It would be easy to conclude that the hype surrounding the Experience Economy is over, following the world-changing events of 2020.
Physical distancing has been mandated by governments across the globe, consumers are hunkering down in the safety of their homes, rarely venturing out and digital engagement, along with touchless technologies, have exponentially increased. However, it can be argued that in fact, quite the opposite is true; that the Experience Economy, now, is more important than ever before.
And here’s why. As companies try to connect with their consumers, employees and partners; as they try and meet the unmet and unarticulated needs of their stakeholders, the experiences they deliver, at this critical inflection point of our history, will be more important than ever to their long term success.
As a concept, the Experience Economy is not new. A 1998 article in Harvard Business Review titled ‘Welcome to the Experience Economy’ highlighted how leading companies understood that “the next competitive battleground lies in staging experiences.” Products and services were no longer seen as differentiators.
By 2017, McKinsey had declared ‘Experiences are king’ as their research confirmed how consumers had gradually shifted their expenditure from products to experiences. In their report, McKinsey found that personal consumption expenditure on experience-related services had grown 1.5 times faster than total personal consumption spending and nearly four times faster than expenditure on products.
Gartner even declared that 2019 would be the year that experience overtake product and price as the main competitive differentiators for brands and businesses. Positive, hyper-personalised experiences were now required to sweeten the deal for consumers.
Rise of Intelligent Experiences
In line with the rise of exponential technologies such as Artificial Intelligence, Big Data and the Internet of Thing, the concept of the Experience Economy has also evolved over the past few years. Today, successful businesses manage their experiences as a core strategic business capability. They have seen how customers are willing to pay more for experiences. They understand that the value needle has shifted.
This new approach is powered by Intelligence. Intelligent Experience Management leverages the power of exponential technologies – AI, IoT, advanced analytics – to drive a more optimal customer, employee, product and brand experiences. This relentless focus on value delivery through enhanced experiences, is what will allow enterprises to win in today’s market.
And these exponential technologies powering differentiated business capabilities, are vital to the long term success of enterprises, because of the volume and nature of data that informs modern Experience Economy strategies. Traditionally, organisations relied heavily on operational data – revenue, inventory, suppliers, workforce – to make decisions, but today they need insights from a different type of data to augment the value their provide to their customers; they need experience data.
Experience data provides insights into the sentiment and emotional aspects that influence a customer, employee, partner or supplier decisions towards a brand. In short, operational data reveals what is happening in an organisation, and experience data reveals why and how it is happening.
An Intelligent Experience Management strategy would measure and track operational data and experience data and use AI in combination with other exponential technologies to construct and augment individualised profiles of customers, employees, brands or products. Predicitve or Prescriptive actions can then be taken in order to optimally drive outcomes that matter.
Put another way, instead of reacting to problems when they occur, increasing the ‘experience gap’, companies can now get ahead of the curve and address challenges before they have a lasting negative impact on the organisation.
The impact and advantage of this type of capability will be indispensable to organisations as they adapt to changing customer behaviour in the wake of the pandemic. While adoption of digital services has exponentially increased across the globe, the events of 2020 and the resulting shift in consumer behaviour, will put additional pressure on organisations to transform how they engage with customer and employees.
And nowhere is this shift as apparent as in the financial services sector.
Experience Economy transforming banks, insurers
Banks’ relationships with their customers have largely been built on the basis of compliance: often a box-ticking exercise that ensures the bank’s conduct is in line with a robust set of rules and standards and that the consumer adheres to a strict set of principles.
This dynamic prevailed until the emergence of the internet and other digital technologies that created new channels for customer engagement. According to a recent Qualtrics study, of all the time customers spent interacting with their bank, 47% of that time was via online channels, and less than a third of that time in person. The same study found that ‘Poor Service’ was the second-most important factor in consumers considering leaving their bank for a competitor.
The banking industry is extremely competitive. Most banks generally offer the same types of products and services. The real differentiation lies in the experience that customers have when interacting with the bank. And the cost of a poor experience I this industry has become increasingly significant: a 2018 survey by Forrester Research found that, for every one-point decline in its customer experience score, a multi-channel bank loses $124-million in potential revenue.
Banks, competing with more agile fin-techs and a growing ecosystem of non-traditional financial services providers – including the powerful telco industry – have taken note of this and have been making significant investment into their Experience Economy strategies. By 2018, McKinsey found that three out of four of the world’s 50 largest banks were committed to some form of customer experience transformation.
Insurers are also taking note.
Insurance provider Allianz recently leveraged Qualtrics, the experience management platform, to collect experience data from customers in 22 countries. Using the platform to filter and priorities insights by location, and function, Allianz could empower their customer-facing teams with the certainty to know what action to take to deliver a seamless and positive experience at every step of each customers’ engagement with the company.
Allianz has also used the experience data to develop entirely new products to help protect businesses from emerging risks, improve its reputation for quality consultations and become integral business partners to its customers, building lasting loyalty.
Financial services companies that have not invested in transforming their customer and employee experiences will be left far behind their competitors in a post-2020 world. Leaving experience management to chance is a recipe for failure.
Instead, organisations should seek ways to improve their collection and processing of experience data and combine that with operational data to make informed decisions over the future of their companies.