Behaviorial Economics 101

James Gilmore and Joseph Pine run a consulting firm called Strategic Horizons that has an almost cultlike following in the business world because of their ability to accurately predict consumer sentiments. Nine years ago, in their first book, they argued that businesses had to start selling experiences—not mere products—in order to survive the new economy.

The Experience Economy: Work Is Theatre & Every Business a Stage made the case that goods and services were being so thoroughly commoditized by Wal-Mart and the Internet that companies would fail unless they could create such diverting shopping experiences that customers would pay more for the same stuff they could buy for less elsewhere.

In their new book Authenticity (Harvard Business School Press), they argue that the virtualization of life (friends aren't friends unless you "confirm" them on Facebook; reporters are now all bloggers, and vice versa) has led to a deep consumer yearning for the authentic. America has "toxic levels of inauthenticity."

Inundated by fakes and sophisticated counterfeits, people increasingly see the world in terms of real or fake. They would rather buy something real from someone genuine rather than something fake from some phony. When deciding to buy, consumers judge an offering's (and a company's) authenticity as much as--if not more than--price, quality, and availability. G&P argue that to trounce rivals, companies must grasp, manage, and excel at rendering authenticity.

So how can companies deliver authenticity? What businesses will survive our jaded new form of capitalism? Gilmore and Pine offer two approaches. First, companies can strive to be transparent and exactly what they say they are. Chipotle Mexican Grill—"Food with Integrity"—goes for this approach, as does Honest Tea, the clothier Anthropologie, and Ethos water. These companies use the holier-than-thou strategy.

Want to know the other stategy? Read the book. It'll be well worth the time.

From the website:
Through examples from a wide array of industries as well as government, nonprofit, education, and religious sectors, the authors show how to manage customers' perception of authenticity by recognizing how businesses "fake it;" appealing to the five different genres of authenticity; charting how to be "true to self" and what you say you are; and crafting and implementing business strategies for rendering authenticity.