To get the most out of the modern world, you need to learn to value experiences, not stuff. Welcome to the experience economy, where what you do matters a lot more than what you own.
Nike no longer just sells shoes, they’ve created ‘Niketown’ which is more akin to a theme park than a shoe store, while tourists are switching hotels for AirBnb, not just for cost but to experience a neighbourhood as locals do.
This probably isn’t news to you. The rise of the experience economy is having a profound impact on neighbourhoods with the way we live, where we spend our money and how we build relationships. Yet our approaches to neighbourhood development remain relatively static. So how can we create authentic vibrant neighbourhoods that embrace the experience economy?
What is the experience economy?
First it’s worth revisiting the term "Experience Economy" which was first used in a 1998 article by B. Joseph Pine II and James H. Gilmore who offered the idea as a new way for brands to think about connecting with customers and securing their loyalty.
The Harvard Business Review has described the experience economy as a higher order of economic value creation. Take Nike, to use the example again, who have moved from selling shoes (goods) to operating stores (services) to building Niketown or creating an app that helps track your running and share your progress with friends (experience).
HBR encourages readers to think about experiences is across two dimensions. The first corresponds to customer participation, where brands now interact and co-create with customers. The second dimension of experience describes the connection, or environmental relationship, that brings together customers with a particular place, event or even an app.
What the experience economy means for urban development and the property sector
The experience economy applies more broadly, beyond branding, to cities and economic development. It’s the next competitive battleground for the property sector.
From a resident perspective, there is little tolerance for a ‘build it and they will come’ model. Residents want authentic local experiences, vibrant places, and opportunities to co-create the places where they live. Developers are increasingly encouraged to collaborate with communities and buyers in the creation of neighbourhoods.
Richard Florida’s seminal work on The Rise of the Creative Class highlights this. It is essentially a thesis of how experience-seeking creatives have revitalised downtown centres in cities across the globe.
What Florida describes is a new type of urban value creation - one which is less about bricks and mortar and more about arts and culture.
Five trends to pay attention to
While brands caught onto value created from experiences decades ago, urban development is still playing catch up. Here are five trends to heed:
Experience over stuff
This shouldn’t be a surprise. Modern lifestyles value access to doing things rather than owning things. However the important thing to note is that neighbourhoods are not brands. They are a diverse melting pot of experiences and often the more variety the better. Experiences in neighbourhoods are often built up over time, and are the result of many thousands of efforts by individuals running businesses, parents groups, sporting clubs, local events, street parties and more.
Neighbourhood over home
If experience matters more than stuff then the neighbourhood, is becoming more important than the home. Its no longer just location - which looks at a home or apartment’s proximity to schools, transport and parks. It’s more about what opportunity the neighbourhood offers to connect with a local community, join a volunteer group, hang out at a local brewery or take part in a community garden. The experience economy is driven by our need for social engagement as much as it is access to services.
Attracting talent is directly linked to the neighbourhood. Florida’s rise of the creative class. It’s no longer location but what’s happening. How vibrant is the area?
Developers should think beyond brick-and-mortar and aesthetics of the property, to reach their audience, investors, or guests at an experiential level.
Sharing over owning
If it’s about experience over stuff then it only follows that sharing is becoming a greater priority than owning. The rise of coliving, coworking, car sharing are all part of the burgeoning sharing economy. Why own when you can borrow.
Transience over lifetime
A global employment market creates new mobility for an experience-seeking generation. This has an enormous impact on neighbourhoods and one which we’re not fully equipped for. Where communities have typically grown organically over decades, transient lifestyles means residents are likely to drop in and out, creating a new challenge for growing social connection faster
Authenticity over curation
The experiences people crave in neighbourhoods are experiences that are local, authentic, hidden, undiscovered: the type that “only a local would know”. These experiences are hard to predict and even harder to create. Many residents would prefer to attend a locally run arts event in a community hall than an expertly organised show.
Many organised entertainment like aquariums or theme parks face this challenge: after an initial rush of traffic, they generally see a decline in attendance as the experience loses its novelty. Consistent with what HBR documented about the experience economy and brands, value is often created by participating rather than attending.
Accelerating change towards the Experience Economy
Culture moves fast but cities move slowly. To accelerate change, we can start with defining and measuring the experience economy.
Traditional mechanisms for understanding neighbourhood life such as opinion surveys no longer weigh true in a hyper transient experience culture. Behaviour and activity become more important. This is captured in a neighbourhood’s digital footprint. We look forward to sharing with you how Neighbourlytics captures the experience economy in future posts.