You cannot go very far in a discussion about services without talking about experience. What does experience really mean? Books have been written about how to navigate, dominate, and co-create in the experience economy? Where did this economy come from? Where is it going? How is it different from the services economy? Do people really buy experiences, or actually pay with them? Perhaps we confuse ‘experience’ with ‘experience’.

There are two types of experience. Type I and Type II. The one for which customers are willing to pay more for less. And the other for which they are willing to pay more for more. When we say they did not experience difficulty or that their experience was smooth, we imply it is something they went through (Type I). This is also what is commonly known as “user experience”. When we say someone or something has a lot of experience (Type II), we imply they have gained or gathered it over time. These are results, benefits and outcomes.

Type I is the experience you go through and the means for Type II or the experience you gain. One feels like an activity or task, while the other feels like the result or outcome. Pleasure is a type II experience, and is not be confused with “not pain”.

Philosophy: Type I // Type II

notional : loss //gain

rational : means // end

practical : effort // result

metaphysical : go through // get

spiritual : what you put into // what you get out of

financial : pay with // pay for

behavioral : tolerate // accumulate

procedural : engagement // fulfillment

analytical : cost // benefit

psychological : pain // pleasure

optimization: minimize // maximise

emotional : relief // satisfaction

Type I: Pay more for less

Think of an airline that provides the most amazing experience in air travel, from the time you check in online or at the airport, to the time you pick up your bags at the baggage claim carousel. To the destination you would like to fly they have two offers:

(a) 8-hour nonstop flight to Djibouti, $1000

(b) 12-hour one-stop flight to Djibouti, $650

Both flights are in the same cabin class and arrive at the destination airport at within 15 minutes of each other. The one-stop flight has a 2-hour layover before transfer to the connecting flight. Assuming you have more than $1000 in your budget for airfare, which offer is most attractive?

Of course, it depends on the traveller and the circumstances under which they travel. Some people will always be price sensitive and saving $350 to spend on something else like food and stay makes a lot of sense. Others prefer arriving a bit more rested, and avoid the chance of the connecting flight being delayed or cancelled.

No matter how good of a travel experience the airline offers, nobody will see it this way: “Wow, I get four extra hours of travel for $350 less. It must be Black Friday!”. Of course the pricing has something to do with the dynamics of demand and supply within the hub-and-spoke operating model of airlines. However, all other factors being constant, passengers are willing to pay more for less, and pay less for more of the experience. That indicates certain kinds of experiences, no matter how good they are designed to be, are equivalent to pain. People and things have tolerance for this type of pain. The level of tolerance may vary by context, culture, and competition. Nevertheless, there is tolerance, even if it tends to zero. In the context of this experience, pleasurable experiences are actually “not painful”.

Type II: Pay more for more

For the same class of travel, flying out of or into the same airport, and with the same number of stops through the same connections, the higher the airfare for traveling longer distances to farther destinations. That’s because airlines and passengers agree, all other things being the same, there are higher costs and more value in being transported to a further off destination.

This principle is reflected in the pricing of launch services delivered by the Falcon 9 and Falcon Heavy rockets by SpaceX. The heavier the payload and further off it needs to travel, the more SpaceX will charge per kilo. What SpaceX and the European Space Agency, with its Ariane 6 vehicle, are charging for is the satellite gaining the experience of being in a particular orbit, after having the experience of being designed, manufactured, assembled and transported, on the ground.

People and their things accumulate this type of experience. For example a poster first has the experience of being an idea in the imaginative mind of the artist. It then gains the experience being sketch on an iPad Pro or Wacom tablet. It then gains the experience of being printed in glorious color by an HP Indigo digital press at a small print shop. Finally, it has the experience of being displayed at a local coffee shop. That’s the cumulative experience of a poster.

Airline passengers pay for gaining the experience of being in Djakarta or Djibouti, on a particular day. So, no matter how good the check-in or boarding processes have been, if the flight gets cancelled, customers would expect to get some form of refund or compensation from the airline because they gain nothing on the ground.

For the sake of clarity and in accordance with the principle of separation of concerns, from now on in this book, we will refer to Type II experience as outcomes, and Type I experience simply as experience.

Outcomes are what customers pay for, and experience is what they pay with.

Customers have expectations for outcomes and experience and are disappointed when things fall short of what was promised. Outcomes are evaluated in terms of gains or avoided losses. Experience is evaluated in terms of pain and “not pain”. People are more tolerant to pain when going through airport security or being at the doctor’s office than when they are watching a movie or enjoying a meal. Outcomes outweigh experience regardless of context. Greater the value of the desired outcome or what is at stake, greater the tolerance for pain. For a given price, competition and culture force service providers to reduce pain as much as possible, to deliver superior sets of outcomes and experiences.

Posted by:Majid Iqbal

TL;DR I bring clarity to the concept of a service.