

However, sometimes complex problems are best answered by simple solutions.

In this case, the answer to the complex question of Experience Economy the answer is Conversational Interfaces.

The hype with AI chatbots had one thing right, interactive experiences engage and convert. Consumers crave and enjoy the interaction. They appreciate personalization. They love the idea of choice.

As Michael Voegele (CIO of Adidas) said, “To change people’s lives, we believe you need to create direct relationships with consumers. You should not put out one-directional messages. It should be a bidirectional joined conversation.”

Where AI failed to answer to the needs and expectations of consumers today, conversational interfaces came to the rescue.

A conversational user interface is an interface built around chatbot-driven conversation. But, instead of relying on the whims of AI, conversational UI works on the simple “choose your own adventure” premise. Giving users the power to make their own choices and determine the outcome of their interaction.

It attacks the CX issue on several different levels:

1. Saving/Catching Attention

Before, we talked about the urgency of ensuring that your customer experience strategy clearly aims to either save or catch consumer attention. The consequences of wasting someone’s limited resources of attention are unforgivable these days.

Conversational interfaces are capable of attacking this issue on both fronts. You can use them to both

  • Save visitor attention by letting the chatbot deliver the answers and content the user is searching for instead of having to browse through endless pages of your site’s content.
  • Engage visitors in an entertaining game-like experience providing them with an unusual immersive way to obtain information, subscribe to a newsletter, receive help or make a purchase.

2. Digital Humanization

Better experience calls for a more human experience.

Websites and software are intended for humans and so must be their design. The best UX designers always keep analyzing human behavior and thinking patterns in mind.

Human mind is, first of all, emotional. Reason always runs a few seconds behind.

As Aaron Walter wrote in his book ‘Designing for Emotion’ defines emotion as a universal human language. Hence, users are inclined towards digital experiences that make them feel like there is a person on the other end. He also points out that emotional appeal is key to any successful interface as there is an incredibly strong link between emotions and recall.

Conversational UI enables you to keep things focused (on the conversation) and connect with users emotionally through a chatbot persona with human attributes that uses culture-references and language intrinsic to your target audience.

 

In fact, designing a natural conversation with “human” perks can significantly increase your engagement/conversion rate.

3. Protecting from Overwhelming Pressure of Choice

It’s not a secret that too much of a cognitive load drains our energy. The brain makes up only about 6% of the human body but burns about 25% of its energy. These days most of human activity is mental rather than physical, so keeping things simple has never been more crucial.

The smaller the mental load you dump on the consumer, the better it is for your conversion.

According to a recent study by ResearchScape, 54% of consumers stopped purchasing a product from an online retailer or brand because they made choosing the right product too difficult. 42% of shoppers admitted abandoning their purchase intent because the choice was too overwhelming. And, last but not least, a staggering 71% made a switch to a competitor brand because it made discovering and choosing the right product easier.

One of the most effective applications of conversational UI is using it as a shopping assistant. You have a chance to ease the trouble of making a choice. Even better, you can do so in an interactive and fun way. A virtual assistant can make tasks such as obtaining a quote, checking and comparing features or filtering products helpful as well as entertaining.

For instance, research shows that 64% of shoppers consider virtual experience much better as opposed to using traditional filters.

conversational-interface-CX-rating

4. Omnipresent Customer Service Experience that doesn’t suck

One of the common challenges faced by online stores and business trapped in the thriving Experience Economy is the inability to provide 24/7 friendly customer service that offers a frictionless experience that (as the title of this section suggests) doesn’t suck. This has a lot to do with the culture of immediacy and instant gratification. Consumers feel that an immediate response is a fundamental right rather than a luxurious add-on.

The reality is, however, there are few businesses who can afford big support teams or cater to users in all time zones. It’s not uncommon for companies to resort to the FAQ, email support or phone support (during working hours).

According to the aforementioned ResearchScape study, although FAQs and product filters are the most commonly used support options (43% and 40% respectively), FAQs actually ranked the lowest in terms of helpfulness. On the contrary, services driven by interactive elements such as Digital Assistants and live chat ranked as very or completely helpful by a majority of shoppers.

interactive-CX

Conversational UI enables you to provide your site visitors with a 24/7 support with an interactive element that creates a journey of choice instead of blind search. Also, it deals with the issue of millennials stirring away from using phone calls to get information.

Naturally, a conversational chatbot cannot fully substitute a human. However, a dialogue interface can help you identify and sort customer queries. By creating variable conditions you can initiate human takeover for the most urgent or complex queries.

5. Connection Through Participation

It was about a decade ago when video games started to outperform Hollywood blockbusters. Did you know that a popular open-world game Grand Theft Auto V grossed more than double the highest-grossing films in history? Yes, it’s that serious.

At some point watching your heroes on the big screen became secondary to becoming your heroes and experiencing their struggles and triumphs.

What does that have to do with business, you ask? Well, everything. People’s choices in entertainment reveal the shift from passive to active participation culture. Consumers want to have control and impact on their own customer journey.

Conversational interfaces allow you to create a dialogue and let customers choose what information they receive and in what order. Unlike with AI interfaces, CUI gives consumers the freedom of choice while keeping you in control as the conversation threads (no matter how complex and diverse) are carefully pre-defined.

conversational-interface

Engagement with a compelling human persona that immerses visitors in an interactive conversation creates a memorable experience. Better yet, it builds connection through positive emotions.

Wouldn’t you feel entertained and intrigued by a conversational shopping cart?

6. Personalization

This comes without saying that once consumers have the opportunity to take an active part in their own customer journey, personalization comes into effect.

conversational-user-interface-personalization

In this sense, interactive dialogue interfaces make for the ultimate, personalized encounter. As the conversation advances the chatbot can actively react to customer choices and hence provide him or her with tailored answers. By default, or the irrelevant informational clatter of a passive website is eliminated.

The important thing, however, is to design your interface to allow personalization that goes beyond asking for and using the visitor’s name. The trick is using multiple information and creating answers that don’t look generic.

7. Making Data Collection Fun & Effective

As I mentioned before, customers are the trend to watch.

Indeed, running an online business and creating a marketing strategy without feedback is shooting in the dark.

Still, even if you have the best of intentions and run feedback surveys regularly you are likely to bump into one or both problems below:

  • You ask questions that don’t really reflect customer experience
  • Your customers don’t waste their limited time filling in surveys

Both of these issues ultimately prolong your stay in data darkness.

The first issue can be solved by focusing on obtaining experience data over operational data. Experience data focuses on identifying the decision-influencing feelings customers/employees have towards a brand/product. In other words, operational data aims to learn “what happened?” while experience data focuses on finding out “why and how did this happen?”

A conversational interface can solve the second one. They allow you to make the survey part of your brand experience instead of creating a boring form that has little to do with your brand voice. The same way you create an interactive interface for customer support or lead qualification, create your customer survey.

Give it personality, make it fun and benefit from the personalization.

Unlike when using a form, an interactive survey lets you react to customer responses immediately. Imagine a customer complains about a specific issue you are aware of. Now imagine you are able to offer him or her an apology or, even better, a discount in the middle of that survey?

It’s not a blind suggestion, conversational surveys show a significantly higher response rate.

Wouldn’t you love it?

8. Accessibility

Last, but most certainly not least, conversational user interfaces are accessible to everyone.

When it comes to conversational builders, today, there is a plethora of options to choose from. Most platforms are financially accessible and require little to none IT support. So, whether you are a marketer, HR recruiter, researcher, business owner, you can create your own chatbot with relative ease.

Hence, unlike AI or voice recognition software, conversational UI lets you answer customer needs and craving for positive experiences today, not in 5-10 years time without putting too much pressure on your budget.

So What’s Next?

The experience economy trend may seem far from your day-to-day business-running reality. However, it comes with a flotilla of practical consequences. It has a crushing power to influence customer satisfaction, brand image, sales and conversions. Hence, as such should not be underestimated.

This doesn’t mean that other online business factors such as reliable web host, good SEO or PPC campaigns are irrelevant. All those things still matter to get consumers to visit your site. The trend pushes you to give as much value to what happens when customers land on your site; before as well as after purchase.

While following tech trends is undoubtedly important, make sure you don’t fall in the trap. Don’t invest precious resources into something that can only start bringing in value years from now.

Focus on your customers.

Let them talk. Let them choose their experience.

Think conversational.

Related Post