The growth of ‘The experience economy’ reflects people’s increasing desire to ‘experience’ rather than ‘consume’; to ‘do’ rather than to ‘have’. It is about generating memorable events that are personal and unique and have an important emotional impact. The experience economy is especially evident in the travel and tourism sector, where “Travelers today are increasingly drawn to travel as a form of self-actualization and personal transformation and growth. They want more than a simple visit to a new destination or days spent relaxing on a beach. Instead, the travel they are seeking is an experience of the world that goes deep – one that changes them in ways they may not even be aware of.”^[1]

There are several possible explanations for the growth of the experience economy. Some see it as a reaction to the increasingly digital nature of our lives – in a world where we are always connected and spend so much time interacting in cyberspace, the marginal value of the physical world increases. We may no longer need to go to a physical shop, office, or restaurant but we choose to do so because of the value of experiencing social interactions and different environments. In the same way, we seek out more in-person experiences and greater cultural participation, rather than simply the acquisition of more ‘stuff’.^[2]

Others understand the experience economy trend as a natural progression in attitudes to consumption for the growing middle classes who may have reached ‘peak stuff’. As wealth increases, there comes a point where material status symbols become less attractive compared to services and experiences that can lead to ‘self-actualization’ by helping people achieve their aspirations.^[3] Some people even speak of a ‘transformation economy’ emerging, where experiences are no longer about enjoyment, but about personal transformation. Increasingly, these experiences are facilitated by new technologies (e.g. 4D cinema, virtual reality), especially since the COVID-19 pandemic.

Yet another perspective is that the experience economy is, in part, a reaction to increasing societal concern about sustainability and ‘Environmental degradation’ (see ‘Sustainable production’). People looking to consume less are driving the growth of the sharing economy, and the rise of rent and subscription models for things (from furniture to cars and even clothes) and services (from transport to accommodation).^[4] These models allow consumers to experience/use products without owning them, and to enjoy more interactive services usually linked to an idea of greater authenticity and responsibility.

Overall, what this means is an important shift in economic value-generation, from products to services, and an imperative for producers/retailers to rethink how they provide customer experiences and create a service culture. This includes using new technologies (albeit with the caveat that technological developments must support the provision of personalized service and people’s desire for emotion and intimacy, not replace them).

Sustainable production

Consumers are becoming more environmentally aware and more empowered. Studies show that around 65% of consumers are willing to pay more for products/services that are environmentally friendly and socially responsible, and they also increasingly expect companies to pay attention to the environment and be transparent about their behaviours.^[5] This sentiment is especially strong amongst the younger generations and is predicted to grow.

At the same time, governments are putting pressure on industry through environmental regulations, as they reflect the growing environmental concerns of their electorates and put in place policies to help them achieve their commitments to the UN Sustainable Development Goals (SDGs).

As a result, ‘going green’ has become an important business strategy and increasingly, companies are redesigning their business models to be more environmentally friendly and sustainable. This includes adopting life cycle models such as cradle-to-cradle (circular economy), sharing economy or peer-to-peer economic models (see ‘New business models’), reducing emissions and creating shorter supply chains.^[3,6] And it is not just about reputation and marketing – companies also adopt sustainable business models to foster innovation, improve operational efficiency, and lower costs.

While this trend of increasing demand for eco-friendly and sustainable products has been evident (and growing) for many years now, a more recent countertrend of climate scepticism and fatigue/jadedness with environmentalism is now becoming evident. Older generations, in particular, do not trust what scientists say on environmental issues (53% of 60–74-year-olds compared to 39% of 16–24-year-olds). Climate-denying attitudes appear linked to the rise of populism in many societies.^[6]

Customized products

Personalization of the customer experience has been a growing trend for some years now. One clear example of this is in the digital world, where, for example, services offered by Google, Facebook, YouTube, Apple, etc. curate searches, news feeds, products, advertisements and more based on a user’s personal history of searches, purchases, and online interactions.^[7] Digital platforms and the increased connectivity of customers also offer customization of physical goods – through digital platforms, customers have products and services available at their fingertips and the digital medium allows them to specify instantly and conveniently what they want, providing feedback to companies on what to produce.

Technological advances in ‘Additive manufacturing’ (3D printing), machine learning and the ‘Internet of Things’ (IoT) will likely accelerate this trend, reducing the cost to businesses of customizing their products and services. This affects business models (most companies already view customization as a strategic priority and may move away from mass manufacturing models)^[8] and could also affect global value chains (which need to become shorter and more flexible, leading to changes in the nature of goods being shipped and the move of production closer to markets).^[3]

While some industry surveys show that demand for customization and personalization is high, for example, 67% of respondents in a survey run by Adobe said customized content was important and 42% said unpersonalized content annoys them^[5], there are also significant concerns about ‘Data privacy’ and security (commercial use of personal data). The respondents had other concerns, notably an individual lack of agency (people feeling their experiences are determined for them without their knowledge) and the creation of group and individual ‘echo chambers’, i.e. recommendation systems only showing people content that confirms their existing beliefs/preferences, possibly leading to increasingly radicalized content, spreading of misinformation, and conspiracy theories.^[8] The continued trajectory of this trend will depend partly on the ability of companies to maintain consumer agency and trust.

References

1. Skift trends report. The rise of transformative travel (Skift, 2018)
2. Digital megatrends. A perspective on the coming decade of digital disruption (Commonwealth Scientific and Industrial Research Organisation, 2019)
3. Future outlook. 100 Global trends for 2050 (UAE Ministry of Cabinet Affairs and the Future, 2017)
4. Future possibilities report 2020 (UAE Government, 2020)
5. Beyond the noise. The megatrends of tomorrow's world (Deloitte, 2017)
6. Global trends 2020. Understanding complexity (Ipsos, 2020)
7. Global connectivity outlook to 2030 (World Bank, 2019)
8. Technology vision 2020. We, the post-digital people (Accenture, 2020)