Question

Can you give me an example of The Progression of Economic value, starting with Commodity and ending with Experience? (Something other than coffee or Starbucks) Who sells at each stage and how do they market and price?

Answer 1

Economic activity and the progression of economic value start with raw commodities that are transformed into goods, which are then wrapped in services and finally transformed into experiences. Each level increases the total value to the customer, and accordingly, the total price the customer is willing to pay. Generally, price sensitivity decreases, profit margins increase and competition decreases as you move up the progression of economic value.

Example of the progression of economic value other than coffee or Starbucks is -

Example of the progression of economic value is birthday parties. Half a century ago, mothers made birthday cakes from scratch with butter, sugar, eggs, flour, milk, etc. Those commodities cost maybe fifty cents back then. Then in the 1960s and 1970s, along came cake mixes and canned frostings. These goods cost several dollars. Then in the 1980s, many parents stopped baking cakes and ordered custom cakes from the supermarket or local bakery, specifying the type of cake and frosting, designs or themes and the specific words for the top (a service). At $10 to $20, these cakes cost about 20 times what they cost to make at home and still involved only about a few dollar’s worth of ingredients (commodities). Then along came Chuck E. Cheese’s and other facilities that offered birthday parties. These facilities stage birthday party experiences that cost $150 and more per party.