The economy started with commodities. People would barter over fresh food at the market. Entrepreneurs saw opportunities for selling goods and started businesses. fresh market produce became processed food It wasn’t long before companies realized that we wanted ease and speed.
The first pizza delivery happened in 1889 near Naples in Italy. This began when people all over the world started looking for ways to get commodities more conveniently.
Things have moved on since the 19th century. An example of this would be the recent increase in demand for food delivery services. Companies like Deliveroo, Uber Eats, and JustEat have based their entire business model around the fact that people want food delivered to them, providing a digital solution that makes these services even more accessible. And that’s when it happened.
Everyone needs commodities. But not everyone was prepared to wait for them. Since businesses have been around for over 100 years, they have had time to evolve and learn how to provide customers with quick and easy access to commodities. The consumerism culture is nearing its end.
People didn’t just want things anymore. They were spending more money on services than they were on physical goods. The current economic value is based on staged experiences, which are different from the traditional values. In order for brands to compete, they needed to begin providing their customers with a more memorable experience.
People started to prefer having experiences over owning things. It was born of our anxiety and uncertainty The experience economy became popular because people were anxious and uncertain, not because they wanted excitement. We longed for more time, more memories, and an easier life. The experience economy derived from The American Dream.
What is the Experience Economy?
Society started with an Agrarian economy. We harvested, mined, and traded raw materials. The economy has been driven by the supply and demand of commodities for thousands of years. The Industrial Revolution changed the way we used commodities. We began to use them to manufacture goods that we were willing to pay more for.
Soon after, the Service economy took off.
To better grasp the concept, let us examine the evolution of pizza. We started out buying things like flour and tomatoes (commodities), then progressed to buying things like oven-ready pizza dough and canned tomato sauce (goods), and finally started just calling a local restaurant to get a pizza delivered to our doorstep (services). Each time, we were willing to pay more.
Pine and Gilmore coined the term “Experience Economy” in their 1998 article. They noticed the new trend early on, before it became the driving force behind all our decisions. The authors argue that experiences are the fourth economic offering, after physical goods, services, and ideas. They note that experiences are increasingly desired by consumers, and that businesses are responding by explicitly designing and promoting them.
They were not wrong.
We are more willing to travel to Naples today to taste the authentic stonebaked pizza Napoletana in a rustic local pizza place than ever before. More importantly, we are willing to pay for it.
While other economic offerings may be external to our existence, experiences are personal by nature. These only exist in an individual’s mind and affect him or her physically, emotionally, intellectually, or spiritually. Experiences are unique by default and can be priceless to many of us.
Why the Shift in Consumer Behavior?
Indeed, why the sudden obsession with experiences?
Why the need for a deeper connection?
What changed?
1. Economic Hardship of the Millennial Generation
The phrase “experience economy” has become increasingly popular in recent years to describe our current moment in history, in large part due to the fact that Millennials have become such a dominant force in the marketplace. Research has shown that Millennials are more likely to spend money on experiences than previous generations, which is helping to drive the trend.
One reason this behavior has changed is because of a combination of stagnant wages, the 2008 crash, and the increasing cost of education. Millennials are the first generation in modern history to have a lower standard of living than their parents. As a result of these advancements, new trends have emerged, such as the sharing economy, the rent-not-buy approach, and the popularity of the minimalist lifestyle.
In the past, people could assess the quality of their lives based on the possessions they had (e.g. a house or a car). The way millennials have coped with the economic situation is by judging the quality of their lives based on the quality of experiences.
2. Social Media and FOMO
It’s popular to think that the growing trend of people using social media on the go is linked to the rise of the Experience Economy. Social media culture makes it possible for us to share how great our lives are with anyone and everyone. Some people think that this trend encourages people to spend more money to keep up with others.
Eventbrite found that 70% of millennials have FOMO, which is anxiety often caused by social media. This drives them to want more experiences.
3. Time Poverty, Peak Stuff and Attention Economy
Investigate the origins of the Experience economy, you will probably find ideas about time poverty, peak stuff, and attention economy. Although there is no scientific evidence to support these concepts, they are still a large part of the “hunger for experience” debates.
The premise of time poverty is that people in modern societies have very little time. Therefore they care more about how they spend it. An article in the Financial Review has noted the rise of experience-driven business models due to time poverty in Japan affecting the leisure industry.
An IKEA executive speculated in 2016 that the change in spending habits could be due to the Western world finally reaching its “peak stuff” moment. The claim that people are spending more on services and experiences than goods drew the attention of major publications such as The Independent, The Times, and The Guardian. These publications noted the shift in spending habits and its consequences for the world economy.
An argument for attention is that individuals are competing for attention. In 1971, a valued economist and psychologist Herbert A. 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.” In other words, too much information leads to people not being able to focus on any of it, which is why it’s important to be selective about what information you take in. With so much information available, it is difficult to pay attention to all of it. Therefore, it is necessary to be efficient in choosing which sources of information to pay attention to.
The premise is simple. If someone’s attention is wasted on negative or unremarkable experiences, it is unforgivable.