Explanation
What it is
The Experience Economy describes an economic evolution where experiences become the primary source of value creation — surpassing commodities, goods, and services.
Coined by B. Joseph Pine II and James H. Gilmore (1998), it argues that customers increasingly seek emotional resonance and personal meaning, not just functional outcomes.
When to use it
- When designing products or services that aim to delight, not just satisfy
- When shifting from utility-based to emotion-based differentiation
- When diagnosing brand stagnation or commoditisation in mature market
Why it matters
The Experience Economy reframes value as subjective and emotional rather than purely transactional.
It challenges businesses to craft memorable moments that foster loyalty, advocacy, and identity alignment.
In this model, emotion becomes the product — and meaning, not material, becomes the differentiator.
Reference
Definitions
Experience Economy
An economic stage in which companies orchestrate memorable events for customers, and the memory itself becomes the product — marking a progression beyond commodities, goods, and services.
Staging
The deliberate design and sequencing of interactions to evoke emotional engagement, akin to directing a theatrical performance.
Customisation
The personalisation of an experience to the individual’s preferences, which enhances perceived authenticity and emotional resonance.
Transformation Economy
A conceptual successor to the Experience Economy, where the outcome is not just memorable but identity-altering for the customer.
Canonical Sources
- Pine, B. Joseph II & Gilmore, James H. The Experience Economy: Work is Theatre & Every Business a Stage. Harvard Business Review Press, 1999.
- Pine, B. Joseph II & Gilmore, James H. “Welcome to the Experience Economy.” Harvard Business Review, July–August 1998.
- Schmitt, Bernd. Experiential Marketing. Free Press, 1999.
- Prahalad, C.K. & Ramaswamy, Venkat. The Future of Competition: Co-Creating Unique Value with Customers. Harvard Business School Press, 2004.
Notes & Caveats
- The Experience Economy is not a marketing tactic but a systemic value framework — it demands integration across operations, culture, and brand.
- Common misread: treating “experience” as service enhancement rather than a distinct economic offering.
- Pine & Gilmore later extended the model into the Transformation Economy, though few organisations reach this stage sustainably.
- Digitalisation has expanded the framework’s reach but also blurred its boundaries with the Attention Economy and Creator Economy.
How-To
Objective
To design and deliver experiences that generate lasting emotional impact — turning customer engagement into a differentiated source of economic value.
Steps
- Map the Emotional Arc
Identify desired feelings (e.g. wonder, belonging, excitement) at each stage of the user journey. - Stage the Encounter
Treat every touchpoint as a scene; script the sensory, visual, and behavioural elements that evoke the intended emotion. - Design for Memorability
Introduce peak moments and transitions that punctuate routine interactions with surprise or meaning. - Co-create with the Audience
Allow participation and agency; experiences resonate deeper when users shape the outcome. - Close with Reflection
End on a note that reinforces memory formation — a takeaway, ritual, or memento that cements the emotional link.
Tips
- Use story arcs (setup → tension → resolution) to structure experiences coherently.
- Prototype emotions: test reactions early, not just usability.
- Focus on authenticity — audiences detect scripted joy.
- Emotional impact often requires contrast; calm can amplify excitement.
Pitfalls
Treating experience as surface aesthetics
Build from emotional intent, not decoration.
Over-engineering the journey
Leave room for spontaneity and co-creation.
Neglecting staff experience
Employees are part of the performance; disengagement breaks the illusion.
Acceptance criteria
- Emotional journey mapped and validated through user feedback.
- Staged experience documented as a repeatable blueprint or playbook.
- Participants describe memorable moments in post-experience surveys or interviews.
Tutorial
Scenario
A luxury travel company facing declining loyalty wants to reposition itself in the Experience Economy.
Customers no longer differentiate between similar premium offerings — they compare emotional aftereffects.
The leadership team decides to reimagine their “journeys” not as service itineraries but as staged experiences that evoke awe and belonging.
Steps
- Map the Emotional Arc
The team begins by charting the traveller’s psychological state across the entire trip — from anticipation at booking to nostalgia after returning home.
They identify two dominant emotions to engineer: anticipation (before) and transcendence (during). - Stage the Encounter
Each stage of the journey becomes a theatrical act.
Airport transfers are reframed as the opening scene — curated playlists, sensory cues, and personalised greetings replace standard chauffeur service. - Design for Memorability
Midway through the trip, guests are invited to a candle-lit dinner at a remote viewpoint.
The environment, timing, and narrative framing (local legend shared by a guide) produce a peak emotional moment — a deliberate memory anchor. - Co-create with the Audience
Rather than scripted itineraries, travellers select from modular “story threads” that adapt dynamically to their mood and preferences, blending predictability with agency. - Close with Reflection
Upon returning, guests receive a hand-written note and a digital scrapbook capturing key moments — reinforcing the emotional continuity between brand and memory.
Result
Customer perception
Before
Premium service provider
After
Emotionally resonant storyteller
Loyalty behaviour
Before
Transactional repeat booking
After
Voluntary advocacy & peer referral
Internal alignment
Before
Operations-led
After
Experience-ochestrated
The company’s NPS rises not because of improved logistics, but because emotion has become the product — proof of strategic repositioning into the Experience Economy.
Variations
- If digital touchpoints dominate, apply immersive storytelling through AR/VR or community challenges to evoke emotion remotely.
- For B2B contexts, reinterpret experience as collaborative discovery — emotion derived from shared progress rather than entertainment.