The term “experience economy” has been popping up quite often lately, but very few people truly understand what it is, why it matters, or how it can improve both individuals and organizations. New and improved technology is not the only change occurring in America. Priorities and goals are changing, as well. For businesses to remain competitive and relevant, they will need to embrace these changes — one of which is the experience economy.

What is this experience economy all about?

Due to the Great Depression and other hard economical times, collecting and material possessions became a very big priority. As many families suffered from extremely impoverished conditions in previous days, many individuals began shopping, and often hoarding away, material possession — some due to fear and others due to a vow to never suffer that much again.

This attitude has been passed down over a few generations, but the younger generations are starting to let that fear go and begin, instead, to truly enjoy life. For years now, people have been intentionally shifting to a more minimalistic lifestyle than ever before. The younger generations have started putting more emphasis on experiences and feelings rather than material possessions. This is not a surprise as most material items are not really something that we want in the first place. Instead, we want the emotions and feelings that those items will provide for us.

For instance, money itself is not what most people chase. It is actually the freedom that having that money provides. Many of those who reach the financial state they desire find themselves unhappy. This is because though they may have that money, they have to work away much of their freedom to do so. Along these same lines, consumers have realized that having experiences and creating memories are more valuable than any material possession could ever be. As such, consumers are now paying for experiences as opposed to goods.

The changes this inspires in businesses

Between 2014 and 2016, there was a 6.3% increase in spending on experience related services. As such, businesses are beginning to spend more on creating experience than increasing the goods being available. A great example of a business deeply involved in the experience economy is Airbnb. Upon the realization that traveling is more comfortable in a home-like setting than a hotel setting, they found a way to provide these homey settings to travelers. Now, many other businesses, including industry giants such as Walmart, are working on creating better experiences for consumers.

What those changes mean for consumers

As more businesses work on providing experiences, consumers will begin to be more involved with companies. They will experience greater reward programs, potential greater respect for these companies, and a great deal of personalization. These experiences will also increase happiness among most consumers, which will likely increase sales. As shared experiences with family members and loved ones strengthen relationships, families will begin doing more activities together. Also, experiences help build social relationships, and having more and stronger relationships can help battle depression and more.

All of the benefits that consumers will gain from the experience economy will also benefit the businesses that are providing those experiences. The greater the level of happiness and improved mental health, the more consumers will hope to experience those feelings again. This will lead to additional sales for the company that can then use the profits to provide even better experiences. This cycle can provide very impactful changes that will cause a domino effect. Ideally, embracing the experience economy can increase sales, strengthen relationships, and improve the overall mental health and well being of the American population.