Techblog
What is “Phygital” and how is relevant for small business?
The blending of physical and digital user experiences for ‘phygital’ isn’t just an excuse to create another marketing buzzword. It’s a way for small businesses to align their digital and real work operations.
Research confirms that harnessing digital technology to meet changing customer expectations is good for the bottom line. According to a PricewaterhouseCoopers report, The retail revolution, digital prowess has seen top-performing companies increase their revenue and profit margins by more than 5%, a growth that the global consulting firm expects to be sustained in the next three years.
Not surprisingly, an increasing number of businesses are integrating physical and digital experiences to drive customer engagement—a development that has spawned the “phygital” buzzword.
Phygital trends in retail
The blending of the physical world and digital media has been most apparent in the retail industry, a WEF white paper found. The PricewaterhouseCoopers analysis also found the retail industry is targeting digitally savvy customers who respond to location-based offers and spend more when given mobile payment options.
To the delight of retail customers, they also address a major customer pain point --- the checkout line --- by allowing various payment systems, including scan and pay, in-app, and click and collect.
Australian supermarket chain Coles for example, alerts customers when their favorite products go on sale through a store app. Email offers are also sent to customers, who can choose between a shopping discount and earning bonus points on their loyalty card. If customers choose to shop in-store, they take what they want from the shelves and scan their purchases themselves at a self-service terminal, and then pay --- all without having to interact with store staff.
Amazon Go in Seattle, Washington, has gone a step further by getting rid of checkout counters altogether. This is how it works: customers use the Amazon Go app to enter the store, take the products they want from the shelves, and what they take is recorded in their Amazon account. They simply walk out when they’ve finished shopping, and don’t need to deal with any store staff unless they need help. When they leave the store, they receive a receipt from the app and are charged for their purchases through their Amazon account.
In Asia, leading the charge in digital-driven retailing is e-commerce giant Alibaba. In the quarter ending December 31, 2017, the Chinese conglomerate reported revenue growth of 56% year-on-year on the back of strong results in its core commerce, which includes the Taobao shopping app and Tmall, an online shopping platform that sells brand-name consumer goods to Chinese consumers.
Alibaba’s new retail initiatives are reimagining online and offline shopping with its Tmall Supermart --- where customers can pay via facial recognition and get a discount on a product when they smile --- and Hema supermarkets whose customers can use an app to place their orders.
Other food businesses hopping on the phygital bandwagon is fast-food chain McDonald’s, for one. McDonald’s diners successfully incorporated touchscreen order kiosks in Australia, Britain and Singapore, where customers can use these to order food and beverages, customize offerings to add or remove certain items from a meal, and pay for their purchase by cash or card. They are now working to roll this out in all its 14,000 U.S. restaurants too.
Blending physical and digital in transportation
Grab is a ride-hailing app in several countries in Southeast Asia. It partners with small entrepreneurs to offer transportation services, from carpooling to taxi rides, motorbike hire, shuttle services and car rentals. In February 2018, Grab announced a partnership with Samsung Electronics to provide microfinancing of smartphones for the network’s 2.3 million driver-partners in Southeast Asia, allowing more kiosks to book a ride in shopping centers, hotels, airports and other public places using a pre-installed Grab app in mobile devices, and provide in-car infotainment services.
Healthcare and education go phygital, too
In 2013, the Singapore government invested $500,000 in RingMD, a healthcare start-up founded by 21-year-old entrepreneur Justin Fulcher. RingMD enables small medical practices grow their client base by providing a platform where patients can book virtual consultations with doctors and allied professionals from their personal computers or smartphones and tablets.
Not to be outdone by well-resourced firms in the business sector, Dennis Johnson Library, a public library in Australia, allows borrowers to browse its online catalogue, reserve books through its website, and specify which branch within the local government library network they want to collect the items from. Borrowers go to the library in person to pick up the books but can keep interactions with the librarian to a minimum because they scan the books themselves in the self-checkout terminals.
What can SMEs learn from Phygital?
These big business examples show the traditional bricks and mortar store is still relevant to customers. While SMEs can’t put resources behind phygital in the same way Amazon can there is still plenty they can do to bring the digital and physical experience together.
By incorporating real time inventory into a business website customers are able to order online then come into the store to collect their items. They don’t have to wait or pay for extra delivery services, plus they know the item is definitely in stock when they make the trip to the store. Similarly, clothing outlets can allow customers to order online, then come into the store to try on the items.
Allowing customers to use digital payments in the store via their mobile devices also brings together the two experiences. Systems like PayNow or Apple Pay are easy ways for SMEs to offer this service. Providing customers with iPads for self services - in restaurants for example - adds a new level of ease to customer service.
Summary
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To succeed in today’s digital economy, it’s no longer enough to just offer products and services.
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Phygital marketing, to blend digital experiences with physical interaction to create a compelling customer experience, can help businesses increase their revenue and profit margins
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Technology-enabled approaches require advanced analytics and artificial intelligence to predict customer preferences and provide personalized experiences.
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Phygital marketing is by no means an exclusive domain for large companies. Small and medium enterprises and micro-businesses can also benefit through strategic partnerships with existing platforms and technology providers.