Business Dynamics



In a nut shell, let’s demonstrate the journey to the Experience economy using a simple Coffee example. Come to think about it in the ancient days coffee for example was grown on farms, the beans were plucked, dried and ground with stone for use in homes. The production was basically subsistence. In this scenario coffee is a commodity. Then came a point in time and machinery were invented to manufacture coffee beans into coffee (the powder) and thus here coffee is a product or good upon which consumers bought it off the shelves and used it in their homes. Along the way entrepreneurs seeing a niche need for ready to drink coffee got into the business of preparing and serving coffee to customers at cafes, fast food joints and restaurants. This is a service and customers are charged for the service. The entrepreneur while deciding his price looks at the cost of acquiring coffee and the capital investment that he put in to serve the customer. Fast forward and there came the concept of serving coffee in sophisticated tastes under serene surroundings with rider benefits such as Wi-Fi connectivity, order as per taste in the advent of the Experience economy. Such brands such as the Starbucks coffee house and The Java of this town stands out serving coffee wrapped in state of the art hospitality. What customers thus pay for is no longer just coffee rather the experience of being served coffee with state of the art hospitality. As you might notice at every stage of commodity, product, service then experience there are variations in taste, preferences and thus price and overall pricing model. It is prudent to notice the progression of the value chain. For instance, a farmer sells a kilo of coffee beans (commodity) from the farm to the manufacturer at less than a dollar and on the other hand a mug of coffee served at say Starbuck costs or Java in this case US$3.50. Later on will look at what inspires the differences in charges at the diverse levels.

That said, the classification for each stage in the evolution of products is; a commodity business which charges for undifferentiated products, a goods business that charges for distinctive, tangible things, a service business charges which for the activities you perform, an experience business that charges for the feeling customers get by engaging it and a transformation business charges which for the benefit customers (or “guests”) receive by spending time there.


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