Madonna needs to get a new tune. We're no longer in the Madonna world of being a "material girl in a material world;" not according to University of Colorado at Boulder researcher Leaf Van Boven. Through a series of surveys and experiments that included more than 12,000 people over several years, Van Boven and fellow researcher Thomas Gilovich of Cornell University found that people from all walks of life were made happier by investing their discretionary income in life experiences rather than in material goods.
Van Boven suggested three possible reasons that "experiential" purchases - those made with the primary intention of acquiring a life experience - make people happier than material purchases.
Van Boven's research found that a higher percentage of women were happier with experiences than were men and that individuals with higher incomes and more education especially tended to prefer experiential spending - perhaps because the less discretionary income you have, the more any purchase will improve your quality of life. However, not a single demographic segment reported being happier with their material purchases.
The research authors summed up their findings: "The good life may be better lived by doing things than by having things."
A trend toward experiential spending is supported by the increase in service spending. For Americans, it has increased from 40% of their incomes in 1959 to 58% in 2000. The figure is understated, as in many cases goods and services are bundled together, yet classified as goods. Food is just one example. The U.S. government in its Consumer Expenditure Survey considers food a nondurable good. Today, consumers dine out for much more than just food for nutrition -- they are seeking the experience the restaurant provides. Dining out is about much more than avoiding cooking. Diners are seeking different cuisines in pleasant and exciting environments. To be successful today, restaurants can no longer consider aesthetics an afterthought. It is an essential part of the dining experience.
Today, creating economic value for consumers is increasingly coming from the emotional value and intangibles that experiences and experiential offerings create, rather than tangibles alone. This trend should continue, because as incomes increase, Americans and consumers in many other countries will spend a greater proportion of their income on the intangibles and less on material goods.
This emphasis on experiential spending is both good and bad news for the location-based leisure venues (LBLs). First the good news. Consumers are increasingly seeking experiences, which are the primary offering of LBLs. Now for the bad news. Every consumer destination, whether it is a restaurant, store, airport, or even a hospital, is enhancing the experiential components of its offerings. This is not only increasing the competition for the discretionary time and money consumers have for experiences, but also raising the bar -- and bar is getting higher at an almost exponential rate.
For example, restaurants in both the quick service and casual segments are undergoing radical upgrades in ambiance to enhance the experiential value of their offerings. "Everybody is going upscale today," said Joel Swirsky, an operator of Denny's, Golden Corral and Coco's.
Borders and Barnes & Noble are just two examples of how book stores have reformatted their offerings to be more than just a place to purchase books. They have cafes, book readings and presentations by authors and have become community and meeting destinations. Visit a Barnes & Noble on a Friday or Saturday night, and you'll be surprised how many people are there, and they aren't all coming with the original intent of purchasing books.
To gain a market share of the expanding universe of experiential offerings, LBLs need to upgrade their presentations to offer more than just entertainment, in the same way restaurants are upgrading to offer more than just food, and airports are offering more than just airplane transportation, with upscale food courts and retail 'malls.'