30th June, 2017
If you ever thought you were in the business of selling an item or a service to your customer, think again.
You’re actually in the business of selling an experience.
Macquarie recently put out a note on several of Australia leading retail stocks, pointing to a growing tendency for millennials to value an experience over a physical object.
In the age of ‘peak stuff’, it argued, those producing ‘stuff’ may be in a bit of trouble.
The idea that young people in particular are starting to value experience over something that’s real isn’t a new one.
If millennials are buying less ‘stuff’ and putting their dollars into something that provides an experience, that’s something that demands attention.
Associate Professor Paul Burke at the University of Technology Sydney doesn’t buy into the idea of ‘peak stuff’, but told The Pulse that ‘experience’ is playing more of a role in the decision to buy something.
“People are looking for more meaningful experiences in general,” said Burke.
“You do see consumers looking at more services that offer experiences, like Red Balloon.”
The way people experience a product or service is changing.
Burke primarily studies the way people make decisions, whether that’s a decision to buy something, which career to pursue or which school to send their kids to.
He says that given there’s an ever-expanding range of ‘stuff’ for people to buy, the decision on whether to buy a particular item is increasingly being driven by others’ experience with it.
“Our problem at the moment is that we have information overload,” said Burke.
“When you get all this information about a product feature consumers may say ‘that’s too much information’, so they end up going by what they feel about the product or what people are saying about it.”
He said while the phenomenon isn’t present in all product categories, people are now seeking out peer reviews on how other people rated their experience with the service or item.
“Social media is driving a new kind of decision-making,” said Burke.
It’s also is being used to extend experiences and the associated endorphin rush beyond the point of purchase.
For example, a person doesn’t just go to brunch and eat the food – they Instagram the food, too.
“When people say nice things about what you bought or congratulate you, there’s definitely a social influence in all of that,” said Burke.
“Receiving that kind of feedback makes people feel better about themselves – it’s just part of our social make-up.”
The sharing of the experience has become integral to the enjoyment of the product.
If more and more consumers are focused on the experience rather than the product, how can businesses adapt?
Last year National Leader on Retail at Deloitte, David White, told The Pulse that retailers had responded to the shift in sentiment by trying to offer a more tailored in-store experience.
They found that consumers seemed less focused on price point and product features and more focused on the service they received.
Burke said the key for any business wanting to take advantage of the shift in sentiment from stuff to experience was to look at the experience they were offering consumers.
“A lot of the metrics in companies are now based around consumer feedback –knowing that they have to retain customers and build a solid base through delivering on service rather than seeing the customer as a number,” he said.
The key to responding to a trend being driven by millennials is as old as retail itself: customer service.
“It’s about welcoming feedback and having those conversations,” said Burke.
“Listen to the customer and think about things from their point of view. Are you making their experience more enjoyable?”