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The Experience Economy in Museums

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The Experience Economy in Museums The experience economy in museums MSc Business Administration – Track EMCI Supervisor: Matthijs Leendertse Isabella van Marle 10024832 Date 24-6-2016 Statement of originality This document is written by Isabella van Marle who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents. 1 Table of content 1. Introduction 5 2. Theoretical Framework 7 2.1. The Experience economy 7 2.2. Generation Y 9 2.3.1. Museum objectives 11 2.3.2. Museum challenges 12 2.4. Business model innovation 16 2.4.1. Value proposition 18 2.4.2. Customer relationship 24 2.4.3. Channel 39 3. Research methodology 33 3.1. Research design and strategy 33 3.2. Sample 34 3.3. Data collection 36 3.4. Validity and reliability 38 3.5. Data analysis 39 4. Results 40 4.1. Challenges 41 4.2. Generation Y 41 2 4.3. Value proposition 42 4.3.1. Participation and interactivity 42 4.3.2. Education vs. Entertainment 46 4.3.3. Personalization 48 4.3.4. Design 50 4.4. Customer relationship 54 4.4.1. Co-creation 57 4.4.2. Networks 58 4.5. Channel 60 4.5.1. Communication channel 60 4.5.2. Distribution channel 61 4.5.3. Sales channel 64 5. Conclusion & discussion 67 5.1. Summary of empirical findings 69 5.2. Discussion of findings 72 5.3. Implications for practice 72 5.4. Limitations and recommendations for future research 74 6. References 76 7. Appendix 83 3 Abstract The oversupply of leisure activities makes it challenging for museums to attract audiences. This thesis explores how experience economy principles can strategically help museums to attract and retain Generation Y consumers. New business models are combined with the experience economy. Empirical data is obtained through interviews with fifteen experts, working in the Dutch museum sector. Interview transcripts have been compared and results show experience economy principles function as strategic tools to attract and retain Generation Y. Museum experiences are enhanced through the emerging trends of digital storytelling and visual culture. Experience economy principles help museums create public value in new ways, by offering innovative offerings and increasing participation and connection with Generation Y. 4 1. Introduction In the 70’s of the last century museums emerged on a large scale. The Western industrialized world was overwhelmed by a museum “boom” (Burton & Scott, 2003). Contemporary museums became cultural icons with symbolic value, part of urban landscapes and started to boost the local economy (Burton and Scott,2003). Since the “boom” on museums have competed with each other for visitors, as well as with other creative industries that provide leisure activities (McCarthy and Jinnett, 2001; Burton and Scott,2003). In 2011 the Dutch government decided to significantly cut funding to the cultural sector. More recently in 2015, has been announced local governments must cut their culture budget by a further 40% (Zwetsloot, 2015). The growing supply of leisure activities along with the governmental subsidy cuts have both made it increasingly challenging for museums in the Netherlands to attract audiences. Young people and audiences with minority race and poor educational backgrounds are especially difficult for museums to attract. Mannheim’s theory of generations (Kecskemeti, 1970) implies that generations vary according to historical social processes, which should be taken into account when regarding museums customer segmentation. Generation Y (18-30 years old) is not a priority target audience for many museums. However, this generation is by far largest part of population and is responsible for the transmission of cultural heritage to future generations (Djamasbi, Siegel, & Tullis, 2010; Leask, Fyall & Barron, 2011). Therefore, it is worth understanding and responding to their behaviour and preferences. Many museums have plenty of unused resources (O’Hare, 2008). Just consider the enormous collections that many museums possess, and then the tip of the iceberg that is exhibited to the public. It is therefore essential to explore how museums might be able to make better use of these resources. To keep up with the dynamic economy, museums need to 5 think strategically of new ways to optimize and fulfil responsibilities of public value creation. Many business models, including those found in museums are outdated (Chesbrough, 2009; Osterwalder & Pigneur, 2010). Dutch museums struggle to cope with digitization, as it asks for time and financial resources (De Erfgoedmonitor, 2015). New technologies, shifts in economy and pressures in environment ask for new business models (Louviere and Young, 2009; Bakhshi and Throsby, 2010). From a social entrepreneurial perspective museums must innovate if they wish to optimize their value to the public. The experience economy implies organizations have to understand and improve the customer journey. Blending experience economy principles with new business models could function as strategic tools to enhance value for this younger audience. Experience economy lives up with characteristics of tech savvy Generation Y consumers, who grew up as digital natives and are spoiled with endless options in a broad range of leisure activity opportunities. The experience economy emphasizes that companies/institutions connect and co-create with their consumers and ask for their participation (Pine II and Gilmore, 1998). The experience economy has already proven its relevance and efficacy in many industries and could also function as guiding strategic tool for museums when considering new business models to increase value for Generation Y. Research regarding the experience economy generally focuses on commercial companies and industries for which profit is the end-goal. This thesis will approach the experience economy from a different angle. Little is currently known about the value that the experience economy could have for nonprofit organizations and public institutions. Therefore, this thesis will explore how the experience economy might be integrated into a public institution, as well as how “experience” can be strategically deployed to create public value for Generation Y. 6 In order to explore the components of the experience economy most fully I outline the following research question and sub-questions: RQ: How can museums strategically use experience economy principles to attract and retain generation Y? SQ1: How can experience economy principles improve value propositions of museums for generation Y? SQ2: How can experience economy principles enhance customer relationships with Generation Y? SQ3: How can museums deploy new channels that will reach Generation Y? 2. Theoretical Framework In this chapter, a description of the existing literature in the relevant field will be given. First, the meaning of the experience economy and its components are described. Then “Generation Y”, the focus customer segment in this study, and its characteristics are defined. Also, common museum objectives and challenges will be explained. Then an explanation of the business model and its relevance is given in chapter 3. Experience economy principles are interconnected with new business models. All constructs of business model innovation ; value propositions, customer relationships and channels, are related to the customer segment Generation Y. 2.1. The experience economy In past decades an evolution has taken place in the economy. Where firms once competed to provide the best products and services, now they prioritize experience in enhancing their 7 economic value (Pine II and Gilmore, 1998; Prahalad & Ramaswamy, 2003; Edvarsson, Enquist and Johnson, 2005; Pine II and Gilmore, 2014). For many industries, customer experience management has long been an important strategic focal point. Customer experience-oriented organizations analyse experience-based businesses can generate growth (Verhoef et al., 2009). The concept of customer experience has started to infiltrate organizations an increasing number of sectors. In an experience economy, understanding the customer journey is crucial. Organizations need to focus on all the phases of a consumer’s experience, which includes that customer’s expectations prior to, during, and after the interaction with the organization and may include multiple communication, distribution, and sales channels (Berry et al., 2002; Verhoef et al., 2009). Industries and technologies have become more interconnected since the fast growth of a digitized world. Today’s consumers, specifically Generation Y, are much more active and are always connected online (Bolton et al.,2013; Leask et al., 2013). These shifts towards customers being constantly “switched on” make product– and company- centric views rather out-dated. A more customer oriented view in which consumers actively participate better suits the experience economy (Prahalad & Ramaswamy, 2003; Chuah et al., 2014; Pine II and Gilmore, 2014). Connecting with consumers and encouraging participation with an organization is an ideal customer-company relationship in the experience economy ( Pine II and Gilmore, 1998; de Swaan Arons et al., 2014; Pine II and Gilmore, 2014). Connecting implies the way in which companies create environmental relationships for their consumers. Compelling experiences include themes,
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