Lesson 2' Adding Value to Rural Businesses with Experience Economy Strategies

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Lesson 2. Adding Value to Rural Businesses with
Experience Economy Strategies
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Quick Links

• 2.1 The 4E Strategies to Differentiate Your
  Business from Competitors
• 2.2 Making Offerings Memorable through Experience
  Economy Strategies

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2.1 The 4E Strategies to Differentiate Your
Business from Competitors
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2.1 The 4E Strategies to Differentiate Your
Business from Competitors

• A competitive advantage differentiates a small
  business from its competitors. A competitive
  advantage is a distinct combination of offerings
  that customers want and only you can uniquely
  provide. In a world full of options, it makes
  you more attractive than your competition. Some
  examples of factors that provide a competitive
  advantage are product quality, service
  reliability, and unique experiences (Megginson,
  Byrd, Megginson, 2006).

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2.1 The 4E Strategies to Differentiate Your
Business from Competitors

• Traditionally, small firms have attempted to
  develop competitive advantages and
  differentiation based on several practical
  benefits delivering your goods to customers
  better, cheaper, or faster. Few small firms can
  compete in all of these areas and some may not be
  very effective with any of the strategies due to
  their limited size and scale of operation.
  Additionally, small firms will rarely win the
  price competition game and thus should not use it
  as a differentiation strategy (National Retail
  Federation, 2005).

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2.1 The 4E Strategies to Differentiate Your
Business from Competitors

• Instead, small firms should look for
  non-traditional means of creating valuesuch as
  experiencesto compete against major discounters
  and chain operations. Experiences can be a key
  competitive resource for small firms as they can
  be very unique, hard to copy, and difficult for
  larger firms to effectively deliver on a personal
  customer level. In the case of experiences, size
  can be used to the small firms benefit as it
  allows for personalization, flexibility, and
  quick reaction something not easily accomplished
  by the big guys!

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2.1 The 4E Strategies to Differentiate Your
Business from Competitors
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2.1 The 4E Strategies to Differentiate Your
Business from Competitors

• Pine and Gilmore (1999) suggest that in the
  Experience Economy, customers idea of a business
  being better increasingly includes
  differentiated offerings, such as experiences,
  along with goods and services. A retailer
  offering an Educational wine tasting experience
  along with selling bottles of wine exemplifies
  added (Experience Economy) value.

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2.1 The 4E Strategies to Differentiate Your
Business from Competitors

• The success (or failure) of many small businesses
  grows out of the decision to move beyond just
  selling a good to creating a customer experience
  (National Retail Federation, 2005).
• Experiential offerings address a higher level of
  customer value that can uniquely position and
  differentiate your business. Creating value for
  the customer also creates value for your firm.
  In this lesson we will explain what a
  differentiation strategy is and how small
  businesses can add value to their offerings by
  enhancing them with experiences (Megginson, Byrd,
  Megginson, 2006 Zimmerer Scarborough, 2005).

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2.1 The 4E Strategies to Differentiate Your
Business from Competitors
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2.1 The 4E Strategies to Differentiate Your
Business from Competitors

• The real strengths of successful small
  independent businesses revolve around
  specialization, differentiation, and finding
  profitable, defendable, and sustainable niches
  (National Retail Federation, 2005)
• A differentiation strategy seeks to develop a
  competitive advantage and attract customers by
  positioning its offerings in a unique and
  distinctive way. It must be truly different in
  the eyes and mind of your customer. The
  element(s) upon which a firm positions itself
  must be something important to customers---it
  must be something they value. Once this is
  discovered, a small business can then begin to
  charge (maybe even a higher price) for this
  offering (Pine Gilmore, 1999).

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2.1 The 4E Strategies to Differentiate Your
Business from Competitors
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2.1 The 4E Strategies to Differentiate Your
Business from Competitors

• This diagram reflects the continuum of elements a
  small firm can use to develop a unique
  combination of offerings and achieve
  differentiation in the marketplace (Kotler, 1997,
  p. 283). Note that experiences can complement
  the other offerings or could be the primary
  offering.

Adapted from Kotler, P. (1997). Marketing
Management Analysis, Planning, Implementation,
and Control. Upper Saddle River, NJ Prentice
Hall. Pine, B.J., Gilmore, J.H. (1999). The
Experience Economy Work is Theatre and Every
Business a Stage. Boston, MA Harvard Business
School Press.
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2.1 The 4E Strategies to Differentiate Your
Business from Competitors

• To view this diagram from an Experience Economy
  perspective, Pine and Gilmore (1999) provide a
  theatre example to demonstrate the value created
  by experiential offerings. They suggest that the
  goods you offer could be considered like props in
  a play. Similarly, your services could be viewed
  as the stage where you offer the props and your
  personnel as actors in their interactions with
  customers. Experiences are the highest value
  creating element when added to other components
  of your offerings. All of these elements must
  work in coordination with each other for the
  play to be a hit!

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2.1 The 4E Strategies to Differentiate Your
Business from Competitors

• Remember, like in a play, all elements of your
  differentiation strategy must make sense together
  and hinge on a common theme. How will your
  customer experience your goods (props) and
  services (the stage)? This approach would
  require consideration of all details that support
  your theme. For example, if your theme involved
  replication of a 19th century schoolhouse, you
  would not use a digital clock. Although this
  sounds obvious, small details in combination
  create and support a themeand can make it
  effective or not.

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2.1 The 4E Strategies to Differentiate Your
Business from Competitors

• It is wise for small firms to find a niche in the
  market and serve it well. However, successful
  differentiation requires that offerings be unique
  yet complementary to each other and to the theme
  and memorable experience you aim to deliver.
• Effective differentiation through experiences
  requires that small businesses consider their
  goods (props), services (stage), and personnel
  (actors), and experiences together.
• Small rural firms must consider new ways for the
  customer to experience their business and
  offerings that are fresh, different, and fun
  (Lisanti, 1997). In so doing, they will add
  greater (experiential) value for the customer,
  uniquely position and differentiate themselves in
  the marketplace, and strengthen their
  competitiveness.

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2.1 The 4E Strategies to Differentiate Your
Business from Competitors
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2.2 Making Offerings Memorable through Experience
Economy Strategies
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2.2 Making Offerings Memorable through Experience
Economy Strategies

• Implementing Experience Economy strategies to
  create a competitive advantage, as outlined in
  the previous lesson, offers an added benefit for
  small businesses. These strategies result in
  experiences in the mind of the customer that
  endure beyond the business-customer interaction.
  In other words, implementing Experience Economy
  strategies can create an experience that is
  memorable for the customer.

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2.2 Making Offerings Memorable through Experience
Economy Strategies

• Think about the experience that comes to mind
  when you say, I remember when. The experience
  you remember is likely to reflect one or more of
  the following qualities
• Situations of personal significance such as
• Getting engaged
• Winning an award
• Rarity, surprise, or suspense such as
• Spotting a mountain lion when on a neighborhood
  walk
• An acrobatic circus show

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2.2 Making Offerings Memorable through Experience
Economy Strategies

• Special design or sensory features such as
• Decorations of a party or holiday
• Incredible natural beauty of nature like the
  colors of a setting sun
• Intensity of emotion such as
• A really scary roller coaster ride
• An exciting moment in sports

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2.2 Making Offerings Memorable through Experience
Economy Strategies

• Making something memorable means to make a
  positive experience easy to recall or remember at
  will. An operator should aim to make his/her
  business memorable. When a business remains in
  the mind of the customer, it is likely to lead to
  both repeat business and positive communication
  by the customer to friends and relatives. This
  positive message shared by customers is termed
  Word-of-Mouth (WOM) advertisinga cost effective
  promotional strategy or what is commonly called
  free advertising for the business.

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2.2 Making Offerings Memorable through Experience
Economy Strategies

• This message is not only free, but when it comes
  from a trusted source, such as a family member,
  friend, or colleague, it increases the
  persuasiveness of the message (Derbaix
  Vanhamme, 2003). WOM provides a description of
  the experience for potential customers, which
  helps reduce perceived risk associated with
  patronizing a new business (Wilkie,1990).
  Therefore, WOM advertising can be an effective
  way of increasing the customer base for
  experience-oriented firms.

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2.2 Making Offerings Memorable through Experience
Economy Strategies

• There are a number of techniques to make
  something easier to recall or remember (Gordon,
  2003 Meyers Jones, 1993 Revelle Loftus,
  1990 White, 2002 Wolfe, 2003 3 Memory Systems,
  2005) and they relate to the qualities presented
  in the previous slide. These techniques include
• Repetition of information
• Personally relevant experiences
• Making sense of unexpected information
• Physical performance of an action rather than
  simply observing
• Multi-sensory e.g., sight, smell, sound
  experiences
• Emotionally arousing experiences

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2.2 Making Offerings Memorable through Experience
Economy Strategies

• These recall-enhancing techniques are embodied in
  Pine and Gilmores (1999) Experience Economy
  strategies. By using such competitive strategies,
  a business and its offerings are made memorable.

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2.2 Making Offerings Memorable through Experience
Economy Strategies

• Repetition of information
• As mentioned in the previous lesson, Pine and
  Gilmore (1999) recommended creating a theme for
  the business and harmonizing cues around the
  theme. The theme and harmonized cues reinforce
  the message of the business. Thus, the message is
  repeated and made memorable.

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2.2 Making Offerings Memorable through Experience
Economy Strategies

• Personally relevant experiences
• The theme also attracts a customer and makes the
  experience more memorable because of its personal
  relevance. For instance, a young customer with an
  interest in Indy 500 drivers is more likely to
  remember who won each go-cart race when the cars
  are modeled after Indy cars with which he/she is
  already familiar.

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2.2 Making Offerings Memorable through Experience
Economy Strategies

• Making sense of unexpected information
• Themes many times have an element of the
  unexpected, or surprise, that help the customer
  recall the business and its offerings. This
  surprising information piques curiosity because
  it does not fit a customers expectations.
  Customers, therefore, spend more time paying
  attention to and thinking about the business,
  aiding recall (Gordon, 2003). For instance, the
  theme of the furniture shop, RVP-1875, is
  furniture production using 19th century methods
  and tools, which is surprising thus drawing
  attention and enhancing recall.

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2.2 Making Offerings Memorable through Experience
Economy Strategies
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2.2 Making Offerings Memorable through Experience
Economy Strategies

• Physical performance of an action, multi-sensory
  and emotionally arousing experiences
• The 4Es employ a number of the recall-enhancing
  techniques to make the business offering more
  memorable. Educational and Escapist experiences
  require the customer to be actively involved.
  Esthetic experiences, and many times Escapist and
  Entertainment experiences, provide rich
  multi-sensory settings. Each of the 4Es is likely
  to arouse emotions of the customer. For
  instance, pleasant scents (Engen, 1982 Van
  Toller, 1988) and music (Ackerman, 1990) that
  help create an Esthetic experience can arouse
  pleasant emotions.

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2.2 Making Offerings Memorable through Experience
Economy Strategies

• The suspense of an Entertainment or Escapist
  experience can be thrilling. The joy of learning
  and achieving personal accomplishment during an
  Educational experience can create emotional
  arousal as well. For instance, a joyful
  experience can come from learning about new
  produce varieties and recipes at a farmers
  market.

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2.3 Summary of Lesson 2

• This lesson presented how a differentiation
  strategy used in small businesses could add value
  to the business offerings by enhancing them with
  experiences. Experience economy strategies, key
  distinctive business strategies, help
  differentiate the business from its competitors.
  Customers are attracted to the added value
  offered by experiences unique to the business.
  Experience economy strategies also support
  lasting memories of the experiences that lead to
  repeat customers and free advertising helping to
  sustain the business. 

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References

• Ackerman, D. (1990). A natural history of the
  senses. New York Vintage Books.
• Derbaix, C., Vanhamme, J. (2003). Inducing
  word-of-mouth by eliciting surprise--a pilot
  investigation. Journal of Economic Psychology,
  24(1), 99-116.
• Engen, T. (1982). The perception of odors. New
  York Academic Press.
• Fiore, A.M., Ogle, J.P. (2000). Facilitating
  the integration of textiles and clothing subject
  matter by students. Part I Dimensions of model
  and taxonomy. Clothing and Textiles Research
  Journal 18(1), 31-45.

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References (continued)

• Gordon, K. T. (2003, November). Total Recall
  Find out what the latest research can teach you
  about creating ads your prospects won't forget.
  Entrepreneur Magazine. Retrieved May 25, 2005
  form http//www.entrepreneur.com/article/0,4621,31
  1562,00.html
• Holbrook, M.B. (1986). Emotions in the
  consumption experience Toward a new model of
  consumer behavior. In Peterson, R.A., Hoyer,
  W.D., Wilson, W.R. (Eds.), The role of affect in
  consumer behavior Emerging theories and
  applications. Heath, Lexington, MA, pp. 17-52.
• Holbrook, M.B. Hirschman, E.C. (1982). The
  experiential aspects of consumption Consumer
  fantasies, feelings, and fun. Journal of Consumer
  Research 9, 132-140.

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References (continued)

• Kotler, P. (1997). Marketing management
  Analysis, planning, implementation, and control.
  Upper Saddle River, NJ Prentice Hall.
• Lisanti, T. (1997). Whatever you may call it, the
  theme concept spells success. Discount Store News
  36(3), 13.
• Megginson, L.C., Byrd, M.J., Megginson, W.L.
  (2006). Small business management An
  entrepreneurs guidebook. New York McGraw-Hilll
  Irwin
• Meyers, C. Jones, T. B. (1993). Promoting
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• National Retail Federation. (2005). Challenges of
  the future The rebirth of small independent
  retail in America. New York National Retail
  Federation.

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References (continued)

• Pine, B.J., Gilmore, J.H. (1999). The
  experience economy Work is theatre and every
  business a stage. Boston, MA Harvard Business
  School Press.
• Revelle, W., Loftus, D. A. (1990). Individual
  differences and arousal Implications for the
  study of mood and memory. Cognition and Emotion,
  4 (3), 209-237.
• Scarborough, N.M. Zimmerer, T.W. (2006).
  Effective small business management An
  entrepreneurial approach (8th Ed.). Upper Saddle
  River, NJ Pearson Prentice Hall.
• Van Toller, S. (1988). Emotion and the brain. In
  S. Van Toller G. H. Dodd (pp. 122-144),
  Perfumery The psychology and biology of
  fragrance. London Chapman and Hall.

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References (continued)

• White, R. (2002). Memory for events after twenty
  years. Applied Cognitive Psychology, 16(5), 603
  612.
• Wilkie, W.L. (1990). Consumer behavior. New York
  John Wiley Sons.
• Wolfe, B. (2003). Twenty ways to spruce up your
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• Zimmerer, T.W., Scarborough, N.M. (2005).
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  management (4th Ed.). Upper Saddle River, NJ
  Pearson Prentice Hall.
• 3 Memory Systems. (2005) Retrieved May 25, 2005
  from http//www.uni.edu/walsh/memory.html

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References (continued)

• Images
• http//www.flipviewer.com/pictures/!Sunset,20Door
  20County.jpg
• http//www.psysheep.com/punkflamingo/RollerCoaster
  _1.jpg
• http//www.mdf.ru/english/contests/sprotshot/cart_
  racing/
• http//www.rvp1875.com/studio.html
• http//www.knowdowntown.com/events/farmersmarket/
• http//www.pegasusbookstore.com/
• http//www.stillpond.com/gift.htm
• http//www.openbookmn.org/
• http//www.daphne1.com/studio.html
• http//www.lhf.org/