The Main Event

Lights, camera, dazzle! Follow the masters of the experience economy to an adult Disneyland to learn business as theater.

The Forum: ThinkAbout, an annual two-day "Learning Excursion" of the experience economy
The Speakers: Consultants B. Joseph Pine II and James H. Gilmore
The Insights: The curtain is about to rise on the emerging experience economy, in which every business is a stage and companies must design memorable events that keep customers coming back.
The Details:

Four years ago consultants B. Joseph Pine II and James H. Gilmore set about popularizing the art -- and what they hoped would become the science -- of using drama to help companies build unbreakable relationships with their customers. We're in the midst of an economic evolution, they proclaimed, in which savvy entrepreneurs who hope to compete on more than price alone will shift from merely selling goods or services to wrapping those goods and services in experiences. Since then an avid band of followers has latched onto the notion. Every year Pine and Gilmore hold court at an event called ThinkAbout, where they share the latest experiential trends. The fourth annual gathering drew entrepreneurs of all stripes to Las Vegas to learn from the world's premier business dramatists.

The attendees included the top guns of show-biz entrepreneurship. Michael Graves, an original investor in the Hard Rock Cafe and now an experiential designer, talked up his latest project: converting an ordinary Houston car dealership into an $18-million, 32-acre "Autotainment Mall." The development turned the once-struggling business into one of the top-selling dealerships in the country and garnered praise from former Ford CEO Jacques Nasser, Graves said.

Also on hand were Robert Stephens, CEO of the 50-employee Geek Squad, a Minneapolis computer-repair company that sends its employees out wearing black clip-on ties and police badges and driving new VW Beetles or vintage cars; and Lewis Carbone, a consultant who helped Progressive, a $5.5-billion Ohio-based insurance company, change the way it does business. (Now if a Progressive policyholder has an accident, a claims rep whisks to the scene with coffee, a cell phone, a satellite-linked laptop, and, in most cases, a check.)

What those company leaders share is the belief that the service economy is over; now all business is show business. Computer repairs, cars, insurance -- even the most common of offerings can be turned into a magnetic attraction with the right experience. And their companies' transformations have paid off with higher margins, greater customer loyalty, and a load of free publicity, pointed out Pine and Gilmore.

"Las Vegas is coming to your town and business" was the oft-repeated and not entirely welcome slogan of the conference, which promised to get at no less than the heart of American commerce. Vegas is no longer the psychotic-gambler's paradise portrayed by Hunter S. Thompson in Fear and Loathing in Las Vegas but rather an adult Disney World, the capital of the experience economy. The consultants suggested that casinos, no longer able to compete on price (hotel rates) or product (blackjack), expand the experience (Vegas kitsch) that they offer their customers. What's important now is not what happens after the first card is dealt but where people choose to play their hand, whether it's in Las Vegas's faux streets of Gotham (New York-New York Hotel & Casino) or in the fin de siÈcle boulevards of an Italian lakeshore resort (the Bellagio hotel). Far from Las Vegas neon, that concept is evolving in every industry, Pine and Gilmore insisted, from hospitals looking to transform themselves from a space for medical care to a place of healing, to banks trying to convey a sense of home to their patrons.

The idea goes a long way toward countering the gripe of the inner skinflint in us all over the high price that Starbucks slaps on a cup of coffee. You're not paying for the java; you're paying for the Starbucks experience. But how, some attendees wondered, do you become the Starbucks of your industry? You get there, advised Pine, by asking your company, "What would we do differently if we charged admission?" And no place does admission better than the Vegas Strip, a virtual laboratory for performance-as-commerce.

To make their point, Pine and Gilmore led a walking tour through what they claimed were the world's most successful experiential businesses. How jarring it was, then, to encounter so early on the tour the "Grand Canyon Experience." Set in a souvenir shop dressed up in an achingly gauche mountain motif, the experience was a failure. "This is absolute rubbish," growled conference-goer Albert Boswijk, a management consultant who is opening the European Centre for the Experience Economy in Amsterdam. "Only Americans could do such a thing." But the Grand Canyon visit had been, in fact, by design. The consultants' first lesson concerned failure. "The easiest way to turn a service into an experience is to provide poor service, thus creating a memorable encounter of the most unpleasant kind," said Gilmore.

Several hours later the salty European was put slightly at ease during a stroll through the Forum Shops, a mall based on a Roman marketplace. The Forum's dramatic high-tech effects and impressive attention to detail infused the Forum with a decadent opulence. The illusion worked. The retail shops enjoy sales of more than $1,200 a square foot compared with about $350 at a typical mall, Pine said.

The tour then wended its way through several more hotels, the $70-million themed attraction dubbed "Star Trek: The Experience," and a light show -- all fun, all entertaining. But Mark W. Hansen, a project manager for Lego who had spent the past few years researching how the giant Danish toy company might benefit from Pine and Gilmore's insights, found it all wanting. "All this is fine in theory, but we still don't know exactly how to turn experiences into profits," he said. The consultants never did explicitly answer that question -- the art of marketing experience has yet to become truly a science. On the last day of the conference Gilmore admitted as much when he told the attendees that they must serve as the frontierspeople of the experience economy.

By the end of the event, attendee Michelle Hebert was ready to do just that. Hebert, who owns Pop Culture, a $1-million-plus chain of four gourmet-popcorn stores, was already dreaming up Pop Culture characters who would extend the brand. Popcorn-tin-painting parties. A Pop Culture cop to keep peace in unruly lines. Flavors available only to members of a Pop Culture club. Her ideas were more than hot air: she was planning for growth of more than 50% this year and a serious franchising push. But would she import the Las Vegas spirit to her town? "Oh, my," she gulped, "I hope not."

Tahl Raz is a reporter at Inc.

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