October 21, 2004
Raghunathan: Marketers Must Adapt to the
Experience Economy
By Erica Grieder
For marketers, it may no longer be enough to simply anticipate your customer’s needs. Speaking to the Austin chapter of the American Marketing Association Oct. 19, Raj Raghunathan, a professor of marketing at the McCombs School, explained that we now live in an “experience economy,” and marketers would be wise to adjust their strategies accordingly.
Raghunathan framed his explanation of the experience economy with a quick tour of marketing history. Just as economies have evolved from agrarian to industrial to service and, now, experience, so have consumer tastes. For centuries, consumers were primarily interested in the functional features of a product.
About 150 years ago, all of that began to change as manufacturers cottoned on to the idea of branding and advertising. Consumers became interested in the less tangible features of a product, such as status or cachet. Eventually, providers began to customize their offerings for specific consumers, further upping the emotional ante.
Today, said Raghunathan, “people want to be catered to emotionally, treated as intelligent, meaningful and significant.” Consumers are no longer willing to settle for mere service. They look for an aesthetically pleasing, sensually appealing experience, even if they’re just buying a cup of coffee.
In other words, business is no longer strictly business; it has become a kind of seduction. “There’s a kind of life that you think you would like to lead,” said Raghunathan, reflecting on the example of Starbucks, “and lo and behold, it’s available to you.”
Raghunathan attributed the emergence of the experience economy to the vast improvements in technology of recent years, which allow for greater personal interaction between consumers and companies than ever before. Consumers have come to expect more, and companies are able to deliver it.
Other researchers, he said, have linked the change to a natural evolutionary process. Raghunathan likened this theoretical "hierarchy of demands" we have as consumers to the “hierarchy of needs” identified by psychologist Abraham Maslow.
Either way, said Raghunathan, the experience economy is most likely here to stay, so it would behoove marketers to move beyond the frame of “satisfaction/dissatisfaction” and adopt a more empathetic approach to their customers. They can achieve this in any number of ways. For example, toothbrush manufacturers now offer a wide range of colors and shapes in their designs.
“They’ve used the handle of a toothbrush as a medium of communication,” said
Raghunathan, explaining that even a seemingly mundane product can be used to
evoke emotion.
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