How Social Media enables Experience Economy?

Apparently, there are only 3 reasons why you choose to buy a product or a service -
1. It's the cheapest
2. It's unique
3. You're sold on marketing!!

These are also the fundamental reasons that drive a company's differentiating strategy. A company can choose to:
1. Differentiate on price (Indian IT companies, Goods sold in Flea markets)
2. Differentiate on product (Apple, Tata Nano)
3. Differentiate on marketing (Pepsi, Coke, Microsoft)

For ages, companies have followed various versions of these strategies with varying degrees of success. However, during the last 2 decades, a special kind of differentiating strategy (customer experience) has been found to produce better and more sustainable returns than what other strategies produce. This interesting trend was discovered in 1998 by Joseph Pine and James Gilmore. They noticed that as goods and services became commoditized, the customer experiences that companies created, led to more sustainable differentiation. They published their seminal research in an article "Welcome to Experience Economy" in HBR and also wrote a book with the same name. Although differentiating-on-experience falls in the realm of differentiating-on-marketing, there's more to it than just marketing as discussed below.

My goal here is not to explain what “experience economy” is; rather I want to show how fundamental the roots of social media are from an "experience economy" point of view. To prove this point, let's begin by looking at an interesting example from the book "The Experience Economy" that beautifully explains this tectonic shift.

"The entire history of economic progress can be recapitulated in the four-stage evolution of the birthday cake. As a vestige of the agrarian economy, mothers made birthday cakes from scratch, mixing farm commodities (flour, sugar, butter, and eggs) that together cost mere dimes. As the goods-based industrial economy advanced, moms paid a dollar or two to Betty Crocker for premixed ingredients. Later, when the service economy took hold, busy parents ordered cakes from the bakery or grocery store, which, at $10 or $15, cost ten times as much as the packaged ingredients. Now, time-starved parents neither make the birthday cake nor even throw the party. Instead, they spend $100 or more to ”outsource” the entire event to the Discovery Zone, the Mining Company, or some other business that stages a memorable event for the kids-and often throws in the cake for free. Welcome to the emerging experience economy."