Strategy & Leadership

Integrating experiences into your business model: five approaches

B. Joseph Pine II James Gilmore
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B. Joseph Pine II James Gilmore , (2016),"Integrating experiences into your business model: five approaches", Strategy &
Leadership, Vol. 44 Iss 1 pp. 3 - 10
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 Integrating experiences into your
business model: five approaches
B. Joseph Pine II and James H. Gilmore
B. Joseph Pine II and
James H. Gilmore
(PineGilmore@Strategic
Horizons.com) are the
co-founders of Strategic
Downloaded by RMIT University At 15:18 19 January 2016 (PT)
Horizons LLP and the
co-authors of The
Experience Economy:
Work Is Theatre & Every
Business a Stage
(Harvard Business School
Press, 1999), updated in
2011. Pine, a contributing
editor of Strategy &
Leadership is also the
author of Mass
Customization (1992) and
Infinite Possibility:
Creating Customer Value
on the Digital Frontier
(2011).
DOI 10.1108/SL-11-2015-0080
t has been nineteen years since we published the “Economic Pyramid” chart below to
I illustrate how economic history had evolved over time and to anticipate how
technology and new opportunities to offer customer value would revolutionize it
again.[1] The chart chronicles how, in little more than 100 years, the Agrarian Economy –
based on commodities – was supplanted by the Industrial Economy – based on processed
goods – which in turn was superseded by the Service Economy, setting the stage for
today’s Experience Economy. In the modern era this new segment of the economy is being
driven by customers who are increasingly dissatisfied with mass-produced goods and
services and instead want their purchases to be authentic experiences, memorable events
that engage each individual in an inherently personal way. In recent years, a fifth stage in
this evolution of customer value, the Transformation Economy, has rapidly become a part
of our daily lives. This emerging segment is based on business models that use
experiences in the process of guiding customers through transformations such as healthy
life-style changes.
In little more than a decade, experience thinking has been a potent influence in the
development of new business models in a wide variety of enterprises.[2] Five approaches
are noteworthy:
1. Experiential marketing (EM or XM) applies experience staging to the marketing of
goods and services, seeking to be less dependent on traditional media as the means
of building demand.
2. Digital experiences increasingly flourish, using the Internet and other electronic
platforms to create new technology interfaces focused on the user experience (UX).
3. The application of experience-staging prowess to operations – in what many call
customer experience management (CEM or CX) – typically aims to enhance
interactions with customers.
4. Experiences as a distinct economic offering.
5. Designing experienced-based business models that yield transformations.
1. Embracing experiences in marketing (EM or XM)
When companies outside of traditional experience sectors – such as tourism and
entertainment – first began bringing the idea of experiences into their business plans, they
generally thought in terms of experiential marketing (EM or XM). For example, many
companies experimented with making their mailers more dimensional, or evoking the
senses in dazzling video ads. Few of these campaigns truly engaged with the customer in
a meaningful way.
VOL. 44 NO. 1 2016, pp. 3-10, © Emerald Group Publishing Limited, ISSN 1087-8572 STRATEGY & LEADERSHIP PAGE 3
 Exhibit 1 “The Economic Pyramid” illustrates how economic history has evolved in
little more than a century

Transformations
Determine and Guide

Experiences
Describe and Stage

Services

Devise and Deliver

Goods

Develop and Make

Commodities

Discover and Extract

© 1997 Strategic Horizons LLP

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A more successful practice was to create events – live, programmed experiences that
engage current and potential customers with offerings the company wanted to promote.
Proctor & Gamble. For example, for years Procter & Gamble has placed the Charmin
Restroom Experience in Times Square, New York, from Thanksgiving to New Year’s, the
most heavily trafficked time of the year. Patrons head up an
escalator while “brand ambassadors” sing the praises of
Charmin toilet paper. They can peruse Charmin’s brand values
while waiting their turn to use a restroom, afterward partaking in
such experiences as meeting the Charmin mascot and getting
their pictures taken. Charmin’s “experience agency,” the
Gigunda Group, stated that in the first season of this project
over 400,000 people “experienced” Charmin toilet paper,
yielding over 450 million media impressions shared around the
world.[3]
Blendtec. Marketers have found that such events can work
online as well. For example, blender manufacturer Blendtec
created a series of YouTube videos called “Will It Blend?” where
founder Tom Dickson, bespectacled and wearing a white lab
coat, attempts to blend – always successfully – odd objects to
demonstrate the powerful capabilities of the company’s
blenders. These experiments include blending half-chickens,
golf balls, and a number of Apple products. With these startling
video experiences Blendtec caught marketing lightning in a
blender jar: sales went up 700 percent after some 260 million
views.[4]

Think of such activity not as experience marketing but as

marketing experiences – either real or virtual – that generate
exposure to and demand for a company’s core offerings. And note
how such marketing experiences can be integral to a business
model – whether demonstrating the indefatigable blender or the
memorable softness of the toilet paper.

PAGE 4 STRATEGY & LEADERSHIP VOL. 44 NO. 1 2016

 ‘‘Blender manufacturer Blendtec created a series of YouTube
videos called ‘Will It Blend?’ where founder Tom Dickson,
bespectacled and wearing a white lab coat, attempts to
blend – always successfully – odd objects to demonstrate
the powerful capabilities of the company’s blenders.’’

ING. Many of the most successful companies embedding experiences in marketing think
beyond one-off events or YouTube videos, instead devising programs that create
permanent, physical places. For example, ING, the big Dutch bank, began operations in
the US with almost no name recognition. Rather than roll out a routine branch network the
bank created a number of ING Direct Cafés around the country where financial
professionals engaged current and potential customers in conversations about their
financial needs over a cup of coffee. This informal setting yielded far more in new accounts
than a normal bank branch would. Needing to retrench after the last financial crisis, ING
sold the US business to Capital One, which now runs the coffee bar/banks as Capital One
360 Cafés.
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Whirlpool. Creating permanent experience places works equally well for business-to-
business marketers. Appliance manufacturer Whirlpool Corporation, for instance, slashed
its trade-show budget to create its own marketing experience along the Chicago River, the
World of Whirlpool. Instead of trying to snag 10 to15 minutes of a potential channel partner’s
time at a trade show, Whirlpool now invites them to its own ”World,” where they spend as
much as a day or two with the company as they experience “hands on” all the appliances
Whirlpool has to offer.
Apple. Perhaps no company has more successfully embedded marketing experience
places into its business model than Apple. When Steve Jobs first announced that Apple –
traditionally classified as a manufacturer – would go into retail, the business press was
highly skeptical. Business Week, for example, ran a commentary entitled “Sorry, Steve:
Here’s Why Apple Stores Won’t Work,”[5] but Jobs proved critics wrong by creating a
portfolio of places that enable consumers to directly experience all of its devices. In fact,
Apple is now the number one retailer in the world, with over $5,000 in sales per square foot
in the US.[6] Of course this success depends on a succession of offerings that are a delight
to try out.
LEGO System A/S. LEGO has been in the experience business for almost 50 years with its
LEGOLAND theme park outside its headquarters in Billund, Denmark. Today it boasts an
experience portfolio that includes several other theme parks (now operated by Merlin
Entertainments), LEGOLAND Discovery Centers, LEGO Imagination Centers, over a
hundred of its own LEGO Stores – as well as such virtual experiences as LEGO Minifigures
Online, “The LEGO Movie” and the LEGO Movie Maker app.[7]

2. Embracing user experiences via technology (UX)

The second approach to incorporating experiences into companies’ business models is
through technology, where the focus is on what’s called the “user experience,” a term
coined by famous user-centered design advocate Donald Norman, now the director of The
Design Lab at the University of California, San Diego. In his definition he says that in
companies that are digitally connected with customers the user experience “encompasses
all aspects of the end-user’s interaction with the company, its services, and its
products.”[8] Its requirements include meeting “the exact needs of the customer, without
fuss or bother” and a “simplicity and elegance that produce products that are a joy to own,

VOL. 44 NO. 1 2016 STRATEGY & LEADERSHIP PAGE 5

 a joy to use.”[9] And the joy that many feel when interacting with particularly well-designed
products – such as the pleasure Apple devotees get from their devices – can indeed go
beyond the satisfaction of goods and services to ascend to the level of an engaging
experience.
Nowadays the concept of user experience has been expanded to include all types of
technological interfaces. Thus the term “products” doesn’t just refer to manufactured goods
anymore, but can mean any designed and created economic offering, and so includes
services and experiences. As a result, the opportunities to innovate to produce additional
customer value have burgeoned. As a UX Magazine headline declared, “We’re Living in an
Experience Economy, Design Accordingly.”[10]

3. Embracing customer experiences through operations (CEM or CX)

Operations management, designing and directing the interactions that customers have
with the company and its workers,[11] is an approach that can upgrade an offering from a
service into an experience.
Insurance provider Progressive Corporation, for example, worked relentlessly for decades
on improving its claims adjustment operations. It began by looking in new ways at the
“nonstandard pool” of people considered to be high risks for accidents, finding niches
within that segment that were of less risk than others. Then it used that analysis to design
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a “Name Your Price Tool” to customers. On the accident side, it shifted first to 24/7 claims
adjustment, then added an adjuster-assisting expert system, and finally moved to mobile
operations, which put its claims adjusters into “immediate response claims vehicles.” Now,
whenever a policyholder has an accident, Progressive can dispatch a claims adjuster to
the site of the accident to perform a customer interaction the company has designed to be
a reassuring experience. Thus the service power of the corporation is manifested in its
customers’ moments of need. As a result, in the vast majority of cases the policyholder
walks away from the accident with a check in his pocket. Progressive turns what used to be
a horrible experience – both the accident and the insurance company response – into a
positive, memorable one, a process that, perhaps surprisingly, lowers Progressive’s costs
as well.
While Progressive Corporation embraced experiences in its operations by mass
customizing, the Geek Squad does so through theater. Its founder Robert Stephens
dropped out of the University of Minnesota in 1994 to get into the computer installation
repair business. His insight: who better to fix computer crashes and banish malware than
geeks, especially when dressed to look like FBI agents? He costumed his Geek Squad
Agents in white shirts with clip-on black ties, black pants and shoes, and white socks, and
had them drive around in Geekmobiles – which nowadays are black-and-white Volkswagen
Beetles with the Geek Squad logo emblazoned on the side. In 2002 retailer Best Buy
bought the service company to enhance the customer experience in its own stores and now
every Best Buy has a Geek Squad Precinct inside, filled with Counter Intelligence
Agents – some 20,000 around the world.

‘‘Instead of trying to snag 10 to15 minutes of a potential

channel partner’s time at a trade show, Whirlpool now
invites them to its own ‘World,’ where they spend as much as
a day or two with the company as they experience hands on
all the appliances Whirlpool has to offer.’’

PAGE 6 STRATEGY & LEADERSHIP VOL. 44 NO. 1 2016

 Three common confusions about CEM or CX
Good service vs distinctive experiences. Too many companies mistakenly assume that the goal of
a satisfying “customer experience,” is to make interactions nice and pleasant. Such attributes
facilitate good service, but they are not sufficient elements of distinctive experiences in operations.

Experiences are, by design, memorable. If a company does not create a memory, then it has not
offered a distinctive experience, key to differentiation. Instead of just offering “nice” service,
businesses must design their interactions to be so engaging that customers cannot help but
remember them, prefer them, and tell others about them.

Customization vs being personal. Services are customized to the individual customer, but good
experiences are inherently personal. If the offering does not engage a customer’s heart or mind,
then it is not a distinctive experience. Customizing processes to be quick and easy may be
counterproductive if it also makes them less personal. So instead companies must always take into
account the actual, living, breathing customer, even if treating a person or a business individually
gets in the way of greater efficiency.

Services on demand vs staged experiences. Services are delivered on demand, so the customer
gets what is wanted when it’s wanted. In contrast, properly designed experience offerings are
staged as a performance over a period of time. If a business does not let the time spent with
customers unfold dramatically over the course of the interaction in a way that goes beyond the
routine, then it is not offering a distinctive experience. Companies must stage the sequence of
interactions as a dramatic performance, rising to a climax and then concluding with a personal and
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memorable ending. The critical distinction: services are delivered while experiences are carefully
staged.

To summarize, making transactions nice, efficient and convenient results in customers

spending less time with the company, and usually less money as well. But staging transactions
as dramatically structured experiences encourages customers to spend more of their
hard-earned time, and harder-earned money engaging with the company in memorable and
personal ways.

Operationally, bringing theater into interactions focuses not just on the functional activities
that must be performed, but also on the intention of those activities, changing the way in
which they are performed. This focus on intention in operations can turn mundane
interactions into engaging, even joyful, encounters.

4. Embracing experiences as a distinct economic offering

When well crafted, customer experience management enhances operations in a way that
enables customers to perceive a company offering as a distinctive experience. This works
best when company innovators take into account the using experience of a company’s
offerings, instead of just focusing on the user. And at its best, such experiential marketing
yields marketing experiences that not only generate greater demand for a company’s core
offerings but rise to the level of creating profitable experience offerings.
That is the promise of the Experience Economy in which experiences are a distinct
economic offering. They’re not a new economic offering, just newly identified. More
industries are now learning how to efficiently commercialize experiences using digital
technology.
Concepts underlying best practice. To successfully adopt experiences as a distinct
economic offering, begin by understanding that this approach entails a particular mindset.
Innovators must recognize that in a world saturated with largely undifferentiated and
therefore commoditized goods and services, staging experiences offers an untapped
opportunity for value creation.
But to truly pursue experiences as a distinct form of economic output, companies must
design a business model that involves charging for the time customers spend engaging
with the business, such as an admission or membership fee of some sort. Witness the

VOL. 44 NO. 1 2016 STRATEGY & LEADERSHIP PAGE 7

 success of such admission-fee marketing experiences as REI’s climbing mountain,
Volkswagen’s Autostadt theme park, the Land Rover Experience, as well as Apple Stores’
One to One offering. Pay-to-play technological experiences include gaming (EVE Online),
music listening (Spotify), and movie downloading (Netflix). Examples of operational
experiences with admission fees are the restaurants Next in Chicago and Trois Mec in Los
Angeles.
A business model is defined by what it charges for. A company that charges for
undifferentiated stuff is in the commodities business. One that charges for tangible
things is in the goods business. One that charges for the intangible activities its people
execute is in the services business. But if a company charges for the time its customers
spend with it, then and only then is it – economically – in the experience business.
Charging for time incorporates experiences in a business model as a distinct economic
offering.

Innovative business models that embrace experiences and transformations

 Marketing. If you purchase a grand piano from Steinway & Sons, don’t be surprised if it
offers to throw a concert in your home! For these promotions, Steinway asks who you would
like to invite over for the concert and handles all of the details, including hiring a
professional concert pianist to play your own piano in your home. A bank executive we
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talked to who had a Steinway concert staged in his home said the performance was
magnificent, and two of his friends bought pianos for their own homes, further evidence
that the experience is the marketing.
 Technology. At the US Open at Pebble Beach, California, fans no longer suffer regrets over
how much of the golf tournament they aren’t experiencing as it happens on distant holes.
In 2010, the USGA in partnership with American Express provided a device from FanVision
that enabled attendees to have an ever-present leaderboard plus the radio and TV feed at
their fingertips. Without detracting from the reality of the beautiful locale and amazing
golfers they were watching live, attendees could use the devices to learn what that huge
roar of the crowd from across the course meant.
 Operations. Chick-fil-A now stages a number of unique experiences in each of its
restaurants. At the opening of every new operation, for example, the “First 100” customers
get free chicken sandwiches for a year. To be among the first, customers camp out for
twenty-four hours in the parking lot, often joined by the CEO, Dan Cathy. The success of
the company’s “Daddy-Daughter Date Night” – where fathers bring their daughters for a
special dinner complete with formal tablecloths and flowers, music, and special touches
like horse-carriage rides – led to “Mother-Son Date Knight” with a medieval theme. There’s
also “Cow Appreciation Day,” “Backstage All-Access Tours,” and a number of other
consumer experiences. In recognition of the skillful integration of these experiences into its
operations, Strategic Horizons gave Chick-fil-A the 2015 Experience Stager of the Year
award.
 Offering. Grant Achatz, the award-winning Chicago chef who gained fame at his
three-Michelin-starred restaurant Alinea, opened his latest restaurant Next, which dazzles
customers with its changing theme and menu. Of course dining in a fine restaurant is always
intended to be an engaging experience, but Next incorporates this into its business model by
charging an admission fee for its dining experience! Prospective guests must first go online,
reserve their table in advance, pay for it ($165-$315 per person) and print out their admission
tickets before arriving at the appointed time. The service of preparing and serving the meal is
included with the price of the experience.
 Transformations. To reposition its offering, Heartland Health of St. Joseph, Missouri, changed its
name to Mosaic and centered its health care experience on the theme of “Live Life Well.” This has
become the organization’s meaningful purpose as it works to lead patients, their family members,
its employees and the overall communities it serves to live life well. As part of its rebranding, it even
renamed its industry: in order to embrace the vocabulary and mindset of a company that offers
transformations it is now in the “life care” business, not just health care.

PAGE 8 STRATEGY & LEADERSHIP VOL. 44 NO. 1 2016

 ‘‘Companies must stage the sequence of interactions as a
dramatic performance, rising to a climax and then concluding
with a personal and memorable ending.’’

5. Business models of experiences that yield transformations

The fifth type of experiential transactions in the Economic Pyramid are offerings of
transformations. These experiences are crafted to match an important customer aspiration
at a particular moment in time. By doing so companies can promise a “transforming
experience” – one that changes customers in some fundamental way.
Many businesses routinely provide customer-changing experiences – think of fitness
centers, healthcare institutions, coaches and consultants, wealth management firms, and
so forth. But many more types of companies could embrace transformations if they focused
on the aspirations their customers desire to achieve. What do customers want to become?
And how can companies help them first formulate those aspirations and guide them
through the transformation process?
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Companies with a sustainable transformational business model charge for the demonstrated
outcomes customers achieve. Outcome-based compensation is increasingly catching on in
industries such as consulting – charging for predetermined changes in key measurements and
in finances – charging for achieving portfolio-growth targets. To embrace transformation as the
distinct economic offering it is, each business should adapt its business model to charge – for
at least a portion of the revenue – for what your customers most value, the outcomes they
achieve.

Notes
1. See James H. Gilmore and B. Joseph Pine II, “Beyond goods and services,” Strategy &
Leadership, Vol. 25 No. 3, 1997, pp. 10-18.

2. B. Joseph Pine II and James H. Gilmore, The Experience Economy: Work Is Theatre & Every
Business a Stage (Boston: Harvard Business School Press, 1999), now out in an updated edition,
The Experience Economy, (Boston: Harvard Business Review Press, 2011).

3. “Charmin NYC restrooms,” Welcome to Gigunda Stories, www.gigundastories.com/charmin/

4. Christian Briggs, “BlendTec will it blend? Viral video case study,” SociaLens Research Advisory,
www.socialens.com/wp-content/uploads/2009/04/20090127_case_blendtec11.pdf, and “Will it
blend?,” Wikipedia, https://en.wikipedia.org/wiki/Will_It_Blend%3F

5. Cliff Edwards, “Commentary: sorry, Steve: here’s why Apple stores won’t work,” Business Week,
May 20, 2001, available at: www.bloomberg.com/bw/stories/2001-05-20/commentary-sorry-steve-
heres-why-apple-stores-wont-work

6. “Apple still sells the most per square foot,” eMarketer, May 22, 2015, www.emarketer.com/Article/
Apple-Still-Sells-Most-per-Square-Foot/1012523

7. For more on creating a portfolio of marketing experiences, see James H. Gilmore and B. Joseph
Pine II, “Customer experience places: the new offering frontier,” Strategy & Leadership, Vol. 30
No. 4, 2002, pp. 4-11.

8. Jakob Nielsen and Don Norman, “The definition of user experience,” Nielsen Norman Group,
www.nngroup.com/articles/definition-user-experience/

9. Ibid. Note that when most people use the term “the customer” in this way they mean an average
customer, one of many in an agglomeration of anonymous people that comprise a “market.” We
encourage companies to always focus on the individual customer (an unfortunately necessary

VOL. 44 NO. 1 2016 STRATEGY & LEADERSHIP PAGE 9

 redundancy), the living, breathing “user” in this context. See B. Joseph Pine II and James H.
Gilmore, “Satisfaction, Sacrifice, Surprise: three small steps create one giant leap into the
experience economy,” Strategy & Leadership, Vol. 28 No. 1, 2000, pp. 18-23.

10. “We’re living in an experience economy, design accordingly,” UX Magazine, May 19, 2014,
https://uxmag.com/articles/were-living-in-an-experience-economy-design-accordingly

11. While the UX focuses on the interactions users– usually but not necessarily customers– have with
the technology embedded in a physical good, CX focuses on the interactions customers have with
the company itself, either through workers or devices. In practice they can meld together.

Corresponding author
B. Joseph Pine II can be contacted at: bjp2@StrategicHorizons.com
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