We are currently amidst the experience economy. What is this, and how does it relate to employee experience, employee engagement and experience management?
The term ‘Experience Economy’ was created by Joseph Pine II and James Gilmore in their 1998 book of the same name. This book outlines the evolution of different types of economy, describing the experience economy as the next economy, following the agrarian, industrial and more recently, the service economy.
The experience economy describes the current economy we are surrounded in today, wherein the customer base are seeking experiences (and to a certain extent memories) over products and services. Experiences are tailored for customers, making personalized solutions which are highly customisable and fits to a given time period. In an overpopulated world, people are no longer seeking out products and services, instead choosing experiences to reach personal fulfilment. Consuming experiences acts as a lifestyle facilitator according to Bardhi and Eckhardt (2017). They suggest that choosing to spend money on experiences enables consumers who may lack the economic ability to consume desirable brands, products and services, to experience a desirable lifestyle.
Over 20 years ago there was a big boom in the service economy as the importance of the service sector increased in industrialized economies. But now even services have become commoditized, less personable and in effect, at risk of extinction. There is no need to check around to compare different services when sites like GoCompare.com and ComparetheMeerkat.com provide this data immediately. This in turn, drives consumers towards one metric. Price. As products and services become ever more attainable and ubiquitous, so too does the commoditization of said goods, decreasing their price and perceived worth.
When goods and services lose rarity, they lose their worth and interest to the consumer. Subsequently, rare and exciting experiences become the new social capital. As such, the new and emerging economy is now the experience economy.
The growing size of the experience economy follows the increasingly growing millennial population. According to Harris Group, 72% of millennials would rather spend money on desirable experiences compared to material goods. Although this trend is most pronounced in the millennial generation, it does appear to extend across the generational and socioeconomic board with a 70% increase in total consumer spending on live experiences since 1987. This data indicates that living a happy and meaningful life is become less and less driven by acquiring material goods, and more about capturing memories through experiences (particularly in the millennial generation).
Relatedly, the growth of the experience economy also follows the rapid increase in technological innovation and the emergence of social media. Virtually everyone has a high-quality camera sitting in their pocket at all times - their phones! Integrated into this phone is a whole host of social media applications (Facebook, Instagram and Twitter) which are geared towards the enhancement of public image. Camera phones and social media to a certain extent, attempt to improve the customer experience by enhancing their profile. A fallout from this is that we consume others’ experiences and feel obliged to compare and continue our consumption of experiences. Experiences and social media go hand-in-hand.
This ‘consumer’ experience economy is beginning to filter its way into an employee experience economy. As the millennial workforce population continues to increase alongside the growth of the experience economy, it is becoming increasingly important to consider employee experience, employee engagement and experience management.
The experience economy has also translated to the workplace, in the form of values and experience that employees want from their employers. Employees want meaningful experiences at work. They want to see professional and personal development through their work. People are beginning to recognise that they don’t need to just consume meaningful opportunities in recreational settings; they should also have the opportunity for experiences to occur in the workplace.
Well. You. You should care. As either an employee, manager or employer, employee experience is becoming increasingly important. People are beginning to cotton onto the idea that employee experience is as important, if not more than customer experience! Why?
For the employee the answer is relatively simple. Happiness and enjoyment resulting from positive experiences at work.
For managers and employer’s improvements in employee experience can filter down to profit through mechanisms such as customer experience and productivity. According to research by WorkHuman Analytics & Research Institute and IBM Smarter Workforce Institute there is a financial impact of a positive employee experience. They found that organisations in the top quartile for employee experience report nearly 3 times the return on assets and over double the return on sales, in comparison to organisations who score the in the lowest quartile for employee experience. Further, the report indicates that even small improvements in employee experience can lead to increases in revenue.
Excitingly, the research finds that human workplace practices like recognition, feedback and empowerment have the potential to improve employee experience and don’t require a complete overhaul of your business processes.
Research by the WorkHuman Analytics & Research Institute and IBM Smarter Workforce Institute culminated in the Employee Experience Index, which outlines the essential workplace practices which lead to increased positive employee experience. They include:
• Feedback, recognition and growth
• Organizational integrity and co-worker support
• Empowerment and voice
• Work-life balance
• Meaningful Work
The report goes into depth about the importance of each workplace practice and ways of improving each human workplace practice.
Interested? Find out how PeopleGoal can help you with employee experience!