“Customer experience” has been a buzzword for years. From your mom-and-pop shop to your big box brands, customer experience has been key for years - and we support this. It should be! But something has changed in these past few months, and it’s this: The basic definition of what “customer experience” really means.
So what does it mean, and how can brands do it right?
Before we get into that and how we got to the experience economy, let’s take a quick rewind back into the past.
Remember the transaction economy?
If you’re 30 years or older, you might remember the transaction economy. It was pretty basic: As consumers, the main thing we cared about when making a purchase was just that - making the purchase. Our shopping expectations were targeted and specific, and were largely centered around convenience. We wanted to walk into a store, find what we wanted on a shelf, and then walk out of the store with it. We wanted to walk into a bank, cash a check, and then walk out of the branch with it.
When online shopping became more common, consumers in the transaction economy were thrilled. The convenience! The speed! Buying something became even more transaction-like, and many consumers ate it up. Amazon prevailed, and more traditional retailers - the ones who had to rely on those physical store shelves to actually have the thing that their customers wanted to purchase - began to struggle. And retailers weren’t the only ones - following the model set by retailers, financial institutions, telcos, and other companies felt pressured to start offering some minimal degree of online services. It all became about an online presence, and it all became about using that online presence to simplify every transaction down to its bare bones - so that the customer could spend minimal time, and exert minimal effort.
Introducing the interaction economy
About ten years ago, traditional brands understood that they needed to start differentiating themselves in order to stand out in a sea of online transactions. They needed to build a strong digital presence to compete with the single-click retailers and the challenger banks - and it needed to be unique and engaging.
Fortunately, something had come along to help them: The sudden explosion of social media. We were in the dawn of the interaction economy: consumers moved from just wanting to complete a transaction, to wanting to be able to feel like they had the chance to interact with a brand.
With social media, interaction became not only possible - it became scalable. Whether it was Twitter, Instagram, Pinterest, Facebook, or some combination of all of them, brands had a direct line to their consumers in a way that they’d never had before - and consumers ate it up. Although social media started as a way for people to stay in touch with friends, it quickly evolved into a space where people could also connect with the brands that were a part of their everyday lives - whether it was just to pin a specific clothing style to a board for later reference, or to reach out to a financial services organization to ask a question about a mortgage. Transactions still existed - but brands that offered only transactions were quick to be left in the dust.
Then came the experience economy
And that brings us back to the experience economy, and what the true definition of “customer experience” should really be.
Over time, the expectations of consumers for brand interaction grew, and smart brands knew that it was time to start taking advantage of those expectations. The forward-looking brands saw something that others didn’t yet, which was that the interaction economy was a movement that - although it started online - could be complemented offline. And consumers started to respond. As McKinsey & Company put it, consumers didn’t want to just buy products and services anymore - they wanted to buy into an experience. The transaction economy was long gone, and the interaction economy had evolved: The brands that would thrive were the ones that could provide a unique, personalized experience for their customers. And this is exactly where the experience economy comes in. (To learn more about a brand that bought into the experience economy and reaped the rewards, check out this Total Economic Impact™ from Forrester Consulting.)
When COVID-19 hit and the world shut down, this concept became even more important than it had before...precisely because it was, in some sense, taken away. More than ever, consumers now crave unique experiences and human connections; more than ever, they long to do something more than just use a single click to purchase something. They long to connect to a brand and to feel like that brand connects with them - and if your brand can give that to your customers, the potential benefits are huge. Consider the following statistics:
- Best-in-class personalized experiences can quadruple the revenue lift from these initiatives (BCG).
- 59% of customers want to see increased personalization (CSA).
- For every $100 billion in assets that a bank has, it can achieve as much as $300 million in revenue growth by personalizing its customer interactions (BCG).
This is the experience economy. And it’s not just about offering a good experience. It’s not about a great NPS score, or a 5-star review for customer service. It’s about a world where a “good experience” doesn’t mean a “not bad experience” - it means a memorable experience. It means making your customers feel like, when they do business with you - whether you’re a clothing store, a telecommunications shop, a bank, or anything else - they’re doing business with a company who knows them as an individual, and can offer an experience as unique as they are. And if you can offer an experience this compelling, then you are well on your way to increasing brand loyalty and customer value.
The experience economy is here. Where are you?
March 16, 2021
5 minute read