The retail industry has experienced a seismic shift in recent years, fueled by advancements in technology and further accelerated by the COVID-19 pandemic. Hitting the ‘buy now’ button on one’s a mobile device at home became the more efficient, cost-effective way to shop for one’s daily needs and jeopardized the existential relevance of ‘the in store' retail experience.

This has lead many retailers to contemplate the value they’re able to provide. Thankfully, consumers have come to understand that as social beings, they yearn not just for products, but for a broader, consumer experience. The challenge for retailers is to provide such experiences in order to draw them back. To do so, brands have to offer the best of both worlds, with a more interactive and immersive experience, the key differentiator from the ‘at home’ coffee and the mechanical online purchasing journey from a mobile device or desktop. Retailers must bring technology and experience back into the stores. But how?

As consumers navigate between physical and digital realms, a new marketing approach has emerged to cater to their evolving needs and preferences: Phygital marketing. By seamlessly integrating physical and digital experiences, phygital marketing holds the key to engaging consumers, enhancing their shopping experiences, and driving business success in the post-COVID era.

In this article, we’ll explore what phygital marketing is, its impact and effectiveness on the consumer journey, what technologies can be used to enhance and support this marketing trend, its strategic benefits to retailers and brands, its impact on data collection and personalization as well as some examples where it has and can be used in the future.

Defining Phygital Marketing and The Tools of Phygital Retail

So, what is phygital marketing? Simply put, phygital marketing combines the best aspects of the in-person shopping experience with the convenience of digital tools to create customer journeys that are functional, fulfilling and highly memorable.

Phygital marketing is a novel and innovative approach that blends digital and in-person shopping experiences to meet the needs of today's omnichannel shoppers, personalized to each customer, to create a seamless, immersive, and enhanced shopping experience. While eCommerce is still popular and, on the rise, customers still value the convenience and sensory aspects of in-person shopping.

At the same time, phygital marketing transcends the traditional marketing methods' boundaries, by acknowledging the interplay between online and offline interactive technologies like AI, machine learning, augmented reality (AR), virtual reality (VR), geolocation, beacons, wearable devices, and social media to bridge the gap between online and offline interactions. In many cases, consumers use a “ROPO” approach of research online and purchase offline, to ascertain quality, look and feel before making a purchase.

OTTpay.com notes that about 63% of consumers discover products online and complete the purchase process in person and 49% of America consumers prefer making purchases in brick-and-mortar shops. In an ever-evolving retail landscape, phygital marketing holds significant relevance and perhaps is the only hope for in store retailers to engage and keep consumers coming to their stores. The COVID-19 pandemic has accelerated the shift toward online shopping, but it has also underscored the importance of real-world experiences and social interactions.

Humans are social creatures and as such, consumers still crave the sensory aspects, personal connections, and immediate gratification that physical stores provide. Phygital marketing allows retailers to meet these evolving expectations by seamlessly blending the best of both worlds. Allbirds Footwear recently reported that while online sales accounted for 80% of its sales, the instore customer was crucial to customer retention and in fact in 2021, its in store sales were up 112% from the previous year. They further stated that “In 2021, omnichannel repeat customers spent 1.5x more than single channel repeat customers at Allbirds.”

The Consumer Psychological Benefits of Phygital Marketing

Central to the appeal of phygital marketing is its ability to impact consumer psychology, and namely it’s power to stimulate pleasure and anticipation of future enjoyment. Our brains are inherently wired to seek pleasure. By enabling physical interaction with products and offering customization through digital tools, retailers can heighten this pleasure response. Augmented reality and other digital tools amplify the excitement by providing personalized, interactive experiences, creating an anticipated reward that ignites the consumer's imagination.

Moreover, phygital marketing strategically addresses a significant psychological barrier in retail: The pain of payment. Traditional methods like cash often induce psychological discomfort. However, by utilizing newer payment methods like credit cards or facial recognition, a more abstract, less painful payment experience is created. “AmazonGo”, for example, epitomizes this by eliminating explicit transactions, fostering a consumer experience characterized by ease and freedom, thereby reducing the pain of payment. “No hassle…No Credit Card required.” With almost 30 locations, Amazon announced they are planning to open 3,000 more such stores, to include their grocery arm, Whole Foods. They are among hundreds of companies adopting the approach of various technologies to automate tasks in retail environments.

The impact of phygital marketing extends beyond consumer engagement and satisfaction—it also brings strategic benefits to retailers and brands alike. By creating innovative and immersive shopping experiences, brands can differentiate themselves from competitors in a crowded market. Phygital experiences leverage consumer psychology to enhance pleasure while minimizing the pain of payment, ultimately driving purchase intent. Retailers that embrace phygital marketing stand to gain a competitive edge, increase customer loyalty, and boost their bottom line.

Applying Phygital Marketing through Innovative Technology

Where and how can phygital marketing be effectively applied? The possibilities are vast and ever evolving. For brands with physical stores, integrating digital technology can enhance the in-store experience. Imagine trying on clothes virtually using AR or receiving personalized product recommendations based on your preferences and previous purchases. On the other hand, e-commerce brands can leverage phygital marketing to reach new audiences. They can offer virtual try-on experiences, utilize geolocation to provide localized offerings and promotions, and engage customers through social media platforms. In turn, they also increase brand awareness, customer loyalty, and it’s an opportunity to get instant feedback as consumers roam around the store with the touch and feel and try on interactions.

Several innovative technologies support phygital experiences. Marketing automation software enables personalized messaging across various channels. Geolocation information helps identify a customer's location for targeted interactions. Beacon technology can match online and offline shopping data to provide personalized recommendations. Wearable devices provide personalized information based on a customer's location. Social media platforms enable personalized interactions and gestures, such as greeting a passenger in the airport. The Internet of Things (IoT) allows proactive service based on sensor data. Interactive touch screen screens, Kiosks, and RFID / Smart mirrors in retail stores offer product suggestions and additional product information.

Implementing phygital retail strategies can help retailers deliver a holistic omnichannel experience. These strategies include offering multiple pick-up and delivery options, using AR/VR to create immersive experiences, localizing offerings and promotions, providing self-service options, utilizing QR codes and digital media for content, leveraging social media for enhanced digital experiences, allowing customer reviews in-store, hosting pop-up shops and live-stream shopping events, augmenting customer service with AI, and utilizing dark stores for faster fulfillment. Phygital developments have the potential to bridge the gap between the physical and digital worlds, offering proactive and creative services. These experiences can predictively engage customers, meet their needs, and provide upselling opportunities.

Furthermore, phygital marketing provides retailers with valuable data and insights that can inform their business decisions. By tracking customer interactions in-store and online, brands can gain a deeper understanding of customer preferences, behaviors, and purchasing patterns. This data-driven approach allows retailers to optimize their strategies, refine their product offerings, and deliver more targeted personalized marketing campaigns. However, companies must be mindful of customer comfort and data privacy to avoid crossing into intrusive territory.

Examples of Successful Phygital Marketing in The Consumer World

Several successful implementations of phygital retail illustrate the potential benefits. This includes:

• Starbucks were one of the first to create an ‘app’ where you order your coffee online and pick it up at your local location.

• IKEA's AR application, "Place," offers customers the ability to visualize furniture in their homes before purchasing. Argos provides an in-store visual search application with convenient ordering and payment options.

• Marks & Spencer offers virtual try-on features through QR codes.

• Nike's digital retail experiences with touch terminals for product information and recommendations have proven popular.

• Sephora's digital workshops and interactive tutorials, which continue to engage customers.

While many examples exist, there is still away to go: Perhaps Retailers need to rethink of their stores more like show rooms and less like warehouses amassed with large amounts of SKU's, where the front of stores is more niche and about the experience and advice (with the advantage perhaps of saving ‘retail’ rent), focused on style and fit recommendations using technology and visualization (lets be honest trying on clothes is always a bit overwhelming, price, size, color, scraping the hangers from one side of the rack to the other - we all need a little help).

Imagine shopping without having to haul your bought merchandise from one store to another, and it could be more like duty free pick up before you board the plane ( with a drive through pick up at the end of your multi store shopping expedition), perhaps this idea would encourage consumers to buy more than just the 3 bags you have to lug around; or downloading an app on your phone to help navigate ‘where to buy product x’ in the store or mall itself, and even better when arriving at a mall there would be some pop up suggestions on an app / text, based on previous shopping or criteria inputted by the consumer, suggesting where to shop ‘just for you’. The options are endless and could only enhance instore in-person experiences and drive-up sales.

No doubt in today’s world, consumers expect an enhanced, seamless, and integrated experience across various touchpoints. Brands can provide a consistent and frictionless omnichannel experience, ensuring a smooth transition between online and offline interactions. They can leverage technology to personalize customer journeys, offer convenience, and deliver a cohesive brand experience that delights consumers.

Phygital Marketing as The Future of The Retail Experience

As we look to the future, it's clear that businesses must reinvent themselves, making themselves more relevant by embracing phygital retail as a fundamental part of their strategy. Through the advent of technology, consumer behavior and purchasing decisions have changed forever and its up to brands and retailers to adapt, evolve and step to the challenge of making the ‘instore’ experience that much more engaging, interactive, and compelling. With the increasing adoption of technology and changing retail landscape, implementing a phygital strategy can help retailers and brands do this and stay competitive and meet the evolving expectations of customers in an omnichannel technological world.

To this day, phygital marketing remains a relatively novel and underappreciated approach, with many retailers yet to unlock its full potential. It will increasingly become a strong component of a brand’s approach to psychology. However, as businesses navigate the complexities of the post-COVID era and beyond, those who understand and apply phygital strategies as a part of their brand narrative stand to reap the benefits by offering interactive solutions and experiences, engaging consumers, and bringing them back to the malls for some in person retail therapy, and yes even a coffee with a friend.

By embracing these elements and staying attuned to the evolving needs and expectations of consumers, brands can establish themselves as cool, relevant, and appealing in the 21st century market and scale online and in-store simultaneously and exponentially.

Photo by Simon Bak via UnSplash