Based on i. B Joseph Pine II, James H. Gilmore, The Experience Economy, Harvard Business School Press, 1999.
Let me take the example of a cake. First, people would buy the ingredients they need for a cake and prepare it themselves at home.
Then bakeries would buy the ingredients, prepare the cake and sell it to you from their premises. The main ingredient is expertise.
Afterwards we evolved to a world where bakeries bought the ingredients, made the cake and delivered it to your home. The main ingredient becomes convenience.
And today we are in the age where the bakeries deliver the cake to your home together with a balloon and a messenger that will sing you happy birthday. The main ingredient becomes personalization. Now this is an experience which you are willing to pay for a higher price, even though you are getting the exact same cake.