Mere material product consumption has evolved into providing more immersive experiences to customers. Luxury goods brands need to go back to the drawing table if they want to be on the positive side of the ‘Experience Economy’
By: Abhay Gupta, Luxury Expert, Author, Speaker, Professor of Luxury Management
Posted on: August 6, 2019
Steve Jobs famously once said, “Design is not just what it looks and feels like. Design is how it works.” The founder of Apple had spent years in ensuring all Apple products excelled in the way they worked, how they were designed and how they looked. However, there was one more aspect that he had focused - the User Experience. Today, the experiential value of a product has become a benchmark for the technology industry. So much so that today, it is not about how things work, but the Experience of how it makes you feel.
Welcome to the Experience Economy!
The term “Experience Economy” was first used and coined by a Harvard Business Journal in 1998. The journal discussed how people ultimately spend more money on experiences rather than products or commodities. Over the years, there’s been a movement where consumers don’t want to just consume, rather experience new emotions, and feelings as they use the products. For examples, vacations are not just about visiting new places, it’s about experiencing the place from a new perspective, something that creates a moment and brings out an emotion.
Experience Economy is defined as an economy in which goods or services are sold by emphasizing the effect they can have on people’s lives. Today, Experiences are their own category.
Experience Expert – Joseph Pine, explains the concept in his best-selling book ‘The Experience Economy’, with a simple example: coffee.
From simple beans that traders bartered to ground coffee powder that was sold in a grocery store to brewed coffee in the local coffee shop, coffee became a style statement. Today the coffee experiences come with free wifi, great music, chic ambience, great decor, multiple flavours and combinations, and beans sourced from exotic locations. You are not just paying for a coffee. You go to a coffee house today for that amazing experience. Today’s coffee shops are a place where cool people hang out and it’s hip to be seen in one of these places. Anything less in this experience and it’s a waste even if the coffee is great.
This new model has done well for companies that have adapted their products and services accordingly. Tesla revolutionized the driving experience with the autopilot feature and the recently launched ‘enhance summon’ feature that allows a car to drive itself to the summoner. The Virgin brand is world famous for its laser focus on great customer experience. Virgin America is the only airline in America that offers economy passengers cushy black leather seats. It is also the only American airline to ensconce first-class passengers in plush all-white leather recliners that come complete with fully adjustable leg rests, lumbar support, an industry-leading 52-inches of pitch and individually adjustable reading lights and massage functions as well. Similarly, Airbnb is changing the way people travel, Uber is driving millennials away from car ownership, Apple’s new Card will change the way Americans think of credit cards.
Millennials are leading the charge
A lot of companies are catching on to the fact that the more immersive the experiences are, the more it influences their consumers and the people in their network. A generation that has been exposed to the latest technology and social media, awareness levels are extremely high among millennials. For every transaction and interaction with a brand, this generation demands nothing less than wow. For every wow experience delivered, the referrals generated from that are much stronger as compared to standard marketing practices. In India, Veg-NonVeg, an experiential sneaker showroom, does just that. The sneaker boutique curates top-of-the-line sneakers from Nike, Adidas Originals, Air Jordan, and more, and also offers a small café, for customers to engage with the labels’ identity. Art Deco architecture, live events and store parties strengthen interaction with their consumers.
With the young generation being the core demographic that retail is focusing on, what does it mean for brands?
For the retail industry, the first step in having a successful strategy is to define what the goal is in terms of their relationship with the audience and the wider context of its brand and business strategy. Is the goal going to be to excite the audience, to inspire, to give them things to talk about or to celebrate their way of life?
For instance, to celebrate the new-found desire in consumers to live an eco-friendly lifestyle, sustainability needs to be the core messaging of the brand. Franco-Indian luxury fashion brand Lecoanet Hemant’s sustainable fashion line, Ayurganic, promotes just that. Created under the supervision of Ayurvedic scientists in India, Ayurganic represents a new benchmark in consciously curated apparel. Scientific, sustainable and spiritual elements merge with design to form comfortable, breathable and distinctive clothing. Ayurganic exclusively uses GOTS certified cotton and is hand-treated following century old Ayurvedic recipes.
The garments, or Ayurvastra (Ayur and vastra meaning health and cloth respectively in Sanskrit), have been permeated with special herbs and oils, making it free of synthetic chemicals and toxic irritants. Wearing these garments help restore balance within the body and strengthen the immune system. The messaging to their consumers, fans and loyalists is loud and clear – it is a healthy, eco-friendly fashion line for the international Indian. And customers are loving it.
Why should Brands focus on creating immersive experiences?
Immersive experiences are not new. For years, luxury retail and high-end fashion industry has created bespoke events as part of their marketing strategies. But as luxury approaches more affordable segments and premium brands expand their product lines to cater to the luxury consumers, such immersive experiences are in huge demand.
Primarily there are two aspects within the experience economy: Customer Participation and Connection.
Bespoke events which customers can be a part of, actively or passively, define Customer Participation. For example, a fine dining workshop by a high-end kitchenware brand. Customers may choose to take part in the workshop where the brand gets to showcase its products or just passively talk about the event or share moments on social media. Either way, since the reviews come from a trusted source, the impact is higher than standard social media updates by a brand.
Building a strong connection with the end-customer is the most important aspect of an immersive experience. For example, by embedding elements of wellness, and sustainability into their offerings, luxury brands from the beauty and fashion industries have been able to deliver a level of experience that goes well beyond their products. This connection, that is built by merging the needs and aspirations of the consumers with luxury goods, is a much stronger bond that lasts for a long time. And in the current times, where brand loyalty is available in small measure, such steps can actually help build those bridges.
Benefits of Connecting Immersive Experiences With Luxury Products
Instant Fandom: When done right, immersive experiences drive unparalleled acceptance and growth. If customers love an experience, they promote that experience to friends and family. Such referrals, based on positive personal experiences, directly relate to stronger positive response towards the brand, leading to faster new customer acquisition. In a world of rising customer acquisition costs, your customers become your brand’s mouthpiece, activating their network and becoming your best converting channels.
Pride of Ownership: Exclusive merchandise, limited edition stocks, limited access, exclusive invite-only clubs. As social media continues to invade further into our personal and professional lives, customers want to be seen as part of a better life that is only available to a select few. Exclusivity and limited accessibility to such immersive experiences are driving forces for viral content. With immersive experiences, this interaction between brands and their customers simply gets amplified due to social media and brands must utilize it to their benefit.
Enhanced Value: The sole purpose of an immersive experience is to showcase the value of a product and help customers understand how it makes their lives better. More than a simple consumption, it adds meaning to the product, a sense of purpose. Uber Luxe offers on-demand rental luxury cars for consumers; Louis Vuitton products are collected by consumers world over as collectables; and Mercedes Benz offers memberships in their brand clubs to car owners where specially curated events allow owners to connect with other like-minded individuals. The enhanced value the brands offer to consumers beyond the product itself is why these brands are loved.
Communicate your brand values throughout the customer journey
Spread across the entire customer journey, luxury brands need to clearly communicate the core values that define what they are about. Going beyond just standard marketing and brand messaging, luxury brands need to showcase what those values are by living those values and building their business around it. It’s about the embodiment of the values that the brand associates with. For instance, a brand that has a tradition of artisanal craftsmanship should open its workshops for exclusive tours.
Over the course of the next 10-12 years, the experience economy is projected to grow to $8 trillion by 2030. Industries like hospitality, travel, retail, wellness, food and fashion can no longer afford to be one-dimensional. The experience is and has always been part of a luxury purchase. There exists an emotional aspect and an aspiration to buying high-end goods which goes way beyond a simple transactional event. But that experience is now going much further than retail. At a time where affluent consumers are shifting their spending towards personal life experiences, luxury goods brands need to think beyond their product features to inspire shoppers. The winners are going to be those who successfully design their business models and organizations around a holistic, cross-category experience.
Abhay Gupta is the founder, promoter and CEO of Luxury Connect (a boutique consulting organization) and Luxury Connect Business School (LCBS). He has helped establish luxury brands like Versace, Versace Home, Versace Collection, Corneliani, Arredo Classic, etc in India. Luxury publication Blackbook recognizes him as one of the ‘Top 100 Indian Luxury’s Most Influential’ for the past 6 years. He is also a recipient of the ‘Luxury Retail Icon 2012’ title by Asia Retail Congress. Having being featured in Forbes Luxury Trend Report 2012 as one of the industry leaders, he has also been widely recognized as a luxury expert by many media organisations. Fondazione Altagama has also recognized his contribution to the growth of Italian luxury industry by his pioneering efforts in India.