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How to add value to products: the experience economy perspective

A research on how companies could add value to their products using the experience economy

Written by Anonymous

Paper category

Master Thesis

Subject

Business Administration>General

Year

2020

Abstract

Master Thesis: Experience economic theory As we discussed in the introduction, every economic transfer is related to value transfer. According to Pine and Gilmore (2013, p. 25), “every economy is defined by its main economic product: what the buyer obtains from the seller in exchange for money”. The difference between the various economic types can be illustrated by the following figure (Figure 1): As can be seen from the figure, each economic type provides its own value to customers. This idea can even be explained by using coffee as an example. In the agricultural economy, coffee is grown and sold as a commodity, and there are no other tools or options to create anything. The only difference between various types of coffee may be where it is grown, weather conditions, etc. Then customer demand develops, people become more complex and critical, and the economy has to turn to commodities instead of commodities. Entrepreneurs no longer try to sell coffee beans; they develop supplies into commodities such as bags of coffee and other products. In this case, they can add more features to the products, thereby adding more value to the products and making them more suitable for customers. The next step after commodity industrialization and mass production is the development of the service industry and another transformation of the economy. At first it was regarded as “unproductive labor” (Smith, 2007) and became a major part of the economy of every developed country. This value transfer is also related to the company's desire to increase product sales and meet customer needs. Today, we are experiencing another kind of economic transformation, which Pine and Gilmore described more than 20 years ago. This is the transition to the experience economy. In this article, we are very concerned about the concept of experience economy, so we think it is very important to have a complete understanding of this phenomenon and show it from different angles. So, what is the experience economy? This term appeared in the scientific community in 1994, when Pine and Gilmour published their first book on the subject (Pine and Gilmore, 2013). In their book "Experience Economy", Joseph B. Pine and James H. Gilmore assume that experience is the fourth economic proposal, which is surprisingly different from services and commodity services (Pine & Gilmore, 2011). Consumers are willing to pay for their feelings and feelings. The main goal of any business at this step is to establish a strong emotional connection with consumers. As mentioned earlier, both services and goods are related to impressions. When using the service, consumers experience certain emotions. 3.1.2 Types of experience Pine and Gilmore (2011) suggested using the following diagram (Figure 2) when discussing the types of experience. They identified 4 areas of experience formed by the intersection of two axes. The horizontal axis indicates that guest participation can be passive or active, depending on whether the customer can directly affect performance. As for the vertical axis, it reflects the connection between the customer and the event, with two endpoints-absorption (the customer gets the experience from the outside) and immersion (the customer is physically part of the experience). As a result of the intersection of axes, "4E" can be defined as-entertainment, education, escapism and aesthetics. Entertainment-Customers passively absorb the experience with the help of their senses, for example, while listening to music or reading a favorite book. This type of experience is considered to be the oldest and most familiar experience for people. them. A good example here is a course or interactive course with a personal trainer (the emphasis is on communication between teacher and student rather than strict obedience). Escape from reality-it is "the opposite of pure entertainment" (Pine & Gilmore, 2011, p. 49). Here, customers are fully immersed in the experience through active participation. These experiences help people escape from reality and find themselves in a completely new environment. It can be an online chat, a video game, or any other simulator that can bring customers into another reality and enable them to influence it. Aesthetics-customers are immersed in the event, but they neither influence nor change it. They will be fascinated by being in a particular place, for example, they might be impressed by the scenery, history and architecture of the Caffe Florian (the oldest cafe in the world) in Venice. The same applies to Disney stores, where customers can listen to music from Disney movies, see the exquisite theme walls and enjoy decorations. In general, it can be concluded that the participants of the entertainment experience are eager to enjoy, the educational experience-learning, escape from reality-do/go, the aesthetic experience-just exists. Fiore et al. (2007) continued to study the types of experience economy and identified four groups of technologies that companies should use to enhance customer experience. The author proposes the classification of "4Ps": • People-the way a company interacts with its potential customers. Read Less