01:56:18 am on
Wednesday 29 May 2024

Different, but not comparative
Garrett K Smith

This is a question of debate among some experts. Joseph Pine and James Gilmore, the two authors of a very interesting book named The Experience Economy, suggest that our nation is now moving away from the current service economy and into what they are calling the experience economy.

The world from its inception has undergone several different economic phases. In the beginning in the first ever human economy, humans lived in a commodities driven economy. An example of a true commodity--at least the example given in the book--would be a coffee bean. Coffee as a commodity trades for about $1 per pound or roughly translated one or two cents a cup.

The next economic phase the goods phase is seen in the grocery store. A manufacturer will take the coffee beans, grind them, package them, and distribute them. The beans have now become a good. The price to the consumer now lands somewhere between 5 and 25 cents a cup. Even later, in the service economy, a small coffee shop can brew the coffee and serve it in a cup for about 50 cents to a dollar per cup. So, what if the coffee is now served in a fancy expresso bar overlooking the city of San Francisco? A customer will now gladly pay $2 to $5 per cup.

Why will someone pay up to $5 a cup for something that is only worth 50 cents somewhere else? It is the experience and memories surrounding the cup of coffee, not the actual coffee that is fetching the larger price. One quick look around and you'll start to see the new experience economy taking root. The Hard Rock Cafe, FAO Schwarz, Niketown, The Geek Squad, to name a few companies in the business. People are now hungry for services that can fill items that are higher on our list of hierarchical needs. Feeding people, or providing the goods or services they need isn't enough anymore. People are looking for experiences that will provide them with personal memories and they are willing to pay a premium to get what they want.

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