Why Top Brands Are Obsessed With Phygital Marketing

Why Top Brands Are Obsessed With Phygital Marketing process.st/phygital November 27, 2020

Leks Drakos November 27, 2020 Marketing, Technology

You’re waiting for the train on your way to work. You’ve got a long day ahead, and don’t feel like swinging by the grocery store afterward. Fortunately, there’s a supermarket kiosk on the platform. You scan the barcodes with your phone and arrange for your food to be delivered when you get home.

As you cross the street to your office building, the strap of your computer bag finally breaks. You don’t have time to run out and get a new one, but that’s okay. Once you’re in your office, you log on to the company’s website, put on the augmented reality headset, and virtually try on different bags.

At lunch, you head down to your usual restaurant. The AI in the touch-screen kiosk suggests sandwiches you might like based on your order history, then uses facial recognition to complete the order and charge your account.

This is phygital marketing – all made possible by advances in augmented reality (AR).

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The global AR and virtual reality (VR) markets are expected to reach 18.8 billion USD by the end of 2020 – over 78% growth from spending in 2019. By 2025, that growth is only expected to increase exponentially.

With the sophistication of AR/VR tech, more companies are incorporating it into their campaigns – and more consumers are expecting it.

In this Process Street post, we’ll take an in-depth look at the what and why of phygital marketing, but you can also skip ahead to one of the following sections: Let’s get phygital!

Phygital isn’t a real word… Is it?

It is an unusual word, and you may not have come across it yet; I spent an entire day discussing it with a colleague before they realized I wasn’t saying digital marketing.

You might think “phygital” is yet another buzz word being thrown around as a new fad by marketing teams – and you wouldn’t be alone. In researching this article, nearly every article posed the question is phygital marketing a temporary trend?

Some are curious, some are skeptical, some are excited by the possibilities, but, truth be told, phygital marketing is doing what advertisers have always done: create experiences.

What is phygital marketing?

It’s simple: physical + digital = phygital. Phygital blends physical strategies with digital applications to create a seamless customer experience using the best of both worlds.

“We have the technology to curate the entire collection to their personal style. … They’re seeing the things that they love, that are true to them.” – William R. Adler, CEO True Fit app Like most trendy terms, claims for coining “phygital” are all over the shop, but Australiabased Momentum was the first to copyright it for their 2013 motto: An agency for the Phygital World.

For 2020, the company has opted for a very sleek front page linking to their biggest campaigns. Instead of being for the phygital world, they now offer the “Total Brand Experience,” claiming “digital is in our DNA.” The aim of phygital marketing? Create an experience that captures the three I’s: Immediacy: the experience happens at an exact moment in time; Immersion: the user is included in the experience; 2/13

Interaction: the experience activates the physical and emotional aspect of the purchasing process.

Is phygital a fad?

As the graph shows, interest in the phygital has shown a consistent uptick since 2015, reaching maximum saturation in September and October 2020 – and no wonder with more and more brands trying to offer customers a complete experience without the benefit of inperson, physical interactions. AR and VR trends come in handy when you want your customers to feel the softness of your new sweater line, or how comfortable your new boots are when they aren’t able to try them on in-store.

So is phygital a fad? Will it still be around when we’ve moved past social distancing, lockdowns, and essential services only?

Marketing blogs and business magazines have spent a lot of time speculating about the “new trend” of phygital marketing, but the truth is, phygital experiences aren’t new at all.

In fact, they’ve been around since 1893.

But how, you might ask, can phygital marketing exist when digital doesn’t?

Phygital is only the newest name for a very old trick: experiential marketing.

The first documented instance of experiential marketing is the Chicago World’s Fair in 1893. Here brands like Wrigley’s, Cracker Jack, and Pabst handed out free samples of their products in the hope of driving sales. More significantly: the Fair introduced the White City.

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The fairground became known as the White City due to the large white Neo-Classical and Beaux-Arts buildings designed by Daniel Burnham, which went on to influence architectural trends nationwide well into the next century. Chewing gum, popcorn snacks, and grand buildings were not the main attraction at the World’s Fair, however. On May 1, 1893, attendees to the fair got the chance to witness a technological innovation never before seen in the United States: electricity.

It wasn’t one or two lamps on display, nor were they switched on by some anonymous technician. The button was pushed by none other than President Grover Cleveland, illuminating 100,000 incandescent lamps.

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It is hard to argue that that experience wasn’t memorable.

And so the very first glimpse of what would eventually become the experience economy occurred on May 1, 1893 in Chicago, Illinois.

“Since 1893, Chicago ought never to be mentioned as ‘Porkopolis’ without a simultaneous reference to the fact that it was also the creator of the White City, with its Court of Honor, perhaps the most flawless and fairy-like creation, on a large scale, of man’s invention.” – James Fullarton Muirhead, The Land of Contrasts

What does “experience economy” mean?

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Experiences are their own product category, like “goods” or “services.” Products are sold by emphasizing the affect they have on people’s lives, not just their function.

In the case of the World’s Fair, electricity was the thing being marketed, but it was the experience of seeing electricity for the first time that was being sold; that was what attendees paid admission for.

While modern examples of viral marketing and pop-up events may not possess the same awe-inspiring effect as a (small) city being lit by electricity for the very first time, they do utilize the same technique: memorability, connectivity, and emotion.

“People now spend less time and money on goods and services, and more on experiences that engage them in a personal and memorable way.” – James H. Gilmore & B Joseph Pine II, The Experience Economy: Work Is Theatre & Every Business a Stage Not that long ago, the big push was for physical become digital; businesses and organizations who couldn’t build a solid e-commerce processes often found themselves without a market. In the past few years, however, that trend has shifted, and we now see digital organizations are using physical locations to enhance the consumer experience.

In 2018, Amazon launched its first physical stores to promote what they call “Walk Out Shopping” – grab the items you want and walk out. Once you leave the store, the total is 5/13

charged to your Amazon account and you receive a receipt by email. Just like buying through the website, but in the real world.

But in the strange, new landscape of lockdown and isolation, our digital and physical selves have been melding in ways we never imagined, making phygital the buzzword of the year.

This is especially true in the case of event coordinators who have had to rethink their gatherings with social distancing in mind. While some canceled events indefinitely, others, like Milan Fashion Week, decided to embrace the challenge with a combination of physical and digital shows. Iconic houses like Louis Vuitton and Burberry not only got on board, but took it to the next level by creating short, narrative-based films that blended aesthetic and activism.

In addition, Fashion Week Online has created VR Fashion Week, which includes a plethora of events from giveaways to fittings and everything in between – as long as it takes place either in virtual or augmented reality.

According to Gartner, Gen Z are the ones who will determine the fate of post-pandemic commerce. Offering them immersive experiences with AR and VR tech that offer “close to real” fitting and color schemes reduces return rates and increases profitability.

The future, it seems, is indeed phygital. At least as far as Gen Z is concerned.

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Living in a phygital world: Nintendo, Porsche, and Sephora

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You’ve probably noticed I’m using the word “experience” a lot (my inner editor is screaming), but that is the primary appeal of the phygital… encounter.

Hey – I tried, okay?

It’s not enough for brands to come up with a memorable slogan and eye-catching graphics; modern consumers want to play an active role in their purchasing journey. They don’t want only a product or a service; customer success now is all about entertainment.

Consumers want to feel good about their purchases – it’s sustainable, it meshes with their ideological values, it preserves habitats for endangered marsupials – and they want an emotional connection to the companies they purchase from.

Again, this is nothing new. Think about the appeal of offers to “try at home,” or stores that encourage interacting and playing with products.

Think about the absurdity of stores with multiple floors devoted entirely to M&Ms or Legos, and the reality of customers waiting in line for an hour or more just to go inside one of these locations.

It’s all about the experience.

Once inside, you can purchase custom-printed candy or location-specific building sets.

There are games, activities, and exclusive merchandise to commemorate your trip. The store transforms from a mere retail outlet to a destination in itself.

And, of course, you’re going to share that trip on Facebook, Instagram, and Twitter so all your friends and family can see how much fun you’re having, and share in the excitement (or envy).

Nintendo Nintendo has always been ahead of the game, adapting and evolving in ways its competitors can only covet.

As the only game company that can boast an impressive 100+ years of existence (founded in Japan in 1889 manufacturing Hanafuda cards), it is no big surprise that, once again, Nintendo is on the cutting edge of advertising.

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The Nintendo Labo, which combines our innate love of DIY builds from everyday objects with the technology of the Switch to create a unique experience where these cardboard creations let players be AR robots, play piano, and even design their own Toy-Cons.

The announcement of Labo caused the company’s stocks to jump 2.4% (about US$1.4 billion), and sold over 90,000 copies in Japan within the first week. Between 2018 and 2020, the console was nominated for 16 different gaming awards, winning over half, including Game of the Year in 2019, and two different awards for innovation.

How does this strategy place Nintendo against PlayStation and XBox? As of August 2020, PlayStation 4 had still outperformed both the Switch and XBox One in its lifetime. However, from 2019 to 2020, the Switch had consistently outsold the PS4 each month (by 916,524 units in August 2020). Compared to the previous year’s sales, Switch saw an increase of 48.3% in sales, while both PlayStation and XBox were down (-43.7% and -50.1% respectively), which indicates that the three-year-old Switch is still experiencing a meteoric rise.

Porsche You would expect a gaming company to take on the most up-to-date tech, but what about a luxury car brand?

Both Millennials and Gen Z are redefining the meaning of wealth, and their expectations of luxury brands. As consumers, they’re more interested in value-based purchases, experiences, and self-expression than the traditional definitions of status. 57% of 8/13

consumers are more likely to boycott a brand based on its political stance, regardless of any perceived prestige that brand might have.

Porsche is taking these trends seriously. Not only has it collaborated with marketing firm Magik Book to create digital catalogs for their showrooms, the company has opened Porsche Experience Centers around the world.

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These centers offer racing simulators, off-road tracks, personal driving coaches, a restaurant, and “sports science laboratory” to provide guests with a “greater understanding of their general health, wellbeing, and fitness levels.”

If you don’t have a center close by, you can get the same feeling in your living room through a variety of 360 views and augmented reality experiences on their website.

It certainly puts a different spin on the standard once-around-the-block test drive.

To get the most out of these centers, though, Porsche also offers meeting spaces from intimate rooms to exclusive access to the entire facility for various functions, which is, to put it mildly, brilliant.

74% of consumers are more likely to purchase promoted products at branded events, and 98% create digital and social content at these experiences. What better way to market your luxury vehicle than by tapping into that all-import Insta-induced FOMO?

Sephora

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Joining the ranks of Amazon and Nike, beauty company Sephora’s phygital stores combine the best of the physical and digital experience. Their website offers the usual Click & Collect services, as well as the ability to book beauty treatments online.

In-store, hubs like the Beauty Studio, Fragrance Studio, Moisture Meter, and Beauty Workshop offer consumers fully digitized experiences where they can identify their own skin’s “scent group,” test their skin moisture, and access tips and tutorials for makeup application. Customers can even scan product barcodes to virtually try on makeup before they buy.

The Sephora Flash stores offer a whole new level of phygital: smaller physical footprints (the Paris store is ¼ the size of the Champs Elysees flagship) offer a variety of their bestselling merchandise, while also incorporating “digital shopping baskets” for any product not physically in store. Customers can then pay for both in-store and online purchases at the same time.

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Both stores, naturally, incorporate social media as well. The Sephora Experience Store features a Beauty Board with photos and videos made by customers, while the smaller Flash stores have a Flash Bar with a selfie mirror and phone charger to make uploading those pics that much easier.

Phygitalizing your brand Sure, Nintendo, Porsche, and Sephora are all huge brands with massive marketing budgets.

You don’t have to have billions to get phygital with your advertising, though.

Let’s look at a few basic – and affordable – ways even small companies can take full advantage of the digital tools at their disposal.

#GoViral Social media is essential – and a great way to get your customers to advocate for you.

People are 90% more likely to buy a brand based on a friend’s recommendation, and brands inspiring higher emotional intensity get three times the word-of-mouth recommendations.

So picture this: you’re scrolling through your feed after a long commute from the office (read: sofa) to home (read: armchair): 10/13

Your best friend has a whole album of professional-quality selfies taken with the latest phone on the market. Meanwhile, your phone always seems to make you look like a hobbit.

Your cousin posts a picture of him and his partner eating at a quaint Italian restaurant on a quaint Italian street with the Trevi Fountain in the background (full disclosure: I’ve never been to Rome), and you wonder when was the last time you took a vacation.

Your colleague shares screenshots from the new game she’s beta testing and the graphics are ten times better than anything you’ve seen, but it won’t be released until next summer.

Great, but how do you use that for your own brand?

Create a custom hashtag, print some materials encouraging customers to share pics and videos of your product using that hashtag – either in-store or online, depending on how you roll – and get people talking.

LootCrate has done this with exceptional results all by putting their “Looters” front and center. They even include a magazine in every box with selected pictures of “Looters” with their merchandise and offer giveaways for the best photo in a certain theme.

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I know – social media is the furthest thing from simple, especially if you’re a small business or team without a designated social media guru. Forget all the memes, GIFs, and emojis for a second: a successful social media strategy is really just about building a process. To do that, you take your project, and break it down into the simplest tasks you can.

A very basic breakdown of sending a tweet, for example, might be: 1.

2.

3.

4.

Decide what you’re promoting; Identify your audience; Write the content; Post the tweet.

If you are feeling lost, and would like some guidance on developing your own social media campaign, Process Street’s own social media master built a checklist for creating a content calendar. Going through his process will give you some ideas on creating your own calendar, and with your free account, you can add the template to your organization to edit it to your needs.

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Get an app for that At the grocery store, I scan my products with my phone, pack them in my reusable bag, then head to the self-checkout. Then I pay via contactless and I’m on my way, no interacting with a single human required.

My doctor’s practice has an app that lets me make appointments, check on prescriptions, get reminders, and look up health tips whenever and wherever.

Before I even get to my favorite coffee shop, I’ve placed my order, paid, and received my loyalty points all through their app – and my coffee is ready and waiting when I get there.

You see where I’m going with this, right?

Your business has endless ways to utilize apps. Reward points and loyalty cards, notifications for special offers, hands-free payments, and even location-based reminders all keep your customers engaged and make their lives easier.

People love easier lives.

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The unexpected pop-up Another thing people love? Novelty. And pop-up stores certainly have that.

This is a great concept if you’re primarily digital as it gives your customers a chance to get hands-on interaction with your product. They can touch the fabric, or try out some of the features. They can speak to knowledgeable staff face-to-face.

Pop-ups are also a great time to incorporate that hashtag you’re promoting.

While your regular customers will flock to your temporary physical location for a limitedtime experience, new and potential customers will want to check out your business to see what all the fuss is about. Wow them with some exceptional service and you’ve got instant conversion.

And don’t forget about exclusivity. Pop-ups, by nature, are transitory. Often, they’re in tents, stands, or kiosks rather than a more permanent structure. They exist for a brief period of time, and they have a finite amount of stock on the premises.

Throw in an appropriately-themed snack, some swanky swag, and a unique location – suddenly it’s a brand experience.

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The phygital touch Phygital marketing isn’t going anywhere anytime soon, and as technology advances, phygital tactics will as well.

Modern consumers exist in both physical and digital worlds, moving between the two easily and instantly. If you want to grab their attention – and keep it – your brand needs to be able to do the same.

To benefit from phygital marketing, though, you need a plan. You need to develop strong processes for your strategies so that everyone is clear on their responsibilities and the work is completed to the same standard every time.

Good processes management reduces human error, saves time, and – most importantly – cuts down your workload by allowing you to automate your recurring tasks. Once you’ve built those processes, make sure you document them. That way everyone stays on the same page.

As this post has shown, some of the biggest names are using phygital strategies for great results, but these same strategies can be adapted for organizations of any size and budget.

The limit of phygital marketing really is your own creativity and initiative.

How will you turn your brand into an experience your customers will keep coming back for?

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