Experience economy

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Theoretical framework

This chapter presents the theoretical framework which will cover the different theories that is connected to the research question.

Experience economy

As a result of the competitive nature of markets, companies are always on the search for aspects that will differentiate them from the competition. Pine and Gilmore (1998) argue that this has contributed to a natural evolution of economic offerings. The experience economy is the fourth and current step in the progression of economic value, where experiences are seen as specific economic and valuable offerings differentiated from products and services. Companies can intentionally stage a service, where products take on the role of props, to through the engagement of the customer create memorable events that are seen as the offering. The key attribute is personal, the demand factor is the sensation and the experience is revealed over a duration of time (Pine & Gilmore, 1998).

Experiential marketing

Schmitt (1999) argues that a shift has been noted in several industries, where companies have changed their marketing strategies from a features-and-benefits focus towards the offering of experiences. The underlying developments in the business world that have opened up for the expansion of experiential marketing are; the increased value of brands, the evolution in information technology and media transformation, and the transcendence to two-way communication and entertainment focus. Experiential marketing consists of experiences that are memorable for the customer, that builds on sensory, emotional, cognitive, behavioural and relational values. The experiential marketing approach is argued to be beneficial in today’s information and branding revolution (Schmitt, 1999).
The essential concepts to create perceptions with experiential marketing are strategic experiential modules and experience providers. Schmitt (1999) distinguishes five approaches of strategic experiential modules: Sense, Feel, Think, Act and Relate. ‘Sense’ is focused on creating sensory experiences through the five senses; sight, sound, touch, taste, and smell. ‘Feel’ is connected to the customers’ inner feelings and emotions. The goal is to create affective experiences for the customer making them develop emotional connections to the brand, this by triggering emotions so that the customer will get engaged. This can be hard internationally due to cultural differences. ‘Think’ is focused on the intellect of the customer by creating cognitive and problem solving experiences that hopefully result in creative engagement. ‘Act’ is the rational approach with a focus on change in the behaviour of the customer. Schmitt (1999) states that changes often are motivational, inspirational, and emotional, thereby triggering customers to engage. The last module is ‘Relate’ which is focused on the customers willingness to improve. This willingness can be influenced by pushing on factors the customer can relate to. These strategic experiential modules are implemented with experience providers.
Experience providers refers to any medium or touch point that contribute to a experience, such as marketing communication, product packaging, visual- and verbal branding, people (both employees and ambassadors) and the spatial environment itself. For the best result marketers should strive to create a holistic experience by combining all the experiential modules while managing the experience providers carefully (Schmitt, 1999).
In the line of Schmitt’s work (1999), Pine and Gilmore (2016) focus on behavioural change. They state that companies can use experiences to guide customers through journeys of transformation, for example healthy lifestyle changes. One approach in the model focuses on experiential marketing. This is defined as experiences that is staged with the goal to be less dependent than traditional marketing and to build a demand from the customers.

 Experiential Retailing

Baker (1992) assert that by composing and modifying the store environment elements such as lightning and music, the willingness to buy can change for the customer. A video experiment made it possible to see how the store atmospherics impact the feeling of arousal and pleasure from the customer. Furthermore, Bitner (1992) states that physical atmosphere has an ability to affect the behaviour of a customer. Taking this into consideration, new strategies can be developed on how atmosphere can steer behavioural patterns of customers in the desired direction, but also on how it affects employee behaviour. The behaviour and attitude of employees affect the quality of the customer interaction which in turn is a factor impacting customer satisfaction.
The retailer and the employees always stand before the customer’s question; why should I buy from you? Senthil, Chandrasekar and Selvabaskar (2012) try to explain and explore the ways experiential retailing can be brought to life through five design principles. The first key design principle is ‘engage and include all five senses; sight, sound, touch, taste and smell’. The other principles are ‘theme the experience’, ‘harmonize impression with positive cues’, ‘eliminate negative cues’ and to ‘have a mix in memorabilia’. By following these principles together with a detailed understanding about the shopper, the retailer can organise the store to fit the customers’ requirements. The retailer should analyse its marketing strategy and identify factors for improvement when it comes to engaging, empowering, and benefiting their customer. Using experiential retailing as a tool to differentiate the offering, will result in customer loyalty (Senthil et al., 2012).

 Customer perception

Perception is the unconscious process of identifying, organising, and interpreting sensory information in order to make sense of incoming data and the surrounding environment. Perception is not mirroring sensory information directly, since it is also influenced by the person’s attention, memory, cognition, and expectations (Solomon, Bamossy, Askegaard & Hogg, 2013). This process is continuous and takes place unconsciously in the human mind (Krishna, 2013).

The Perceptual Process

The Perceptual Process offers a model for how human perception works in relation to the five senses (Solomon et al., 2013). The five senses are components of the sensory nervous system and are commonly identified as sight, sound, touch, taste and smell. The human sensory nervous system is complex and consists of the sensory neurons with receptor cells, the thalamus (part of the brain processing sensory information), the cortex (interpreting nerve cells surrounding the brain) and the neural pathways connecting these components (Krishna, 2013).
Figure 1. Perceptual process Source: Solomon et al., (2013) p. 122
The senses are exposed to stimuli in the form of sights, sounds, smells textures and tastes. This stimuli is picked up by sensory receptors found throughout the body: in the eyes, ears, nose, mouth and skin. The function of perceptual selectivity make sure the brain does not get overwhelmed, as the receptors only attend to certain stimuli. The receptors convert selected stimulus into electronic impulses sent to the brain. Here, these signals are decoded, resulting in sensations. Only a very limited amount of sensations are noticed and selected for interpretation. In the phase of interpretation, other elements such as memories and expectations, help creating meaning of the sensation which generates a response in the form of a perception (Solomon et al., 2013). If stimuli leads to sensations depends on if the sensory receptor is within range and if the stimuli is intense enough to pass the sensory threshold. The sensory threshold is the lowest level of stimuli that can be detected on a specific channel. For example, if a print is too small or a fragrance is too vague it will not be noticed by customers (Solomon et al., 2013).

 Schemas

Schemas are thought patterns unconsciously used to group resembling objects and categorise new information in order to help us understand the world. Stereotypes, worldviews and scripts are all examples of schemas (Georgeon & Ritter, 2011). How we assign meaning to stimuli is highly subjective and depends on what schema is assigned to the stimuli transmitting object (Solomon et al., 2013).
Retailers can use schemas to shape customer perceptions. By stimulating the senses with different cues, customers will assign different schemas to products. Customers are then unconsciously positioning the product on an imagery perceptual map with the competing products. Customers compare these products using few but relevant dimensions, such as price and quality, or trendiness and convenience. By affecting what schema is assigned to an object, products can be moved in the perceptual map, meaning the perception of the product is changed (Solomon et al., 2013). For example, the colour and shape of a perfume bottle affect what schema is assigned and whereas it is perceived as macho, glamorous or sporty.

1.Introduction
1.1 Background
1.2 Problem discussion
1.3 Purpose
1.4 Target audience
2. Theoretical framework
2.1 Experience economy
2.1.1 Experiential marketing
2.1.2 Experiential Retailing
2.2 Customer perception
2.2.1 The Perceptual Process
2.2.2 Schemas
2.3 Customer value
2.3.1 Experiential value
2.3.2 Value creation
3.Methodology
3.1 Research purpose and philosophy
3.1.1 Exploratory research purpose
3.1.2 Research philosophy
3.2 Research approach to theory development and research design
3.2.1 Inductive research approach
3.2.2 Multi-method qualitative research design
3.2.3 Triangulation
3.3 Time Horizon
3.4 Literature search
3.5 Data collection
3.5.1 Primary data
3.5.2 Data analysis
3.6 Trustworthiness
3.6.1 Dependability
3.6.2 Credibility
3.6.3 Transferability
3.6.4 Ethics and limitations
4. Results
4.1 Case 1: Rituals
4.1.1 Staff interaction
4.1.2 Value co-creation
4.1.3 A uniformed strategy
4.1.4 A higher purpose
4.2 Case 2: Lush
4.2.1 Staff education
4.2.2 Value co-creation
4.2.3 A uniformed strategy
4.2.4 The higher purpose
4.3 Case 3: The Expert
4.3.1 Staff interaction
4.3.2 Value co-creation
4.3.3 A uniformed strategy
4.3.4 A higher purpose
5. Analysis
5.1 Staff education
5.2 Value co-creation
5.3 A uniformed strategy
5.4 A higher purpose
6. Conclusion
7. Discussion
7.1 Contributions
7.2 Managerial implications
7.3 Strengths and limitations
7.4 Further research
I. References
II. Appendix
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