The Most Successful Brands of the Next Decade Will Sell Experiences

As we've begun leaving the confines of our homes, it's not shopping we've craved but immersive experiences. This is evident 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 survive will have to adapt. Calvin McDonald, the CEO of Lululemon, proudly proclaimed two years ago that the brand was no longer an apparel company but an experience company. He’s made a large bet on immersive experiences driving more loyalty than slightly improved yoga pants, spending about $300 million 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 10 years, it'll generate more revenue selling experiences than things. The outdoor retailer is not only expanding in-store education and services but 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? Outdoor Retailers Strive to Make Nature More Accessible to Marginalized Groups 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 concept stores to harness insights and ensure they can grow as the consumer landscape evolves. Home Depot's Design Center creates complete showroom kitchens, baths and more staffed by expert design consultants; Michaels has converted its in-store classrooms into makerspaces with instructor-led courses; Dick’s Sporting Goods is experimenting with House of Sport; and Lululemon is reimagining its stores to build community and long-term loyalty. Even car brands are getting into the fray. With global new car sales down 15% over the last five years, auto brands are increasingly focused on retention and lifetime loyalty. Volvo and BMW have built out museum and theme park experiences, as well as scaled their test drive and facility tour offerings. Tesla also allows customers to tour the Tesla factory in California, an experience that continues to build brand love and reinforce its already fervent brand loyalty—in part due to its 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 new store concepts are flipping traditional retail on its head, allowing brands to set up testing grounds to innovate and iterate. The learnings from these stores will keep these brands relevant into the future. The next decade’s most successful brands will look more like experience providers than traditional goods businesses. Even if experiences don’t seem like a natively integrated part of your brand, a great way to jump in is to think about what interests your target demographic and what will draw them in to spend time with your brand. For example, Grubhub is hosting concerts because it sees music as an effective way to build community and attract consumers. A growing pool of consultants and agencies can bring in outside expertise to guide your brand through an experiential transformation. Like any form of engagement, start with a test or pilot and make sure to lay out success metrics—what experiences are leading to more sales or converting new consumers into brand champions? If we’re moving towards engagement rather than conversion, the language and insights we use to run our companies must evolve as well. 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. Then iterate and optimize experiential investments, just as you would with a new digital or social media campaign. The brands that embrace this long view are the ones who will define their industries tomorrow. Brands Are Doing More Experiential Marketing. Here’s How They’re Measuring Whether It’s Working