With the rise of social media over the past decade or so, the lines set by supply and demand and basic economics have shifted and become blurred.
Let’s take a look at experience goods versus search goods.
Experience goods are products and services that you have to experience before the true value of the good or service can be determined.
Generally, these goods and services are intangible and are usually the opposite of search goods. A big part of experience goods is that you have to consume the good or use the service to know about the quality of the product.
Think of legal services, a haircut or blowout or customer service and treatment at a hospital.
Search goods are the kind of goods that can be evaluated and performance measured before biting the bullet. Reading and watching reviews online is part of the research process.
Think of automobiles, electronics, games and even restaurants.
A 21st Century Approach
In the past, food and beauty products were categorized as experience goods. In our modern world, there is copious amounts of content for you to view and read in the search for high quality food and beauty products based on your tastes. Researching restaurants on social media, for example, is a big component of solidifying the travel itinerary with top-quality restaurants, picture worthy views and exceptional customer service.
Another “experience good” is legal services. I don’t know about that. Personally, I found my lawyer through word of mouth. As it happens, our lawyer has been friends with my father long before I was born. In that time, he has built a successful, impactful law firm with a proven track record. In this instance, an intentional business plan and impeccable customer service transform legal services from an uncertainty to the standard. See our blog post on customer retention and customer loyalty here.
A few more examples of this blending together are travel, music and film, and education. They all were categorized as experience goods. However, in this day and age, you can research airlines and hotels, music and film, and the true value of an educational institution.
With the wealth of information on the internet, the distinction between experience goods and search goods has lessened across the product categories. Listen, about half of the students in my econ class did not pass the course. But the recent changes have me wondering if the principles we were taught are still relevant today?