Chapter 1 Introduction 1.1 Background 1.1.1 The Experience Economy Economists have typically lumped experiences in with services, but experiences are a distinct economic offering, as different from services as services are from goods. Today we can identify and describe this fourth economic offering because consumers unquestionably desire experiences, and more and more businesses are responding by explicitly designing and promoting them. (Pine and Gilmore, 1998, p97) During the past decade, followed by Pine and Gilmore’s (1998; 1999) ground-breaking article and book on the ‘experience economy’, consumer experiences have gained increasing attention. The concept of an ‘experience economy’ comes about in an era where technological advancement has led to higher productivity and richer commodity supply. As such, competition among businesses is becoming increasingly intensified. The Internet has been used ever more intensively allowing for instant price comparison. As a result, goods and services tend to be exchanged on price and availability alone (Schmitt, 2003). Pine and Gilmore (1998; 1999) notes the progress into the fourth economic stage; that is ‘the experience economy’ especially in affluent developed economies where there is clearly an increasing demand for personalised experiences. In an ‘experience economy’, products and services alone can no longer serve as the differentiating factors that provide businesses with competitive advantage (Pine and Gilmore, 1998; 1999). In such an economic stage, the creation of memorable consumer experiences involving using goods as the ‘props’ and services as the ‘stages’ adds economic values centred on the staging of memorable experiences that engage consumers in a personal way (Pine and Gilmore, 1999). Pine and Gilmore (1999) recommend that in order to have rich experiences all four realms of experience namely entertainment, education, escapist and esthetical ones need to be explored. That is to say, companies need to go beyond just ‘entertaining’ consumers and use every available space to ‘engage’ consumers’ five senses, attending to their emotional, physical, intellectual and even spiritual needs. In addition, experiences are best designed and staged using experience design principles, namely the need to: ‘theme the experiences’ so that consumers can integrate all their feelings experienced; ‘harmonize impression with positive cues’; ‘eliminate negative cues’ which are inconsistent with the theme; ‘mix in memorabilia’; and, ‘engage all five senses’ (p.102-104). The successful designing and staging of experiences relies on creativity and innovation. Many of the later work on consumer experiences, in essence, are grounded in the concept of an ‘experience economy’. Such a concept is significant for the 1 tourism industry because the existence of tourism industry lies in the supply of consumer experiences given its hedonic and conspicuous nature (Morgan and Watson, 2007; Morgan, Lugosi and Ritchie, 2011). 1.1.2 The Growing Importance of the Consumer Experiences Over the past few decades the consumer experiences have attracted increasing academic research (Hirschman and Holbrook, 1982; McIntyre, 1989; Arnould and Price, 1993; Lee, Datillo and Howard, 1994; McIntyre and Roggenbuck, 1998; Borrie and Roggenbuck, 2001; Curtin, 2005). Building on the landmark text by Pine and Gilmore (1999), the recent publication by Morgan et al (2011) brings the debate up to the present day in that it explores three aspects of experience research, namely, understanding experiences, researching experiences and managing experiences. Echoing Pine and Gilmore (1999) and Schmitt (1999; 2003)’s view, Morgan et al. (2011) stress that such exponential growth in interest in the consumer experiences has emerged from a context where an increasingly rich supply of commodities and a rising functional homogeneity offer consumers a wide range of consumption possibilities. This in part, can be contributed to the fact that functional homogeneity is unable to differentiate economic offerings. As such, the importance of ‘experience management’ lies in its ability to sustain competitive advantages where there is a rising functional homogeneity. In addition to the principles and techniques offered by Pine and Gilmore (1999) in designing and staging successful experiences, Morgan et al. (2011) highlights the importance of interactive ‘co-creation’ as seen in Prahalad and Ramaswamy’s (2004 cited by Morgan et al., 2011) work, ideally enlarging the concept of ‘experience creation’ (Sundbo and Darmer, 2008 cited by Morgan et al., 2011) with the involvement of a diverse multitude of agencies and processes in producing experiences. While the current experience management literature has addressed the matured Western markets, future work also needs to understand the newly rising markets, such as the Chinese one. Successfully managing experiences cannot be achieved without a good understanding of experiences, which is often uncovered through innovative research methods. While the current experience research has adopted quantitative research methods, Morgan et al. (2011) calls for more creative qualitative research methods. If consumption is not merely about functional utility, but more about subjective ‘feelings, fantasy and fun’, as described by Hirschman and Holbrook (1982) and how it serves social, psychological and symbolic meanings, to operate successfully in such an environment, companies are recommended to adopt a consumer-oriented experiential approach where they 2 explicitly listen to consumers’ voices, attend to their feelings and experiences, and value their subjective interpretations. The literature suggest that only when a comprehensive understanding of experiences from the consumers own perspectives is gained, are companies and experience providers able to achieve added value and competitive advantage by designing and providing personally meaningful experiences that bring significance to the lives of their consumers. 1.1.3 Consumer Experiences in Travel and Tourism The tourism industry has naturally become the pioneer in the adoption of experiential approaches due to the conspicuous and hedonic nature of consumption (Morgan et al., 2011). This means that utilitarian may be less of a concern for tourism industry compared with other industries that mainly focus on the offering of functional ‘products’. The tourism industry, in essence, is presented to supply consume experiences (Morgan et al., 2011). In the tourism industry, as elsewhere, with the increasing development of transportation and Internet technology, there is increasing functional homogeneity in terms of tourism product offerings. For instance, more and more destinations can offer goods and services with similar functional attributes. As such, offering unique tourist experiences can create added values and sustain competitive advantages. 1.1.4 The Growth and Significance of the Chinese Market China is widely recognized as one of the major emerging outbound tourism markets in the world where the annual average year-on-year growth figure has been 22% since 2000 (WTTC, 2006). As a country with the fastest growing economy and the largest population in the world, China is expected to generate more and more travellers abroad in the years to come. It is estimated that the number of Chinese outbound tourists has the potential to reach 100 million by 2015 (WTO, 2008). Despite this rapid growth, the literature on the phenomenon of the Chinese outbound tourist market has been limited. More recently, studies have begun to focus on the understanding of Chinese travellers. To date, certain authors have contributed to the understanding of Chinese travellers (e.g. Choi, Liu, Pang and Chow, 2008; Gu and Ryan, 2008; Law, To and Goh, 2008; Li, Harrill, Uysal, Burnett and Zhan, 2009; Sparks and Pan, 2009; Chang, Kivela and Mak, 2010; Lee, Joen and Kim, 2010; Ye, Qiu and Yuen, 2010; Li, Lai, Harrill, Kline and Wang, 2011; Tsang, 2011). The majority of the current literature on Chinese travellers has focused exclusively on trends (e.g., WTO, 2008; Li et al., 2009), behaviour (e.g., Choi et al., 2008; Gu and Ryan, 2008; Law et al., 2008; Sparks and Pan, 2009; Chang et al., 2010), expectation or motivation (e.g., Li et al., 2011) and satisfaction (Gu and Ryan, 2008) when visiting Asian destinations such as Korea, Singapore 3 and Hong Kong (Choi et al., 2008 ; Lee, et al., 2010) and on all-inclusive package tours (e.g., Chang et al., 2010). A latest study done by (Ye et al., 2010) has started to address both motivation and the experiential dimension of Chinese tourists, despite the fact that the study they conducted is specific to Chinese medical tourists visiting Hong Kong. Lacking to date, however, are studies that investigate Chinese travel experiences, especially in Europe. A variety of reasons may explain this paucity of research to date. For example, although historically tourism has a long tradition in China, contemporary Chinese outbound tourism has not been researched intensively. Until now, Asia still constitutes the number one outbound tourism destination for the Chinese tourist market. Contemporary Chinese outbound tourism, especially to Europe, is a comparatively new phenomenon. As mentioned earlier, the experiential approach is a newly-introduced one, only after Pine and Gilmore’s landmark text in 1999. Finally, the Chinese economy, despite its rapid developing pace and its promising potential demand, may have not yet reached the fully-fledged ‘experience economy’, as is