Esi Eggleston Bracey, Unilever’s chief growth and marketing officer, calls it the “joy and experience economy.” The essential ingredients for an experience economy is that people want to invest in themselves and are willing to pay a premium for not just a product but for memories, Bracey said at an event in Mumbai last month. Bracey should know, as Unilever, one of the largest consumer goods companies in the world, has been engaged in giving customers the “experience” of feeling good. Unilever is one among many, but there are still many companies in India which need to realise fast that the next competitive battleground lies in staging experiences. Those connected with their consumers will be streets ahead in benefiting from the experience economy.
Recognition of the emergence of the Experience Economy was championed by Joseph Pine and James Gilmore and with their best-selling book ‘The Experience Economy’ in 1994. The concept sees the economy as ever-evolving, with offerings moving from low-value tangible things to high-value intangible things. Commodities are fungible, goods tangible, services intangible, and experiences memorable.
Starbucks is a classic example of paying premium for memories via experience. Today, Starbucks is the third-largest food outlet in the world, with over 32,000 stores worldwide and a market cap of over $110 billion. When it first launched in 1971, the concept of paying a premium for something as mundane as coffee did not exist. However, by the early 2000s, customers were paying 10 times more for Starbucks coffee than that of a regular coffee shop.
Airbnb’s Icons Extraordinary Experiences project is another example, offering unique activities hosted by celebrities and experts. Bollywood’s Janhvi Kapoor, one of the first 11 Icons, offers an overnight stay at her family home in Chennai, where guests can learn her beauty secrets and enjoy her favourite South Indian dishes. Other notable experiences include a stay in the house featured in the Disney movie Up.
For beauty companies, customers will create a life-long relationship with a particular brand only if they are made to “feel” good. This enhances their self-esteem. Unilever’s research suggests that more progressive advertising has the potential to deliver 74% better brand power—a key measure of consumer attraction for brands. Progressive ads, in fact, deliver a 13% uplift in purchase intent and increase credibility by around a third.
One example of this is Dove’s Real Beauty campaign, which began two decades ago after research showed that only 2% of women worldwide saw themselves as beautiful—an insight that led to an idea that tripled Dove’s sales. Take the #StopTheBeautyTest campaign, a trend-setter of sorts. One of the recent campaigns, released in 10 languages, featured the real-life stories of five women, all of whom failed the arranged marriage test because they were overweight, dark-skinned, or had a spot on their face. The voice-over at the end of the ad says, “Khaamiyaan nahin, khoobiyaan dekhiye.” (Look at the beauty, not the flaws.)
By taking up the onus to make beauty more positive and more inclusive, Dove addressed the deep-rooted insecurities and self-esteem issues of young women, with which customers could empathise.
Here’s another example. Nothing can be more commoditised than a detergent powder pack. But Surf Excel has made it a brand that is closely in sync with the evolution of women in India—from the earlier homemaker whose opinion didn’t matter to the family to a confident individual who lives life on her own terms. When its competitors were focusing on the product, Surf spoke to the people (consumers). Another example of selling “experience” was the Daag Acche hai (dirt is good) campaign. Extensive research found parents in India felt that the academic and career needs of their children were being met by schools, but what was lacking was imparting character development and value development. This had a greater cultural significance in India, given the traditional high value Indians place on karma, which when taken in a positive light meant “good deeds”. The campaigns showed children soiling their clothes while doing good—whether helping a friend or a stray dog. The meaning of dirt changed for the consumer and from being a bad thing, it became a symbol of ‘goodness’.
Understanding the experience economy is important, as a study by Kalaari Capital says high-end market trends towards experiences is moving to mass markets across lots of different sectors. By 2030, over two-thirds of the global population is expected to be middle class, with most of this growth coming from emerging markets, underpinned by female income growth and new generations entering the workforce.
So, brands need to take into account consumer needs that may not be obvious on the surface, that may not be well-articulated, or maybe that which the consumer cannot pronounce. Apple, for example, did that precisely. No consumer would have envisaged that her mobile phone can also double as a camera and make internet surfing a pleasurable experience.
It’s also not just about what you sell, but how you make your customers feel throughout their journey with your brand. India is primed to make a significant shift towards embracing the experience-based economy. In fact, the shift is already underway, albeit at varying degrees across different sectors. E-commerce giants like Flipkart and Amazon have revolutionised the online shopping experience by offering seamless navigation, personalised recommendations, and hassle-free returns. Similarly, Swiggy and Zomato have transformed the way people dine by providing a wide range of culinary options at their fingertips, coupled with quick delivery and real-time tracking.
In the physical retail space, this is playing out big time. Indian retailers across categories are opening bigger brick-and-mortar stores along with expanding their existing stores as consumers are increasingly looking for a better experience in physical retail. According to Anarock data, the share of stores smaller than 2,000 square feet declined to 52% in the first half of 2023-24, as against 61% a year ago. The share of stores sized 2,000-5,000 sq ft increased during this period, to 21% from 19%, as did that of those sized 5,000-10,000 sq ft (11% from 9%) and 10,000-15,000 sq ft (13% from 9%).
Commoditised products and services are also being differentiated through experiences. Today, even simple experiences such as seats on an airplane has smart pricing—different pricing depending on leg space, seating positions, and food options.
The advent of big data and advanced analytics has helped organisations parse the factors that drive not only what customers say about the things that satisfy them but also the actual customer behaviour that creates economic value. Businesses that fail to adapt to this paradigm shift risk being left behind in a fiercely competitive marketplace. Research shows that 25% of customers will defect after just one bad experience. And losing one existing customer is equal to acquiring three new ones.