Photo courtesy Wikimedia Commons.

In our tough economic times, how can Starbucks survive? That question points us to a principle Joe Pine and Jim Gilmore described in their book: The Experience Economy. They trace our economic progression from an agrarian to an industrial to a service economy—and finally to the emerging experience economy.

Let’s take that cup of coffee as our example. A century ago, you would buy the beans (a commodity in the agrarian economy), roast them, grind them and finally brew them. For a few pennies you had your cup of morning joe. Then someone had the great idea of roasting, grinding and packaging the coffee and selling it as a packaged good (welcome to the industrial economy). We paid a bit more for the convenience. The next leap came with businesses began providing the “service” of brewing the coffee for you (welcome to the service economy) and busy folks gladly paid even more for the same cup of coffee they could have brewed themselves.
And finally: Starbucks. Today we have outsourced the entire chain of events for the coffee “experience” at high-end coffee houses—and we are willingly to pay considerably more.

This progression repeats itself.
Think ice cream! Make it yourself, buy it by the quart, get it scooped at Baskin-Robins—or have the Cold Stone Creamery “experience.”
Think birthdays! Once Mom made a cake from scratch, then Betty Crocker sold easier mixes. Of course, store-bought cakes were even easier. That leads to today’s birthday “experience” at a place like Dave & Buster’s—maybe even skipping the cake!

We value experiences and are willing to scrimp to enjoy them.

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