Experience economy meets business model design: Questioning the fundamental premise of getting automatically higher prices when offering an experience setting

Through the last decade the experience economy has found solid ground and manifested itself as a parameter where business and organizations can differentiate from competitors. The fundamental premise is the one found in Pine & Gilmores model from 1999 over 'the progression of economic value' where companies automatically get a higher prize when offering an experience setting to the customer illustrated by the coffee example. Organizations that offer experiences still have an advantage but when an increasing number of organizations enter the experience economy the competition naturally gets tougher. The Companies do not necessarily deliver the same experience as the competitors, but there are many similarities and even though consumers in these days are hunting experiences they still reach a degree of saturation or they are selective in choice between good experiences. Furthermore it is not always the best produced, designed or staged experience that gains the most profit or creates return of investment. It becomes more obvious that other parameters in the future can be a vital part of the experience economy and one of these is business model innovation. Business model innovation is about continuous development and design of the essence of a firms value creation for the customers and the organisation itself. In economic research and within industry the last couple of years have produced a major shift. Where previously focus was on rigorous and heavy business plan documents the trend has now shifted. There is now a rising focus on development, design and innovation of the central elements of a business model. The questions then become how and in what way the experience economy can use business model design and vice versa how experience design can inform, initiate or facilitate business model innovation. This paper combines state of the art literature with two case studies and two action research based workshops to address these questions. It presents a new experience economy research agenda as well as guidelines on how to combine these two areas, where the design of business models can be a new differentiator in the experience economy and experience design can be an initiator or idea generation starter in the value proposition element in business model innovation.