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Why You Should Understand the Experience Economy

Why You Should Understand the Experience Economy

We often talk about our “consumerist culture” but understanding how financial decisions are made is fundamental to delivering meaningful proposals and solicitations. In a TED Talk from 2004 called “What Consumers Want,” Joseph Pine lays out the principles that were first promoted in an article for the Harvard Business Review, “Welcome to the Experience Economy.”

  1. For millennia, economy was dominated by commodities, things extracted from nature: food, animals, minerals. This is the foundation of the agrarian economy, whose meat and potatoes — as well as gold and salt — were sold in the marketplace.
  2. Next, the Industrial Revolution landed us in an economy of goods, in which those very commodities were now used as raw materials for making things such as washing machines, linen and automobiles.
  3. What we’ve seen in the last few decades is an economy of services, the delivering of goods — the basis of the Service Economy, a term nearly everyone has heard.

But as each of these economies becomes commoditized, there has been a progression. Now that the provision of services has been commoditized, Pine posits that the next economy is that of experience, a staged human experience that people are willing to pay for. Think Disney, theme restaurants, Las Vegas, or travel.

Authenticity, says Pine, is the new consumer sensibility. Starbucks, of course, is the prime example.

As a commodity, coffee beans are as cheap as they come. As a good — i.e., ground and bagged coffee — the price rises. The service industry involves people making a cup of coffee for you in a diner. But Starbucks is the ultimate Experience Economy: people are willing to pay $5 for a coffee (which as a mere commodity would cost 2-3 cents a cup) because Starbucks also includes an distinctive ambiance, an experience as a coffee shop.

What does this mean for us? Our constituency want and are willing to give to an authentic experience that differentiates you from the generic appeal the mass nonprofit sent last week. An authentic experience makes people feel good and creates good memories, whether playing at Disney World, sipping Christmas Blend on a winter day or creating scholarships for future generations.

When developing your authenticity, it is essential to think about the entire philanthropic experience and expectations regardless of the gift amount. Think about Amazon making custom recommendations for a $100 pair of shoes to go with the jeans you bought; or for $10 a month, Netflix helping your family easily find movies you care about. Regardless of the price, our culture expects an authentic custom experience or they are likely to take their money elsewhere. And let’s face it, there are a lot of options in philanthropy today.

Does your website offer an authentic experience to prospective donors? Does it have the ability to foster authentic relationships with your alumni and friends?

By Sean Hill, Senior Content Writer, Capture Higher Ed