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 / Fall 2004 / Issue 36(originally published by Booz & Company)


Why Experience Marketing Pays

Visitors spend scores of dollars — often a hundred or more — just for the experiences. And they spend hours, often four or more, in American Girl Place shopping for branded dolls, clothing, books, and other accessories as memorabilia of their experiences.

As a start in creating such self-funding marketing experiences, companies should consider carving out 20 percent of their public relations and advertising budgets for physical experiences. Companies should also use traditional creative resources differently. Don’t view internal marketing talent or external agencies as support solely for advertising campaigns. Rather, realize that these are the very people who can design the most creative experiences that drive demand for your company’s offerings.

Think of some of the highly imaginative advertisements of the past few years. Instead of just creating those wonderful youth-dancing commercials for Gap Inc., for example, what if Gap’s ad agency had been contracted to conceive, design, and roll out a compelling dance club experience where kids paid to learn swing dancing and show off in their khakis? What if Nike’s incredibly creative talent were used not just to put those basketball-passing, sneaker-squeaking, breath-exhaling commercials on the air, but to design real basketball experiences on courts that customers actually used in its Niketown stores? The company could really make good on its famous slogan, “Just do it.”

Physical experiences should also be connected to virtual ones. For example, REI effectively integrates its Web site,, into its retail channel. Store personnel show customers how to use the Web site on PCs in the stores, and online presentations drive people to the company’s physical outlets, where they can even pick up merchandise they ordered online. REI has found that people who use both channels are usually their best customers.

When companies create compelling, engaging, and memorable experiences, customers gladly pay for them — and the companies can recoup their investments. Or, put another way, with no outgoing marketing expenditures, but rather cost recovery or even profits, the denominator in the return on investment equation is zero, yielding infinite ROI on the marketing budget.

By providing the experiences consumers want today, companies can forestall the forces of commoditization and reap the economic rewards.

Author Profiles:

B. Joseph Pine II ([email protected]) cofounded Strategic Horizons LLP, based in Aurora, Ohio. He is the author of Mass Customization: The New Frontier in Business Competition (Harvard Business School Press, 1993) and the coauthor, with James H. Gilmore, of The Experience Economy: Work Is Theatre & Every Business a Stage (Harvard Business School Press, 1999).

James H. Gilmore ([email protected]) cofounded Strategic Horizons LLP and coedited, with B. Joseph Pine II, Markets of One: Creating Customer-Unique Value through Mass Customization (Harvard Business School Press, 2000).
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