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The characteristic of the experience economy
According to the concept of the experience economy suggested by Pine and Gilmore (1998), the economic revolution has continuously developed over time. They stated that the evolution of economic value has spent four stages until now from the “commodities stage”, “goods stage” then “services stage” to “experiences stage”, and the experience stage has been identified as an emerging propensity in the modern economy (Figure 2.1). In the first stage, the focus of the economy has been on producing, consuming and exchanging commodities to satisfy the basic needs of humans (Maslow’s hierarchy of needs). Subsequently, these commodities are converted into goods via the process of adding further values in the second stage. In the third stage, service is generated upon the combination of tangible goods and intangible activities. In the final stage, the economy evolution moves into the new stage, the experience stage. This period is related to the highest level of the hierarchy of needs (Maslow). At this time, when services and products are more and more popular, the utilitarian value is only a small part of consumption objectives, the more important part is affective and emotional values that customers desire to obtain as consuming. In the experience economy, products and services are regarded as “props and stages” in the process of creating experiences for customers (Pine II and Gilmore, 1999). The objective of the business is to generate memorable and unforgettable experiences to attract and retain customers. The centrality of the experience economy is experiential consumption which is conceptualized as “a subjective state of consciousness with a variety of symbolic meanings, hedonic responses and esthetic criteria” (Maklan and Klaus, 2011). Individual experiences are distinct and exclusive, nobody has the same experience with others. Because these experiences result from the interaction between mental aspects and physical aspects, emotional events and cognitive events within each person alone (Schmitt, 1999). The activities of the experiential consumption are regarded as the enjoyment of artworks that highlights the role of both core values and the adding values of products and services (McGregor, 1974).
Along with the evolution of the economic stage from commodities to experiences, the relationship between sellers and buyers also transforms into the experience economy. It begins with the relationship between traders and markets in the commodities period, it then upgrades to the manufacturer-user relation in the goods stage, the relationship between providers and clients in the service period. Finally, the stager-guest relation is established in the experience stage (Pine II and Gilmore, 1999).
The role of the experience economy
In the experience economy, customers are interested in both functional aspects of products or services and experiential values provided by enterprises. Consequently, creating distinct and creative experiences is the central aspect of their business strategy (Yuan and Wu, 2008). Pine II and Gilmore (1999) postulated that organizations should deliver excellent value to their customers through customizable and memorable experiences. When organizations consider products and services as props and stage, experiences will happen along with involving customers. As the economic offerings evolve from the commodity stage to the experience stage, the economic benefit is also raised upon this development. The enterprises charge premium costs for customer’s special experiences (Pine II and Gilmore, 1999). At this time, what business provides not just products or services, the more important thing is a valuable experience. The profitable level of enterprise obtained in the experience economy is significantly greater than in the commodity economy. Moreover, companies in this period compete by delivering various experiences to their customers instead of price competition. This makes the organization focus on researching and developing unique and creative products and services to survive. The distinct experiences help to create long-term competitive advantages for companies, which can distinguish them from rivals and dominate markets (Pine II and Gilmore, 1999). Further, as entering the highly growing economy, the traditional marketing approach is impossible to satisfy customers due to their diversity and customization in their needs and demands. Therefore, only the experiential marketing approach is the best solution to solve this problem (Kao, Huang, and Yang, 2006). The successful businesses are which businesses can create loyal customers via delivering memorable and valuable experiences. Prahalad and Ramaswany (2000) confirmed that the centrality of the future competitive edge has been on researching and establishing valuable experiences for customers.
The elements of the experience economy
According to Pine and Gilmore (1998), the elements of experience are distinguished in four different categories based on their positions regarding two axes: passive/active and absorption/immersion (Figure 2.2). Meanwhile, passive or active participation refers to the extent to which customers are likely to impact experiential events. In other words, absorption and immersion are associated with the degree in which customers desire to involve in experiences. More specifically, absorption is understood as a partial involvement in experiential activities by customers (for instance, getting information). On another side, immersion refers to a holistic involvement in experiential activities by customers. Based on this classification, a combination of passive participation and absorption involvement constitutes the entertainment experience. Likewise, the educational experience results from the interaction of active participation and absorption involvement. A combination of active participation and immersion involvement constitutes an escapist experience. Finally, the esthetic experience is the interaction of passive participation and immersion involvement.
The characteristics of experiential marketing
The preceding studies revealed that consumers are the logic-based decision-makers (Oliver, 1980; Holbrook and Hirschman, 1982), yet later scholars showed that the decision process is also shaped by the affective factor (Pine and Gilmore, 1998; Maklan and Klaus, 2011). They provided evidence that consumers frequently express various emotions such as fun, excitement or disappointment during the consumption process. According to the perspective of experience economy (Pine and Gilmore, 1998), Schmitt (1999) confirmed that marketing philosophy has evolved into a new step in which the experiences are the centrality of marketing activities instead of traditional values. Customer experience is influenced by external stimuli provided by organizations, therefore controlling and manipulating experiential activities are very critical in creating marketing strategies (Schmitt, 1999).
According to Yuan and Wu (2008), organizations should consider experiential marketing as a marketing tactic in which physical surroundings and operational processes are rationally designed to bring their customers wonderful experiences. Based on the perspective of customers, Schmitt (1999) conceptualized experiential marketing as “customers’ developing recognition and purchasing goods or services of a company or a brand after they get experiences from attending activities and perceiving stimulations”. Lee et al., (2010) simply documented experiential marketing as “unforgettable memory or experience rooted deeply in people’s mind” and the focus of consumers has been on individual experiences they obtained during the consumption process. They also indicated that in the field of experience marketing, more efforts and skills are required by staff to provide valuable experiences to customers.
Williams (2006) stated that experience marketing contributes to advancing the value of a product or a service at one side. On another side, experiential marketing also covers the utilitarian aspects of product or service such as quality and function. Further, it was shown to enhance emotion and stimulate the human senses. Yuan and Wu (2008) agreed that experience marketing combines the core nature of products and interactive experiences to add value in products or services, this increase helps customers make consumption decisions more logically and pleasurably. Additionally, experiential marketing is important to enterprises in discovering the new and prospective market segments to avoid price competition (Schmitt, 1999).
Experiential marketing and traditional marketing
The literature of service marketing showed that there are significant differences between the experiential marketing approach and the traditional marketing approach (Schmitt, 1999; Williams, 2006; Yuan and Wu, 2008). According to Schmitt (1999), these differences are distinguished by four major issues regarding “customer characteristics”, “marketing focus”, “product categories and competition” and “research method” (Table 2.1).
In terms of customer characteristics, the traditional marketing approach views consumers as logic and ration-based decision-makers who emphasize the role of function and price (Schmitt, 1999). For the traditional approach, marketers identified the decision-making process of a customer consisting of 5 different steps from need recognition, information search, and evaluation of alternatives, purchase decision and post-purchase behavior. Conversely, the experiential marketing approach considers customers as logic and emotion-based decision-makers in which pleasure experiences are appreciated (Schmitt, 1999). In terms of the marketing focus, the traditional marketing approach has stated that the focus of customers in the consumption process has been on the purchase process and utilitarian factors such as function, benefit, price or promotion. According to this perspective, the best solution of the customer in selecting products or services with the largest overall utility through a process of considering and comparing the importance among products or services (Schmitt, 1999). In contrast, creating a comprehensive experience in consumption events is the largest interest of experiential marketers. Instead of the consumption process, the attention of the experiential marketing approach emphasizes the process of creating customer experience comprising from “pre-purchase, moment-of-truth to post-purchase” (Schmitt, 1999).
Table of contents :
RÉSUMÉ
ABSTRACT
ACKNOWLEDGEMENTS
TABLE OF CONTENTS
LIST OF TABLES
LIST OF FIGURES
CHAPTER 1. INTRODUCTION
1.1. General introduction
1.2. Research question
1.3. Research objectives
1.4. Contribution of research
1.5. Research methodology
1.6. Thesis structure
CHAPTER 2. EXPERIENTIAL MARKETING AND SERVICE EXPERIENCE
2.1. Experience economy
2.1.1. The characteristic of the experience economy
2.1.2. The role of the experience economy
2.1.3. The elements of the experience economy
2.2. Experiential marketing
2.2.1. The characteristics of experiential marketing
2.2.2. Experiential marketing and traditional marketing
2.2.3. The elements of experiential marketing
2.2.4. The role and application of experiential marketing
2.3. Customer experience
2.3.1. Concepts of customer experience
2.3.2. Concepts of service
2.3.3. Customer service experience
2.3.4. Theoretical models of customer experience
2.3.5. Dimensions of customer experience
2.4. Employee work experience
2.4.1. Concepts of work experience
2.4.2. Theoretical models of work experience
2.4.3. Work experience in the service industry
2.5. Conclusion
CHAPTER 3. SERVICE ENVIRONMENT
3.1. Concepts of service environment
3.2. Dimensions of service environment
3.3. The role of the service environment
3.4. Theoretical models of service environment
3.4.1. The model of Kotler (1973)
3.4.2. The model of Mehrabian and Russell (1974)
3.4.3. The model of Bitner (1992)
3.5. The physical work environment in the service industry
3.5.1. Concepts of physical work environment
3.5.2. Dimensions of physical work environment
3.6. Effects of the service environment on customers and employees
3.6.1. Service environment, service experience and customer behavior
3.6.2. Service environment, job experience and employee behavior
3.7. Conclusion
CHAPTER 4. SOCIAL INTERACTION
4.1. Concepts of social interaction
4.2. Dimensions of social interaction
4.2.1. Customer-to-employee interaction
4.2.2. Customer-to-customer interaction
4.3. Social interaction, service experience and customer behavior
4.3.1. The role of customer-to-employee interaction
4.3.2. The role of customer-to-customer interaction
4.4. Social interaction, job experience and employee behavior
4.5. Service environment and social interaction
4.6. Conclusion
CHAPTER 5. SATISFACTION, LOYALTY AND EMPLOYEE EMOTION
5.1. Customer satisfaction
5.1.1. Concepts of satisfaction
5.1.2. Levels of satisfaction
5.1.3. Antecedents and consequences of customer satisfaction
5.2. Customer loyalty
5.2.1. Concepts of loyalty
5.2.2. Types of customer loyalty
5.2.3. Approaches to customer loyalty
5.2.4. Antecedents and consequences of customer loyalty
5.2.5. The relationship between satisfaction and loyalty
5.3. Employee emotion
5.3.1. Concepts of emotion
5.3.2. Concepts of employee emotion
5.3.3. Theories of employee emotion
5.3.4. The role of employee emotion in the service industry
5.4. Work satisfaction
5.4.1. Concepts of job satisfaction
5.4.2. Theories of job satisfaction
5.4.3. Antecedents and consequences of job satisfaction
5.5. Conclusion
CHAPTER 6. HYPOTHESES DEVELOPMENT AND CONCEPTUAL MODEL
6.1. Effects of servicescape and social interaction on customer responses
6.1.1. Correlation between servicescape and customer’s perceived social interaction
6.1.2. Correlation between servicescape and customer service experience
6.1.3. Correlation between social interaction and service experience quality
6.1.4. Correlation between social interaction, service experience and customer satisfaction
6.1.5. Correlation between social interactions, service experience and customer loyalty
6.2. Effects of workspace and social interaction on employee responses
6.2.1. Correlation between servicescape and employee’s perceived social interaction
6.2.2. Correlation between servicescape and employee emotion
6.2.3. Correlation between servicescape and employee job experience
6.2.4. Correlation between social interaction, employee emotion and job experience
6.2.5. Correlation between social interaction, employee emotion, job experience
6.3. The relationship between customer variables and employee variables
6.3.1. Correlation between employee emotion, social interaction and customer
6.3.2. Correlation between job satisfaction, customer satisfaction and customer loyalty
6.4. Research framework
CHAPTER 7. RESEARCH METHODOLOGY
7.1. Research design
7.2. The scope of research
7.3. Variable definition and measurement
7.4. Questionnaire design
7.5. Sample and data collection
7.6. Data analysis procedure
7.6.1. Descriptive statistical analysis
7.6.2. Reliability analysis of summated scales
7.6.3. Measurement model analysis
7.6.4. Structural model analysis
CHAPTER 8. ANALYSIS RESULTS
8.1. Results of descriptive statistical analysis
8.1.1. Descriptive analysis for customer sample – demographic characteristics
8.1.2. Descriptive analysis for employee sample – demographic characteristics
8.1.3. Descriptive analysis for measurements of customer sample
8.1.4. Descriptive analysis for measurements of employee sample
8.2. Reliability analysis of summated scales
8.2.1. Test the interclass correlation coefficient and within-group interrater reliability
8.2.2. Test common method bias
8.3. Measurement model analysis
8.3.1. Indicator loadings and composite reliability
8.3.2. Construct validity
8.3.3. Test second-order constructs
8.4. Structural model analysis
8.4.1. Evaluation of collinearity
8.4.2. Significance and relevance of research hypotheses
8.4.3. Coefficient of determination
8.4.4. Measurement of effect sizes
8.4.5. Evaluation of the predictive relevance
8.4.6. Results of mediating role tests
CHAPTER 9. DISCUSSION AND CONCLUSION
9.1. Research discussion
9.1.1. The effects of servicescape and social interaction on customer responses
9.1.2. The effects of the physical workplace on employee responses
9.1.3. The relationship between employee variables and customer variables
9.2. Theoretical contributions
9.3. Managerial contributions
9.4. Limitations and directions for future research
9.5. General conclusion
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