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No list of seminal business books would be complete without The Experience Economy, the 1999 bestseller in which American academics B. Joseph Pine II and James H. Gilmore argued that the selling of experiences was the fourth great stage in our consumer development after commodities, goods and services. They explained their idea with the following example: “As a vestige of the agrarian economy, mothers made birthday cakes from scratch, mixing farm commodities (flour, sugar, butter, and eggs) that together cost mere dimes. As the goods-based industrial economy advanced, moms paid a dollar or two to Betty Crocker for pre-mixed ingredients.” 

Pine and Gilmore continued, “Later, when the service economy took hold, busy parents ordered cakes from the bakery or grocery store, which, at $10 or $15, cost ten times as much as the packaged ingredients. Now, in the time-starved 1990s, parents neither make the birthday cake nor even throw the party. Instead, they spend $100 or more to ‘outsource’ the entire event to Chuck E. Cheese’s.”

In recent years, everyone from high street shops to luxury spas has sold consumers experiences – stirring our emotions for the highest price possible. But this model has been as badly hit as any sector by the pandemic. Fittingly, the Chuck E. Cheese restaurant chain is one high-profile casualty, blaming the pandemic when it  entered into Chapter 11 bankruptcy over the summer. It would be easy to think that demand for experiences will simply return next year or the year after, but Brendan Canavan, a Senior Lecturer in Marketing at the University of Huddersfield, is not convinced. Instead, something slightly different may be emerging. 

Are you experienced?

Prior to 2020, the experience economy appeared to be booming. In the U.S., sales of spectator events, amusement parks, restaurants and traveling grew much faster during the 2010s than those of goods, while the United Kingdom was similarly successful in this respect. People spent generously to make memories – witness the recent trend for attending festivals based around cult televisions shows, such as Friends. Or the success of immersive installations like the Museum of Ice Cream. Millennials seemed to particularly prioritize memorable experiences over buying things, and documenting it all via social media.

Then, of course, came COVID-19. A July report from PwC found that accommodations and food were the worst hit service sectors in the UK, followed by arts, entertainment and recreation.

Memorable experiences are about triggering sensations. People remember feeling excited by an adrenaline rush, such as riding a rollercoaster. For example, research on theme parks suggests that to be successful, they must heighten the thrill that visitors expect. Equally, experiences rely on being shared with others. Sharing an activity intensifies the experience. Those who take part in cosplay, for example, where participants put on costumes and act out character parts, enhance their hobby by swapping advice and giving mutual support. Obviously, pursuing and sharing these endeavors has been difficult under enduring pandemic-related  restrictions. This has hit the likes of tourism, brick-and-mortar retail, hospitalityeventshigher educationtheatres and concerts

COVID-19 restrictions will presumably lift at some point, but a deeper underlying challenge for the experience economy is actually not related to the pandemic – although COVID-19 may accelerate the transformation.

To briefly revisit Chuck E. Cheese, as Pine and Gilmore specifically name-check in their book, its troubles predate COVID-19. Commentators suggested that while the brand appealed to children, it was not exciting enough for parents. At the same time, the entire fast-dining sector has been struggling since 2016, when several chains such as the UK’s Ed’s Easy Diner entered administration. Physical retail has also been in long-term decline. Shopping malls and high streets are spaces for staging experiences. The best ones put on a show, bring people together, excite and entertain. Yet, people are seemingly less and less interested. Shuttered brands and empty stores are becoming increasingly commonplace.

Look at me

A more fundamental change in the economy may be underway. Instead of experiences, value for today’s consumers increasingly comes from having an audience: they like to attract attention. Canavan’s research on tourists, for instance, has found that some people go on holiday to be looked at. They will spend significant amounts of money on travel that helps them gain attention. Wearing many different – and oftentimes, over-the-top – outfits, for example, they want people to notice them. Rather than try to blend in, in search of an authentic experience, many tourists doing their best to stand out, as evidenced, at least in part, by the $868 million-plus market for single-use vacation clothing and the burgeoning resortwear category, where an uptick in sales, including full-price sales, are being driven by pressures to keep up appearances, including by way of social media-centric documentation of holidays and the wardrobes that come with them.

With this in mind, it may be time to add a new layer to Pine and Gilmore’s progression of economic development, in which value is added by facilitating performances. People are now willing to pay for goods, services and experiences that support their gaining of attention, a trend that follows two decades of reality television, social media, data analytics and micro-celebrity. Living under observation is the new normal. Becoming an online influencer is the new aspirational. Social media “likes” appear to be addictive and behavior changing.

It is, therefore, unsurprising that we will seek out things which support our online performances. Fast-growing sectors provide opportunities for consumers to enhance their appearance, whether it be facials or fitness. Meanwhile, the outlet for all of these performances – social media – is growing rapidly.

Just as commodities, goods, and services were somewhat pushed aside by the rise of experiences, experiences are now being displaced by performances. It does not mean the end of the experience economy; more a rebalancing towards supporting the performances that consumers increasingly prioritize.

Pine and Gilmore noted that the transition from selling services to selling experiences would be difficult for established companies to undertake and weather. The transition from selling experiences to supporting performances will be difficult, too, particularly thanks to COVID-19. But businesses that find a way to capitalize on this 21st-century shift are likely yo emerge more strongly than their rivals.

Brendan Canavan is a Senior Lecturer in Marketing at the University of Huddersfield. (Minor edits courtesy of TFL)