Article originally published in AdWeek.
As the world bounces back from a global pandemic, and we’re allowed to leave the confines of our homes once again, we find ourselves not craving shopping, but yearning for immersive experiences. This is reverberating in the experience economy: Disneyland is packed, flights are at capacity, hotels have no vacancy, and Coachella sold out in minutes. In this massive global shift from a things economy to an experience economy, the brands that will survive will have to adapt.
Calvin McDonald, the CEO of Lululemon, proudly proclaimed two years ago that “Lululemon is no longer an apparel company. We’re an experience company.” He’s taking a large bet on immersive experiences driving more loyalty than slightly improved yoga pants, spending ~$300M per year on in-store and online yoga classes, pilates, marathons, and meditation.
Some brands are pivoting their business models to reflect their experiential initiatives – REI believes that in ten years, they’ll be generating more revenue selling experiences than selling things. They’re not only building out education in their stores and doubling down on in-store services, but are continuing to scale backpacking trips to national parks, wilderness trainings, and camping excursions. Many consumers seem comfortable buying both adventures and adventurous gear from the same trusted brand, so why not own the whole experience?
Leading brands are not only building brand experiences around their current models, but they are exploring completely new models for consumer engagement. Many are testing and iterating in dedicated experiential “concept” stores to harness insights and ensure they can grow as the consumer landscape evolves. Home Depot launched a design center, focussing on the experience and interactions needed beyond the merchandise, Michaels is testing updated store concepts with “maker spaces”, Dick’s Sporting Goods is fueling their House of Sport, and even Lululemon is accelerating the CEO’s vision by building experiential stores aimed more at building actual community and long term loyalty than merely maximizing a single day’s sales.
These new store concepts are flipping traditional retail on its head and are allowing brands to set up testbeds to reliably innovate and iterate. They are capturing experiential data and tapping into a vein of intelligence into which experiences attract the next generation of consumers and which drive loyalty among their core demographics. The learnings from these stores today will be the consumer experiences that will continue to keep these brands relevant into the future.
Even car brands are getting into the fray. With global new car sales down 15% over the last 5 years, auto brands are increasingly focused on retention and lifetime loyalty. Volvo has built out a museum, driving experiences, and even a tour of its facilities in Sweden. BMW is scaling their driving experiences, test drives, and even invested heavily in their own theme park in Munich, BMW World. Tesla allows its customers to tour the Tesla factory in California, an experience that continues to build brand love and reinforce Tesla’s spot on the throne of auto brand loyalty. In part due to their focus on customer experience, 70.7% of Tesla owners who “disposed” of a Tesla acquired another new Tesla.
Brands that know how to build actual emotional connections are turning into experiential businesses, and these are the ones that are thriving. From Lego’s Discovery Centers and Lowe’s DIY Workshops with plenty of activities for kids to Sur La Table’s cooking classes and Budweiser’s beer pairing dinners more focused on adults, the next decade’s most successful brands will look more like experience-providers than traditional goods businesses.
If your brand hasn’t embraced experiential – now is the time as the experience economy is burgeoning and “post-pandemic” consumers want to interact IRL. Like any form of engagement, start with a test or a pilot and make sure to lay out success metrics and have the infrastructure to measure what works (what experiences are leading to more sales or converting new consumers into brand champions?). Iterate and optimize experiential investments, just as you would with a new digital or social media campaign. Even if experiences don’t seem like a natively integrated part of your brand, you can build events and experiences that would simply attract your core audience. For example, companies like Grubhub are hosting concerts because they see music as a wonderful way to build community and attract consumers. A growing pool of consultants (including AnyRoad’s embedded experts) and agencies are a great way to bring in outside expertise that can guide your brand through an experiential transformation.
A great way to jump into brand experiences is to think about what interests your target demographic, and what will draw them in to spend time with your brand. If we’re moving towards engagement rather than conversion, the language and insights we use to run our companies must evolve as well. We believe we’re moving away from a world that looks at antiquated metrics like sales per square foot in favor of experiential performance indicators like brand conversion, loyalty, and lifetime value. The brands that embrace this long view are the ones who will define their industries tomorrow.