Service or Experience Economy: What Is Your Business?

Matt Walker
May 23, 2017

– First published in PhocusWire, 28th November, 2018 –

Over the course of 2018, there have been forecasts that the travel industry is entering a new economy that wraps itself around what the business is trying to do.

The word “experience” does not seem to convey value to the consumer, certainly in a way that enables travel brands to differentiate their offering, hence a new common ground must be forged, which some have heralded as the Post-Experience Economy.

The discourse of the Experience Economy (pioneered by J. Pine and J. Gilmore) is so prevalent in travel, that airlines and travel brands–for fear of becoming irrelevant–have been compelled to adopt the marketing paradigm.

From budget to luxury, the semantic pervasion of the Experience Economy has rendered everything from basic economy to free Twinkies in the foyer of a hotel as an “authentic experience,” and therein lies the problem: to say everything is an Experience, is to say nothing at all.

To say everything is an Experience, is to say nothing at all.

However, declaring a new economy, without diagnosing the commoditisation of experiences or proposing a new unit of economic value is premature at best.

We are likely to perpetuate the current dissonance between industry and modern consumer values by simply trading in a jaded lexicon for a new glossary of terms.

As pseudo-Confucian as this sounds, the best way forward is to recognise where we stand.

The Two Economies of Travel

The travel industry straddles two units of economic value: service and experience. This is predicated on service, but the expectation of the traveler is measured in experience.

The Experience Economy has exposed an “identity crisis” evident in legacy providers’ messaging and business model (and to a lesser extent in budget providers, too), but by no means is the cause of it; digital was the principal agent.

The advent of digital precipitated new consumer values and recast the “Trip” as a lifecycle with many phases. The modern traveler no longer purchases a “Trip,” rather they are acutely aware of overcoming the planning, the booking and the transport to consume an experience in-destination.

The industry truly entered a schizophrenic state when it embraced a false dichotomy between service and experience, where providers are now trying to offer “experiences” without the pedigree of “service.”  

The Experience Economy

Naturally, brands adopting the language of the Experience Economy while giving their service a chance to catch up are simply trying to keep pace with consumer values in a mature market.

Studies among emerging generations (Gen Y and Z) reveal the shift toward consuming “experiences” more than things because “experiences” make us feel more connected, more authentic and create a sense of belonging.

A cursory glance through social media confirms this; people share their experiences and achievements far more than the purchase of a new toy.

What is more insightful, people curate their online profiles, deciding what to share with their audiences based on what they think is authentic or what is most likely to reveal themselves as authentic.

A New York Times survey reported that 84% of social media users share causes that reflect how they want to be seen.

The business imperative for any brand seeking to trade in the Experience Economy is “rendering” the experience of their product/service as authentic.

“Rendering” seems to afford a certain latitude of interpretation, and technically, there is no such thing as an inauthentic experience.

It follows that the last decade has seen every airline and travel brand go “a-rendering” in their messaging without a clear metric of value in the Experience Economy.  

The Metric of the Experience Economy

“Rendering” aside, the principal aim of the Experience Economy is to create a positive emotional connection between brand and customer, or a memory.

Consequently, the real differentiator between the Service Economy and the Experience Economy is revealed in consumer behaviour: how the consumer spends their time.

• The hallmark of the Service Economy is measured in Time-Saved for the customer.

• The hallmark of the Experience Economy is measured in Time-Well-Spent for the customer.

In a recent IATA report:

• 82% of passengers want Real-time journey information delivered to their personal devices.

• 65% are willing to share personal data for expedited security.

Another survey conducted by Flightview found 70% of passengers were willing to pay a premium for direct flights. 60% were willing to bypass their own airport and drive up to 2 hours farther to get a direct flight.

If we consider these statistics in light of a recent Expedia survey which revealed the top three reasons for traveling are to do with consuming experience in-destination, we get a clearer view of the demarcation between economies in the travel lifecycle from the perspective of the customer.

Airlines have struggled the most with the shift in economies. At one time (decades ago), a flight was an experience in itself, now, airlines have to embrace the fact that the best experience of their service is convenient and unmemorable.

Airlines have to embrace the fact that the best experience of their service is convenient and unmemorable.

The expectation of the customer in every moment from their home to touching down in a new destination is about saving time. However, from the destination, till the traveler returns home, it’s about Time-Well-Spent.

This is clearly seen in the blistering growth of the tours and activities market in-destination.

The traveler seems to better understand what “experience” means in the Experience Economy than the travel brands that supposedly offer it.  

The Post-Experience Economy is Service by Another Name

In a world of influencers and internet celebrities, heralding the “next thing” has become more of a branding exercise than a pursuit of economic value.

The recent commentary around the Post-Experience Economy advises travel providers to differentiate on quality of service and to recognise their brand’s core proposition against the customer lifecycle - which is simply a new label on the age-old economy of service.

However, there are plenty of opportunities for the great service providers to facilitate personal moments, just not at the expense of their service.

The breach of a customer’s expectations in the early phases of the lifecycle is far more costly (and likely) than the brand-gains from trying to exceed the customer’s expectation with a staged experience.

Service Providers Trading in an Experience Economy

The travel industry is first and foremost operating in a service economy that should aspire to facilitate memorable customer experiences. At our best (and in the spirit of making up new terms) we are a ServEx Economy - great service that facilitates transformative experiences.  

Here are three things great service brands can focus on to facilitate the Experience Economy.

1) Consumer behaviour is a great indicator of your business

It provides vision and keeps the main thing the main thing. If your customers are trying to save time–Welcome to the Service Economy.

In this economy, value and brand differentiation are determined by quality of service–without which, there is no hope of trading in the Experience Economy.

2) Invest in corporate culture

The heart of the Experience Economy is memorable moments through empowered human connections.

In this regard, airlines like Alaska and Southwest have been operating in the Experience Economy for decades, but the shift in consumer values is only now penalising airlines and travel brands that have not honoured their staff, who in turn, are incapable of empathising with a customer.

Toxic corporate culture disqualifies any brand from trading in the Experience Economy - maybe not immediately, but eventually.  

3) Thinking beyond simple objectives

The antidote to overreaching in our brand messaging is taking a holistic approach to the travel lifecycle, identifying the Experience your customers are seeking to consume, then rebranding the services in terms of facilitating those exact experiences.

This creates a clear trajectory from the product or service to the experience.

In many ways, we have just come full circle and identified the need for greater personalisation (again) in the travel industry.

. . .
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