Digital Consumer Engagement and the Economics of ExperiencePosted: February 22, 2017
Exploring the Experience Economy and New Ways of Enterprising
Photo: Laflor/ DATA/ i_collage/ Pu/ Shoots
The concept of “free as a business model” has existed since the advent of commerce. It has long been understood, from the times of age-old merchants who pioneered world exploration, to the more recent years which have been largely dominated by modern day business and social entrepreneurs. Whether we consider the actions of luggage carriers who used to offer ship boarding assistance free of charge to passengers, or we observe the free content provisions made by today’s digital influencers; it is apparent that experience economics exist on several levels of human activity, particularly that which takes place online.
It becomes even clearer to see that we, by nature, instinctively appreciate the need to create experiences for the enjoyment of others in order to indirectly strengthen our bottom lines. What is not so apparent is our fundamental understanding that the experience economy is not an idea or area of study to be simply ignored as intellectual innuendo because it does in fact form the core basis on which the idea that existence is by definition a service function of life can be asserted.
In society today, value exchange takes place in layers and via multiple channels. For example, artists are able to invite audiences into their world, engage with them from the comforts of their creative spaces, and share intimate insights about their lives through the use of text, imagery, video, or audio, at the right time and on the relevant platforms. Academics and other professionals do the same by sharing ideas and using similar methods of delivery.
Much of this activity is done with no direct intent to charge the experiencer, but instead to initially provide value. From YouTube videos, audio podcasts, webinars, journals, blogs, games, to other social media content forms, this fluidity of touchpoints is common in today’s open business models and technology has attributed much to their emergence and proliferation. You don’t need to be an “ideation expert” to understand the creative process behind generating business models then streamlining by implementing only the best. Many business persons already make use of similar principles of design in their strategic approaches to decision making. The only thing missing is the full appreciation of network science in helping us to connect the dots.
Conventional wisdom regarding experience economy activities doesn’t necessarily take into account or explore the possibilities of delivery and not only the service of delivery, but the actual information sharing which then becomes the springboard for the income generating activities.
You have to give something away in order to make something back. Kartik Hosanagar, a professor at the Wharton School of the University of Pennsylvania described it best when he wrote that “The demand you get at a price of zero is many times higher than the demand you get at a very low price.” I subscribe to that notion and believe that creating demand through experiences allows you to capitalise at the higher tiers of the customer engagement and buyer journeys.
What is required is a proper understanding of which points in the value chain we can capitalise on during our value sharing activities.
According to Pine & Gilmore, two pioneers who are experts in study of the experience economy, “an experience occurs when a company intentionally uses services as the stage, and goods as props, to engage individual customers in a way that creates a memorable event.” They also make reference to what they call “The Progression of Economic Value”, a theory meant to show the differentiation between production, manufacturing, service delivery, and experience provision. My assertion however, is that we don’t always have to view the experience as a transaction which only takes place immediately prior, during, or after the moment of experience.
The experience creates a strong and lasting impression yes, but the actual transaction can takes place long after the fact, as in the case where people make a purchase as a memento of an experience. We have to remember that it is mostly in internet based experiences, largely accessible to the digitally enabled, that the underpinnings of today’s customer engagement with a view to ultimately encourage those customers to buy are to be found. In most instances, the sale is not directly perceived by the experiencer as attributable to their engagement with a particular activity which offers that experience.
Take a YouTube channel for example, the revenues generated can be as a result of audience engagement with content irrespective of any direct cost to either the creator or the audience, but through third party ads which may be viewed intermittently during the course of core content consumption. Content compensation schemes in the form of enabling or referral fees are agreed on directly between the platform owners or site hosts such as Google and the advertisers, but then also with content producers through frameworks such as the YouTube Partner Program.
If we are to be frank, most of us would admit to our fancies having been tickled occasionally by the stimulating utterances of “make money online” evangelists. The opportunities presented by the digital era and the internet platforms which allow us to interact with others are immense. What is required is a proper understanding of which points in the value chain we can capitalise on during our value sharing activities. We used to group offerings into just two distinct groups of simply goods or services, but now experiences – whatever their forms, ought to be considered a category all on their own.
The important thing is to remember that for a business or individual to succeed, the products or services have to be transformed into value perceived experiences. To achieve this, it’s crucial to recognise the need to invest largely in content creation which is in essence, the expression of experience. It is true for the artist as it is for the expert that to monetise activity in today’s world, one may need to give up or exchange the rights of access to their ideas, creative processes, or technologies in return for support; which ultimately creates opportunities for pecuniary compensation through “productisation”. The experiences created have to give enjoyment, knowledge or other value forms to sustain interest, which can then be driven towards the point of transaction at an appropriate time.
The same holds true for the corporation. That is why you see more and more strategic manoeuvres being made by companies such as Renault which recently acquired an ‘Uber-model’ on-demand transportation startup called Karhoo whose service is built around an experience and is aimed at catering to the emerging consumer trend of people that are more concerned about experiences than they are about protracted ownership.
Originally published under the title “What It Takes To Be A Successful Business On Digital Platforms” in The Huffington Post 21/02/17