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Are we living in the experiential economy?

What is experience? According to the Psychology dictionary it is “a conscious event the aspect of intellect and consciousness experienced as combinations of thought, perception, memory, emotion, will and imagination, including all unconscious cognitive processes.”

We are living in a world where people are spending more money and investing time on experiences over products.(i) Economists have typically lumped experiences in with services, but experiences are a distinct economic offering, as different from services as services are from goods. Today we can identify and describe this fourth economic offering because consumers unquestionably desire experiences, and more and more businesses are responding by explicitly designing and promoting them.

Let’s take an example of Nike Inc. With its Niketown stores, Nike is almost in the experience business. To avoid alienating its existing retail channels, Nike created Niketown as a merchandising exposition. It’s ostensibly for show—to build the brand image and stimulate buying at other retail outlets—not for selling. If that is so, then why not explicitly charge customers for experiencing Niketown? Would people pay? People have already queued to enter the Niketown on Chicago’s Michigan Avenue. An admission fee would force Nike to stage more engaging events inside. The stores might use the basketball court, say, to stage one-on-one games or rounds of horse with National Basketball Association players. Afterward customers could buy customized Nike T-shirts, commemorating the date and score of events—complete with an action photo of the winning hoop. There might be more interactive kiosks for educational exploration of past athletic events. Virtual reality machines could let you, as Nike’s advertising attests, be Tiger Woods. Nike could probably generate as much admission-based revenue per square foot from Niketown as the Walt Disney Company does from its entertainment venues.(ii)

Similarly, in the consultancy business. Here are the top 3 things you need to know when considering your customer experience.

  • It has to be personal
  • Get Engaged
  • Walk in their shoes.

The best way to understand your customer experience is to be your own customer. To conclude:

“Today the concept of selling experiences is spreading beyond theatres and theme parks.”

© Parth Kalke.

 

  • (i) A ‘golden era’ for events? By Andrew O’ Loughlin
  • (ii) Welcome to the Experience Economy

From the July–August 1998 Issue

Blog Newya

What is Stagflation?

Stagflation is an economic scenario where an economy faces both high inflation and low growth (and high unemployment) at the same time. The idea was first proposed by New Zealand economist William Phillips, after whom the ‘Phillips curve’ is named, based on statistical studies on inflation and unemployment.

Some economists prescribe greater spending by the government to resuscitate the economy. But stagflation ties the hands of the government and the central bank from taking such countercyclical policy steps.(i)

Which countries faced Stagflation in the past and present?

In 1970s US faced stagflation. In desperation, President Jimmy Carter (1977-1981) tried to combat economic weakness and unemployment by increasing government spending, and he established voluntary wage and price guidelines to control inflation. Both were largely unsuccessful. A perhaps more successful but less dramatic attack on inflation involved the "deregulation" of numerous industries, including airlines, trucking, and railroads.

These industries had been tightly regulated, with the government controlling routes and fares. Support for deregulation continued beyond the Carter administration. In the 1980s, the government relaxed controls on bank interest rates and long-distance telephone service, and in the 1990s it moved to ease regulation of local telephone service.(ii) Russia suffered from stagflation in 2014-15. Russia's economic growth slowed down to amid dwindling investment, hefty capital outflows, and weak demand and low prices for its commodities exports. (iii)

The Indian economy has now faced six consecutive quarters of slowing growth since 2018. For the whole year, growth rate is expected to be around 5%. Most economists have blamed the slowdown on the lack of enough consumer demand for goods and services. 

What is the way out?

Some economists suggest the policymakers should stop worrying about inflation and instead focus exclusively on boosting aggregate demand in the economy.

To quote legendary economist, Robert A. Mundell, is as follows: “The correct policy mix is based on fiscal ease to get more production out of the economy, in combination with monetary restraint to stop inflation. The increased momentum provided by the tax cut will cause sufficient demand for [money] to permit real monetary expansion at higher rates.”

 

© Parth Kalke.

 

i. Prashanth Preumal J. The Hindu Sunday,9th January 2020

ii. Mike Mofatt thoughco.com 27th January 2020

iii. Alexander Kolyandr and Paul Hannon – The Wall Street Journal 15th Jan 2014

 

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