Three in four millennials (78%) would choose to spend money on an experience or event over buying something desirable (Source: Harris Associates, 2015).

This love of experience over things is most pronounced in millennials, but not exclusive to that age group. In surveys, all age groups value experiences over things.

The funny thing is, many retailers are acting like the opposite is true. When grocery retailers are locked in an ongoing price war, there’s a fine line between competitive advantage to gain customers and a pyrrhic victory in a race to the bottom. And since the financial crash set in motion in 2007, it’s not just grocery retail that’s seen a renewed focus on pricing and value.

For consumers, value is everywhere in retail, from cut-price Subway sandwiches to Black Friday sales that place discounts at the start of the biggest spending season. But is value pricing really the driver we all think it is?

Listen to the science, not the market

The science of happiness that says that people derive more happiness from spending on experience than products. Buy a new pair of jeans, and you get a short term high, but your happiness levels soon return to baseline, while you risk buyer’s remorse.

Buy an experience, like a holiday, and you value it for a much longer term. Part of this is because you get to anticipate it, which delivers as much happiness as the event itself, according to studies. Then you have the memories to re-live, which generates more happiness. Then you have the experience itself.

But what does this have to do with CPG or retail marketing? Experiences make a product more valuable. Delivering a better brand experience makes shoppers assign more value to that product – not value created by price, but value associated by elevating a product from just another thing we can buy, to something that delivers a premiumness or an everyday luxury from the experience of it.

According to a survey of 1,000 UK shoppers by retail marketing agency Live & Breathe (34%) want a better in store experience, while 1 in 5 (18%) think that the shopping experience on the High Street is getting worse (rising to 21% of 25-34-year-olds.

We need to fix this.

We can take a lesson from the rise of Starbucks. When the coffee chains first appeared on the high street, they delivered a superior coffee to UK’s cafe’s. But they also delivered an experience. They brought your living room into the High Street with comfy sofas and a sense that we were living inside an episode of Friends – where a High Street store was not just a place to hurry past, but to pause, relax, chat and people watch. That experience of the retail environment is inseparable from the cup of coffee. The vast majority of the value of a £3 cup of coffee comes from the in-store experience.

This value of experience of a product is taken to the extreme by the fanboys and fangirls who create YouTube unboxing videos – showing in exquisite detail, the opening up of a new product. From opening the beautiful packaging of a new iPhone, to unwrapping and cracking open a Kinder Egg to reveal the toy, unboxing fetishises the product to make it all about the experience. That’s where the value lies.

The products we sell can be both ‘things’ and ‘experiences’ depending on how they are packaged, presented and the context in which they are used and consumed.

A strawberry might just be a ‘thing’, a commodity. A shopper’s decision to buy them might be based on how much they and their family like strawberries and the current market price. It’s a thing. But if you’re using that strawberry on your child’s fifth birthday cake for a party you’ve invited 30 kids to, that strawberry is both a thing, and it will play a role in an experience. If strawberries are really expensive this week due to a supply shortage, and your child loves both strawberries and raspberries equally, you might buy raspberries, because both are still commodity products that you will make into part of an experience.

But take a single strawberry and place it on a plate at El Bulli, the world’s most awarded restaurant, and it becomes an experience. When El Bulli was open, millions of people joined the waiting list to eat that strawberry, when there were just thousands of seats available. That strawberry was infused with gin and tonic and BBQ flavourings, so that the drink flavours are tasted first, followed by the BBQ taste, and finally the strawberry itself. The dish was designed to evoke memories of Summer BBQs. The commodity product is now undoubtably an experience.

Of course we know this lesson about experiences intuitively. We know that a takeaway coffee drunk as you walk to a meeting might be less of a memorable experience than a coffee in a Starbucks on a brilliant first date, which in turn, might be less of an experience than a coffee at the end of a meal in a amazing restaurant to celebrate a job promotion.

So why aren’t we focused on in-store experiences?

The mistake that some CPG and retail brands make when thinking about how to add value to products, is they see the brand as a tangible thing with value in and off itself. Because they work for the brand, they might overestimate the brand’s value. Which is strange, because, the brand is at worst an abstract construct, and at best a sum total of all customer experiences with the product or retailer.

Either way, the brand experience doesn’t exist in the world, it exists in our heads. That’s why we should focus on an individual’s consumer experience of the brand, not on protecting the brand. Great customer service, personal service and personalisation are all great ways to turn a thing into an experience, protecting it from commoditisation.

When Nutella offered jars to be printed with personalised messages in Selfridges, there were long queues to buy a jar. Had that jar cost two, five or even ten times the standard prices, I bet there would still be people queuing up to buy.

The question is, how can we take advantage of the desire for experiences and re-work our product offering or our retail stores to create better experiences.

Starbucks Reserve in Covent Garden, London, marries the power of the brand with the look and feel of a high-end private members’ club. The copper funnels and glass siphons bring an old-fashioned craft element, while the hosts who greet you make you feel like you’re in an independent restaurant where your custom is of paramount importance. It’s about the experience. The coffee is just the product the experience is wrapped around.

It’s easy to look at the flagship stores of luxury retailers such as Burberry or Nespresso to see how they zone the store, invest in attentive staff, great store design and helpful technology to build memorable experiences worth paying a premium price for. It’s harder to suggest how to create the same effect in a sector that’s used to focussing on price and value and convenience as it’s drivers.

What’s stopping investment in experiences?

There are two reasons:

1. Cash

and

2. Dogma

The economy grew 2.5% this year and 2016 is set to be the same. The challenge for retail in 2016 is how to grow in a cautious economy, while innovating in response to changing shopping behaviour. The high street is being disrupted by changing shopping behaviour around which channels they shop in and how they use technology. That’s a problem for physical stores, but moving towards more experiential stores is not necessarily the obvious answer when your industry is tied up in…

…Dogma is a challenge for retailers. Physical retail is being disrupted at such a pace by e-commerce and innovative new business models that it’s hard for some retailers to keep up (hello Blockbusters, Virgin Megastores and Woolworths). But shops have always worked the same way, so do we really have to change now?

Long rows of shelving makes sense in a world where you have to shop in physical retail stores. But when e-commerce satisfies on the hygiene factors of ease of shop, range and price, physical retail stores need to do more. They need to offer experiences people can’t get online – and not just the crap ones, such as standing in queues or meeting unhelpful staff.

The area stores can excel in is in providing an experience that is visually stunning and emotionally engaging. Virgin Holidays’ new retail format V Room (in the image at the top of the post) is based on Virgin’s airport lounges because “It’s no longer good enough to just have a shop with brochures on a wall and sales people behind a desk.” You can experience a little bit of what it would be like to go on holiday to various destinations, by being given airport lounge service and served food from the country of your choice. It’s a very different experience that being greeted by a salesperson behind a computer.

What about sectors where it’s all about value?

Even in grocery retail, there are some great examples of building premium experiences into grocery stores. Morrisons’ Market Street counters encourage you to ask for advice and help from the in-house bakery, the butcher, fishmonger etc. They’ll take the time to advise you and to extend your culinary skills, while filleting your fish or preparing your meat just how you like it. The retailer’s pizza counters allow you to create your own pizza from a choice on toppings, to take home.

Waitrose is trialling sushi bars where you can take away freshly made sushi, or sit at a stool and eat in.

In the US, Wholefoods’ spin-off chain 365 is introducing tattoo palours and Bulletproof Coffee.

People say that grocery is all about price, range and convenience… but maybe customers are not as price sensitive as we think. Sure, there are plenty of households on a budget, but these same families will happily spend money on coffee and cake in Starbucks at the weekend or eating out.

Maybe by framing the conversation around price, we are training more and more grocery customers to compare grocers in this way.

Perhaps there’s another way.

While discounters such as Aldi and Lidl have grown by framing the conversation around price, Waitrose has weathered the storm by hardly entertaining that conversation. Waitrose has achieved its 91st consecutive period of growth – the longest current run of success for any supermarket, according to Kantar. It’s easy to say that grocery is all about every day low pricing. And it’s easy to join that game. But the costs of playing that game with smaller retailers with lower cost bases are high.

By focussing on in-store experience instead, you invest in those experiences instead of price cuts. And as people value experiences more than things, it would be fascinating to see what the effect would be if a major supermarket adopted this approach. The question is: Is anyone brave enough to be an iconoclast and go against the grain of the received wisdom in this sector, despite what the science of happiness might say…

Physical retailers have a choice to make

At Galerie Lafayette in Paris, there is a Chanel store where you can’t just walk in. You have to queue to gain access. The greeter at the door will ask you which items you are wanting to browse before you are allowed in. Once inside, you feel lucky to be able to hold and touch the bags.

A few streets away, you might find a street seller, hawking fake Chanel bags. He is selling them at a fraction of the price of the real bags. The quality is slightly less, and he is making a tiny profit margin on the bags, compared with the huge mark up of the bags inside the Galerie Lafayette. But despite his value offering, there is no ten-minute queue. People are queuing for the brand experience that the Chanel store inside Galerie Lafayette offers. No one here is worrying about prices.

I know not all of our brands are Chanel, but that’s not really the point. By focusing on price, we are setting the frame of experience of our retail or CPG brand around cost – around it’s pure utilitarian value. Instead, we could not do that. We could focus on engineering customer experiences around our brand so powerful, that people want to have those experiences. They want to buy our brand at the prices we set because of how that experience makes us feel.