In a now famous 1998 article in the Harvard Business Review, B. Joseph Pine II and James H. Gilmore introduced the business world to the concept of the experience economy. The theory went something like this: Companies went through different economic phases – agricultural, industrial, and service phases – during which the types of products sold evolved. For example, agriculture focused on selling ingredients (they used the example of the ingredients in a cake) while the industrial economy saw those ingredients prepackaged into a complete offering (cake mix). After all, companies have emerged in the service economy that have built up a variety of services around these products (the bakery that bakes the cake for you). With every step, the price for the consumer rose steadily.
At the turn of the millennium, the authors accurately predicted the new experience economy, in which both the product and the service are an accessory to the main event – the party at Chuck E. Cheese! In an experience economy, the destination becomes a lasting memory (although some prefer not to remember the entire Chuck E. Cheese experience).
Certainly there is little to suggest that the authors were spot on. The experience economy quickly caught on and continues to this day. But there is an offshoot of the experience economy that is developing rapidly. This new variant, which we call the “Digital Experience Economy”, takes the concept even further by imagining products and services not just as physical experiences, but also as (and sometimes whole) digital experiences. In our analogy above, the Chuck E. Cheese birthday party becomes an online event between your child and a group of friends around the world.
The recent rebranding of Facebook to Meta, a company focused on creating virtual worlds, makes the prospect of the digital experience economy even more likely – and immediate. But before we get into a total recall-esque rabbit hole, let’s focus on what the practical digital experience economy looks like today and what it will look like in the near future.
Support of the digital experience economy
Transferring the experience economy to the digital world means data – and a lot of it. A key element of the experience economy, according to Pine and Gilmore, is personalization. However, in a digital world, the experience likely needs to go further to provide hyper-personalization. Artificial intelligence and real-time behavior data are therefore becoming increasingly important. In particular, companies not only have to set up multichannel access for customers, but also understand all of a customer’s interactions via these channels in real time.
The change to a digital experience economy ultimately requires a massive understanding of every single customer. With this understanding, companies can deliver hyper-personalized – and memorable – experiences that add more value to their customers (both internal and external), which in turn enables companies to generate higher profits. This requires systems that can support knowledge accumulation on a large scale.
Systems of experience
So what does it take to support this new digital experience economy? RingCentral-protected “experience systems” to define technologies that can support the kind of hyperpersonalization and knowledge accumulation discussed above. In general, experience systems encompass not only the sophisticated big data stores that support the digital experience economy, but also the myriad of technologies that support the way customers (both internal and external) interact with your company.
In 2018, Gartner discussed the emergence of multi-experience development platforms and realized that while most organizations focus on web-based communications (email) to create customer experiences, and more recently mobile, these platforms alone are now just not enough. Today’s experiences require video, chat and, very soon, the aforementioned augmented / virtual reality. Why? Because customers determine which communication modalities brands should use today, and if they don’t get what they want, they just leave. A survey by RingCentral found that customers stopped using a product or service an average of four times in a 12 month period due to poor customer service.
But systems of experience are not just about multichannel or even omnichannel communication. Real experience systems create a different experience for each channel based on the unique attributes each channel has. It is the opposite of “one size fits all”. And it goes one step further. While each experience is tailored to each specific channel, the experiences all need to feel somehow consistent. Why? Because customers want to switch between channels effortlessly. The truth is, inconsistent experiences across all channels hurt your brand.
Characteristics of systems of experience
While technologies like artificial intelligence and big data certainly underpin systems of experience, these technologies mean very little to customers. For them, the hallmarks of their experience revolve around concepts such as:
- An immersive experience that combines multiple sensory experiences
- A sense of community in which customers feel part of a larger group of like-minded people
- Simplicity that allows customers to have experiences with ease
Ultimately, experiential systems should achieve three main goals:
- Increase the existing product sales for your company
- Enhance the customer experience
- Enhance the experience for employees
This final goal, improving the employee experience, is most often overlooked when building experience systems. That’s because many companies often overlook how the employee experience affects the overall customer experience. In short, happy employees make happy customers. And that’s not just a catchy sentence. There are numbers to prove it. A Gallup poll found that companies with highly engaged employees outperformed their competitors by 147% in earnings per share.
One way that organizations today are addressing the link between employee engagement and customer engagement is to create links between these two components of experience systems. It makes sense, especially because customer service teams, for example, are screaming for it. In the RingCentral survey, nearly 80% of agents said they have to keep customers on hold every day while they look for information to solve problems. The problem is broken workflows. Unifying customer service and employee engagement systems was a welcome solution, however: 92% said integrated communication and collaboration solutions – platforms that tightly integrate messaging, video, phone, and customer experience – would help.
While the digital experience economy feels like a natural outgrowth of the experience economy, the experience systems necessary to support it must be carefully examined. Cloud communications technology is becoming a hub for collecting, storing, distilling, and using interaction data to drive simple, powerful, and consistent experiences with your brand. The ability to effortlessly connect these systems to other technologies such as artificial intelligence will also be critical.
This content was created by RingCentral. It was not written by the editorial staff of the MIT Technology Review.