How to Design a Business Model Around an Experience

So, you’re itching to build a successful income-generating idea, but seek an approach you can pursue without the need of a complex business plan (or even a loaded checking account). Great! How about creating and facilitating an experience, and building a business model around that? Let’s explore the process.

Sounds simple enough – create and facilitate an experience, then build a business model around it. You might think this novel, but to the contrary it’s what makes our world go around.

These days, technology just gives us so much more putty to mold!

Fundamentally, when you design a monetized platform around an experience vs. a specific product or service, it’s FAR easier to know who’s required. You know right away who might want to be involved and why.

We need examples, and the first two that come to mind are AirBnB and Glamping. They’re similar in ways, but I’ve already written a bit about AirBnB. Let’s use Glamping instead so you can see what we’re setting out to do.

Note: If you’re interested, check out the AirBnB Challenge article I just mentioned. Lot’s a great visuals.

Glamping’s the perfect example of creating, facilitating, and monetizing an upscale outdoor experience. It’s arguably camping, but in uniquely-furnished ways and in versatile settings most folks can’t swing on their own.

An experience concept.

Glamping California Example

That’s a screenshot of “Ventana Big Sur, an Alila Resort” in California I found on Glamping.com – a marketplace similar to AirBnB, VRBO, and all the other niches sprouting up around it. The experience economy, or, the sharing economy. As I write this it costs around $350 a night for that particular spot, and that’s in early March.

Why We’re Shifting into a Shared-Experience Economy

To save time, we won’t delve into quantum-fueled robotics, artificial intelligence and automation taking over the vast majority of human labor leaving us with tons of calendar space and most core needs taken care of…to experience this thing called now, the moment, life.

Browsing online provides ample evidence, studies, and glimpses of this radical transformation in terms of consumer spending. One example would be the Eventbrite Nationwide Research released a couple years ago that in general still stands,

More than 3 in 4 millennials (78%) would choose to spend money on a desirable experience or event over buying something desirable, and 55% of millennials say they’re spending more on events and live experiences than ever before.”

Would you rather buy then manage everything necessary to relish an Arabian-themed glamping experience on a sweeping Nevada ranch, or just pay the money, go have the experience, get everything catered to you, and then walk away no strings attached?

Most everyone I know wouldn’t think twice if given the option.

But honestly ask yourself, who’s fueling the experience economy? Is it millennials or pretty much everyone from all walks of life? The point here is that’s the direction we’re naturally moving as technology takes over and the definitions of ‘job’, ‘currency’, and ‘Funding’ are redefined.

For now, let’s pivot towards underlying psychological reasons why the tech-fueled experience economy is such a natural progression in the first world.

#1: Positive Reinterpretation

Okay, when it comes to human psychology, most of us are hardwired to value experiences over material goods (evolution anyone?). We know this because of how we see experiences with ‘rose-tinted glasses’ in our memories – even unpleasant experiences. Like, you may go through all sorts of drama and hiccups during a vacation, but when you recount it later on you’ll see only a fraction of the headaches vs. the positive aspects.

#2: Hedonic Adaptation

I do, I have a favorite pair of jeans I love. But, with most products I get as easily bored as anyone. We adapt to new ‘things’ quickly, but it’s different with experiences. How long would it take you to emotionally and psychologically ‘get into’ a new glamping location in completely unfamiliar territory? It may only last a little while, but the impressions and memories last a lifetime.

#3: The Comparison Challenge

If you’re forced to choose between two different kinds of smartphones or material objects, you’ll probably worry whether you’re making the right choice, will like the one you choose a week later, or have to live with regret. Trying to compare two awesome glamping sites or between two amazing experiences is WAY less stressful and can actually be super-fun! Then, even if it doesn’t go as expected, see #1.

#4: Anticipation

Whether you’re buying an event, product or service, the anticipation before engagement is based on experience. You see yourself doing things in that fresh pair of sunglasses, or playing games on that sparkling new desktop, or hiking by your French Riviera AirBnB. The difference is there’s more pleasure, flow, or zen, when anticipating an unknown experience vs. getting a new object. Afterwards, the experience is more…

#5: Character-Building

Deep down we know inanimate objects don’t build character or add to ourselves in any valuable meaningful way. Only experience, which also trumps purely conceptual knowledge. For example, you can read glamping magazines for months, but that wouldn’t equal a single 3-nighter in a jaw-dropping spot (with incredible company), would it? You can consider yourself wealthy, but how might the experience compare? You can ‘believe’ in love at first sight, but the experience…

We could go into more, but that should do for our purposes in this article. Let’s get to the 10-step plan I threw together as a simple framework to get just about anyone started designing a business model around an experience.

It’s not meant to be comprehensive, just a great Beginner’s Guide sort of deal.

Enjoy!

Step #1: The Mental Image – Vision First

Scratching your head, unsure where to start creating a unique event? Welcome to the doorstep of innovation! Use yourself as the first subject.

What’s an experience you’d pay for? Or, if we’re talking about children, that parents would shell out some dough for so the kids can have this experience.

Don’t focus on how much or how little someone might pay, just begin formulating an experience that sweeps you off your feet that you can’t already go out and get.

Or, if you can, could you improve upon it? In this moment right here and now off the top of my head, I’d pay to experience what it was like to see Wilbert Harrison perform “Kansas City” live in some tiny southern club in the late 50’s…beyond YouTube.

What can I say, the song happened to be playing in the background while writing this section.

It’ll likely be something connected to you, within reach, in your network or sphere of influence, or that immediately inspires you.

Try as best you can to conduct your think-work without limitations. The experience can be as simple (a smile) or as complex (smiling while skydiving) as you can imagine. You’ll soon see most experiences either hammer down on one or two emotions (haunted house), or are designed to trigger a large variety (a movie). So, to make the process a little simpler think of the emotions you’re looking to trigger first and this should help narrow the field.

  • What emotions will the experience be intended or designed for?
  • What’s the setting? Static or mobile?
  • How long will the experience last?
  • Keep in mind this MUST be something you can experiment on and test.

Once you start zeroing in on a specific kind of experience, really take time to shape an initial mental image. Talk with people, anyone, go nuts on a whiteboard, whatever it takes to solidify a running-vision of this experience. It’s likely to change a bunch, or you’ll streamline, but this introductory capturing is essential.

From there you can begin to iron out the…

Step #2: Details, Details, Details

I’m a big fan of all the many kinds of what I call ‘experience kits’ spreading around the ecommerce world. You know, like, a “make a candle at home” kit. Or, one of my favorites are food options like, “make a batch of organic cookies” kits with everything you need in neat little biodegradable pouches inside the box with instructions.

Boom, so you want to give people the experience of creating a scented candle, or of baking the perfect batch of healthy-gourmet chocolate chip cookies.

Look how these business models boil rather complex processes into refined and streamlined experiences. No cooking classes. No having to consult the internet. No having to go get  supplies, which often force you to buy more than you need for the single-serving experience.

You can’t begin boiling things down until you’ve got the core vision and foundational details figured out.

  • What are the components involved in the experience you’re creating?
  • How will the components be packaged, delivered, or curated?
  • Be specific with pricing for now, you can figure out budgeting later on.
  • Go wild. Include everything you possibly can to create the most ideal experience. Carving out something more minimal is yet to come.
  • Who provides what? Is travel involved? Towels? Chat programs?

As you struggle through this process it gives (or takes away) solid footing for your visions – the pass or fail step where you find out how practical ideas are because next you must…

Step #3: Test the Experience

Fun part! It’s time to see the experience in action, or a simplified version so you can start taking note of all the things, angles, components, etc., you didn’t foresee or imagine. Sure, YOU, or your friends might think the experience is awesome because of X, Y, and Z in theory, but how about in reality?

Or, you might enjoy it for X, Y, and Z reasons, but when your friends give it a shot they don’t like it because of C, G, and P. You get the idea. Testing an experience is in essence no different than testing new software, a video game, or snowboarding concept.

  • Apply the 20/80 Rule – meaning 20% of the experience you’re creating will be responsible for 80% of the results you’re looking to achieve. What’s that 20%?
  • What can be added or taken away from the experience to improve it?
  • How can you condense or align components of the experience to streamline it?
  • Is it as practical as you thought for the intended, or ideal audience?

Just be sure to capture this information. Get feedback. Adjust, iterate, optimize. Keep testing the experience until you get to the point where you feel it’s ready to map – set pen to paper, or fingers to keyboard and get ultra-specific.

Note: Looking for a great mind-mapping tool that’s simple to setup and easy to use with others? Check out Ideaflip. There’s a free trial, then the most inexpensive package right now is like $9/mo with up to two ‘guests’ per board. If you’d prefer super-simple and free, Google docs will work.

With all the data you gather and your vision getting less obscure by the minute, the next step is to graduate from charting ideas to mapping the experience.

Step #4: Map the Experience

The point of mapping the experience is about two things – optimizing it for the intended experiencers and figuring out exactly who stakeholders need to be to make this a reality.

  • Can you set up and manage it on your own? What if it goes wild in popularity?
  • Is it going to be totally hands-off and automated?
  • How much innovation is required?
  • Who will need to get involved and in what ways?
  • Who will be impacted by the experience that’s NOT a part of it?
  • Map the experience from the tester’s eyes as well as those around them.

Your map might be very easy to detail, say like drawing a map of crossing the street. Or, you might be designing a complex web that sustains a very simple experience. This step is to really draw it out, like a movie script or an architect’s plans.

Start with long-form written and visual perspectives, then boil it down to a set of points that outline the step-by-step experience. Afterwards, your next move should be coming to terms with any relationships you need to create – the business model.

Step #5: Build ‘Open Innovation’ Business Model

Maybe you don’t have all the skills and resources needed to make this work on a larger scale than just a couple people, or you and your kids. Or, maybe there’s something similar already out there, but you thought of a way to dramatically improve on the experience and need help.

To get your feet wet consider approaching your new business model through the lens of open innovation – a methodology that’s gained tremendous popularity parallel to the experience economy.

Note: I’ve put together a basic Crowdlending Article and Crowdfunding Article as well, which are two other increasingly powerful options to build shared-experience models around.

What’s Open Innovation?

For the purposes of this article, we’re simplifying Henry Chesbrough’s concept, to mean you incorporate inside and outside parties to help innovate an experience instead of innovate a new technology, or company offering, or other more conventional business concepts.

You’re setting out to innovate an experience, but you may also need to innovate things to facilitate the intended outcomes. Unless you can do it entirely on your own, and it’s a very simple experience, this will likely require outside help. Open yourself up. Take the following example…

A Complex Example

Let’s say you wanted to create a much more intricate or elaborate experience to suit a far-reaching goal. How about this, you decide to make it possible for someone to experience saving an actual tree in the Amazon rainforest.

Why not?

Your mind is probably abuzz with possibilities of how you could make this happen.

All it would take these days is a digital platform, the ability to transfer funds digitally, and partnerships with willing people on the ground around the Amazon. Let’s say you charge $100, and make it possible for someone to save a specific tree, and experience this through a digital platform and video footage or live streaming via something like a GoPro.

Why just the Amazon, why not trees anywhere in any protected area on Earth?

Perhaps you could innovate something completely new for the nonprofit space. Maybe you could work with investors or others to create a novel technology that makes it possible for folks to save specific plots of land in the Amazon.

Again, why not?

The point is to begin thinking of the partnerships you could make with educational institutions, nonprofits, startups, social media networks, relevant corporations and all the many other interested parties who could get a slice of the pie to help mold the experience and make this happen.

  • Look at the external ideas and tech used to create and facilitate the experience and any similar experiences.
  • Consider the settings and who might be interested or impacted.
  • Come up with as many parties, including learning institutions, that would get involved as you can.
  • Approach the experience locally, digitally, and globally.

So, we’re talking about a business model based on open innovation and outside cooperation – a team effort! How this is put together will dramatically impact…

Step #6: The Budget

Instead of going straight for the Amazon, or maybe even helping people save a small chunk or the Coral Reef, put together a working budget that helps someone positively impact the environment in a close and personal way.

Generally speaking, first come to terms with the MVP experience. The most streamlined and easy to create version. You can build and scale accordinging as demand grows.

In the rainforest example, you could tier things so that for an extra fee individuals can visit the area where their tree is rather than it being a purely digital experience. All that could be figured out by third parties, including web developers to create the checkout process and platform, the travel agencies or airlines, nonprofits, and so forth.

But here’s the thing, you’ve got to be ultra-specific. And, in order to be specific and get a comprehensive cost-per-experience in the bucket, you’ll need…

Step #7: More Testing, Optimization & Mapping

Trim things down by testing budgets in action, while testing your core experience concept even more and updating the business model as partnerships are formed. Pretty simple, and by this point there should be far less guesswork. It should be more about making executive decisions on specifics and reaching a much more finalized budget.

Ideally, you’re already generating some revenue and serious interest. Once you see this is an honestly viable initiative worth pursuing, it’s time to start hammering down on the digital presence.

Step #8: Build Access & Engagement Platform

Even if the experience has no tech-devices attached to it, and there’s no need to engage in a central online command, you’ll still require a web presence. Chances are whatever scheme you’re going to build it’ll involve the digital realm in a variety of ways, from marketing and payment, processing or booking, to community building and collecting feedback.

Now would be the time to start fleshing out these parts of the experience, and again, always be on the lookout for ways this technology could be improved as it pertains to what you’re doing.

  • How many digital access points are there, or touch points?
  • How will people share their experience with their networks?
  • How will you communicate the larger vision, or cause, if there is one?
  • Is a subscription-based model applicable for repeating the experience?
  • What kind of a role will social media play in your experience?

You’ll need content to market and advertise, or just to spread the word and share your experience with the world. Without going deeply into digital marketing, I’d like to point out you can always…

Step #9: Leverage Experience-Based Content Marketing

The beauty here is, what you’re doing creates all the content you need to market your experience. It’s a two-for-one you can bake into the business model itself, so that your content is automatically created as a part of the deal – primarily video, imagery, and testimonials or social proofing.

A perfect example of those small little picture booths you still see in malls and movie theaters. It’s a fun experience to go there and sit with a friend or special someone and get goofy little picture-strips. Those strips though, are why those booths still exist in an age of smartphones. The content they create is valuable, and amazing marketing content.

Find a way to make this experience create your content for you, and have your users gladly take part and marketing is all but handled.

Step #10: Let Me Know How it Goes!

Wow, if you’re still with me, that was quite the journey. I think we’ve covered the basics. Our goal was to outline the idea of creating a business model around an experience rather than a specific product or service. Why? Because this approach lends itself so well to open innovation – working with others to make the experience happen.

I guess another way of putting it is, you design an experience you think could be monetized. Then, you map it out so you can deconstruct or reverse engineer it to find partnerships and support. Welcome to a new era of experience design, here in our increasingly post-materialistic world.

Thanks for reading, and enjoy!

 

Matt

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