Everything is an Experience
I recently saw a conversation between brewers debating why this holiday season was slower than they expected. One suggested Star Wars.
In all seriousness, is Star Wars a threat to craft beer? How about your local minor league baseball team? Does the new axe throwing place hurt your crowd? What about that trendy little craft beer bar a few blocks away? Even grocery stores are stepping up their experience game. From the movies to restaurants to any genre of entertainment, everything is an experience in competition with one another. For this analysis, we will use craft beer and the effect of the overwhelming selection of consumer experiences on the industry. “Craft beer” can easily be replaced with any specific business name, product, or service. The challenge is real and the need to create unique, memorable experiences is a must.
In Pine and Gilmore’s 1998 classic essay Welcome to the Experience Economy the two said goodbye to an era of merely selling products and services and introduced an age of selling memorable experiences. While written 20 years ago, their work has stood the test of time as we have watched businesses of all industries bundle their offerings with an experience to provide greater value. However, while Pine and Gilmore posited of the importance of creating experiences, I believe we are not just in an economy where experience is a differentiator, but an economy where experience is a requirement. Welcome to the “Everything is an Experience” Economy.
Pine and Gilmore list the two dimensions of an experience as the level of customer participation and the size of the connection. Customer participation varies from passive to active participation. The connection consists of immersion at one end of the spectrum to absorption at the other. Without these dimensions, a business is merely selling a product or providing a service. For craft beer, lack of both dimensions would be a bartender merely pushing a pint across the bar and offering nothing more. When the numbers of craft breweries were far fewer than the 8000+ we have today, it was possible to make an average beer, have an average experience, and be successful. Today that is no longer possible for long term survival. It is engagement, which can be defined as a balanced combination of customer participation and the ability to form a connection, that enhances the experience and transforms that beer from merely a product to a memory.
In their essay, they used the below graphic to demonstrate the dimensions of an experience. They spoke of the unique value of each realm of an experience. They noted experiences like Disney World or gambling in Las Vegas as prime examples of those hitting the “sweet spot” of all four realms. However, the economy has become so highly experience focused since the time of Pine and Gilmore’s publication that it is now necessary to aim towards maximum participation and maximum absorption. If a business is not hitting that sweet spot, then the consumer will find a neighboring business that is.
Any setting where one brewery can engage guests more than the next is an opportunity for differentiation. The same can be said for the level of guest immersion. Think brewery tours and other aspects that allow guests to connect more to your brand. Even something as simple as presenting guests with a menu that teaches the drinker about the flight offerings helps build this connection. Having a brewer interact with guests in the tasting room and providing guests’ with not just beer, but with an array of unique events helps create this. In craft beer, a memory consists of the beer quality along with the quality of the experience surrounding it.
Memory = Value of Product/Service + Engagement + Environment
Through a prior study on Untappd beer ratings, we discovered that there is not a valuable correlation between beer quality and the amount a guest will spend. With that said, making a high-quality product is not an option, but a necessity. From the first sip to the final drop, this represents a crucial opportunity for a brewery to first gain a guest’s attention. Failure to produce a well-made beer is a quick step to a short business lifetime.
While necessary, beer quality does not solely result in profitability. There is however a correlation between the level of engagement and how much a guest will spend. At a brewery, a guest who receives high engagement will spend 15.3 percent more than a guest receiving neutral engagement, and 9.5 percent more than the guest receiving low engagement.
Engagement is vital, but does it translate into future value for a brewery? A guest receiving high engagement is 99.2 percent likely to recommend and return to that business. A guest receiving moderate engagement 96.2 percent. A guest receiving neutral engagement 84.8 percent. A guest receiving low engagement is only 50.7 percent likely to recommend and return to a brewery. This is a drastic 48.5 percent less than the guest receiving high engagement.
Engagement represents a large component of the environment a brewery creates. Staff are a reflection of a brewery’s ideals and their interaction with guests immediately can build the foundation for a strong memory, positive or negative. It is the little encounters that staff have with guests that help create a stronger overall experience. Furthermore, the atmosphere surrounding the staff should be inviting and inclusive. People spend more time, and money, at places where they are comfortable and enjoy themselves.
People only have X amount of money and Y numbers of outings they are going to spend it on. They are going to choose the experiences that provide them the greatest value. Value is no longer just the quality of the actual good or service, but the entire experiential package surrounding it. A consumer can go nearly anywhere to enjoy a well-made craft beer. However, with the sheer number of breweries in existence, it is crucial to also pair that beer with a well-rounded experience.
When a consumer has the option of visiting two breweries equidistant from their home who both produce an equally enjoyable product, which will they choose? The answer is the brewery that creates the strongest, positive memory. Creating these memories and overall experiences is not only necessary for the long-term survival of craft breweries, but any business, in any industry.
Any portion left out of the Memory Equation is a missed opportunity for a business. Potential craft beer consumers can just as easily spend their money in another outlet, whether movies such as Star Wars or towards any other experience. Jim Stutzman of Lazy Horse Brewing & Winery states, “Stop selling beer and start selling experience.”
Craft brewers have a need to evolve inside their four walls; however, the craft beer experience does not just take place in a brewery’s taproom. Their brand experience is on social media, found on t-shirts, seen in all outside marketing, and represented wherever that brand is poured. All of these are additional avenues to turn a brand from that surrounding a pint glass to that which fills a consumers’ need. Don’t just pour, permeate through the consumers’ veins and become part of their lifestyle.
The concept of creating experiences can be understood in an economics lecture just as easily as it can be put into action behind a taproom bar. Sam Holloway, Founder of Crafting a Strategy and professor at the University of Portland, took a one year sabbatical in 2017-2018 to study European craft breweries and the growth of the EU craft beer market. While living in the Netherlands, he also taught courses on traditional strategic management and discovered that most of Europe’s leading business schools’ syllabi had almost no experiential elements in them.
He states, "If our main theories were developed before the experiential economy became a reality, why are we still using them to teach strategic thinking? I launched the first course in spring 2019, Strategy and Competition in the Experiential Economy. Basically, I took my old strategy syllabus and, week by week, looked at the old theories and asked how they needed to change if I assumed great experiences were a primary driver of competitive advantage instead of traditional bargaining power or market forces. The results were astonishing, I learned a lot and several of my students said it was the best course they had taken.” From Holloway, we see a paradigm shift from experiences being a differentiator to experiences being a requirement.
In 2010, there were 1769 operating breweries in the United States. As we enter 2020, this number has climbed past 8000. Craft breweries competition isn’t just Big Beer. They’re a mere sliver of what a craft brewer should be worrying about. It isn’t just the other craft breweries nearby either. It’s every experience fighting for the consumers’ hard-earned money. Continue to make a quality product, continue to fine tune your business practices, and continue to evolve with the “Everything is an Experience” Economy. Why is your experience more memorable?
We would love to offer any brewery that reaches out after reading this article one free Secret Hop*. Please email andrew@secrethopper.com to schedule. Cheers!
*1 free visit per brewery per calendar year