3 Questions Customer Experience Professionals Should Ask About Phygital

The latest buzzword/portmanteau — phygital — should have customer experience professionals asking plenty of questions.

There’s a big new buzzword in town: Phygital. While a bit of a tongue-twister, this portmanteau of “physical” and “digital” signifies a major evolution in customer experience and an increasingly critical consideration in brand strategy.

In many ways, phygital is the next stage of the omnichannel concept that was first popularized around 2010 and has been a strategic mainstay for retailers and other industries ever since. Omnichannel prescribed integrated online and offline experiences to unify the customer journey across various physical and digital touchpoints. One example: the ability to buy online for in-store pickup.

Phygital takes that a step further by marrying or even blurring the boundaries between virtual and real-world experiences to create more immersive, interactive and exciting customer experiences. Examples of phygital taking hold are appearing all around us, such as digital brands likeAmazon that have opened grab-and-go stores to add a physical dimension to their online presence and Nike’s House of Innovation in Times Square that has been called a “temple to shopping in the digital age.”

The fact that both traditional brick-and-mortar and digital-first companies are embracing phygital reveals a growing recognition that creating seamless customer experiences across multiple channels is no longer enough — it’s now about fusing channels to engage customers with a more powerful and memorable experience than a single channel alone can provide.

This is especially true when it comes to younger consumers. “Most Gen Z consumers don’t even think in terms of traditional channel boundaries, our research shows, and they increasingly evaluate brands and retailers on the seamlessness of their experience,” a McKinsey report said.

Phygital is the natural culmination of a mega-trend that has dramatically altered the customer experience landscape — the connected consumer, whose higher-than-ever expectations and choices make it harder for businesses to stand out. But there’s a new wrinkle, too: Consumers in the post-pandemic age are returning to physical stores for, as senior consultant Jacquelyn Baker at VMLY&R Commerce put it, “inspiration and ‘retailtainment.’”

“Online has become a place of specificity and efficiency,” she said, while “physical stores play a tactile purpose for consumers to immerse themselves in brands and experiences that ignite the senses and bring joy.”

Related Article: Online? In-Store? Get Ready for the Era of Phygital Shopping

As you can see, a lot is riding on phygital. But while leading companies and early adopters are showing what’s possible, many other companies, as usually happens with emerging trends, remain unsure how to move forward on new strategies and models for the future.

Here are three top-line questions every company — the CEO, chief digital officer (CDO), the marketing lead­, and any other executive with skin in the game —should ask to wrap its arms around phygital.

It’s easy for any organization to fall in love with the latest trend, but no one should do phygital just for phygital’s sake. Companies should get a hard read on what kind of experiences customers want, why and how phygital can address those needs, wants and motivations. In other words, why is phygital specifically relevant for our customers and right for our business? By gaining that understanding first, rather than just diving in willy-nilly, a company stands a far greater chance of embarking on a phygital strategy that resonates and sticks.

If a company is wondering whether to lean into phygital as a true business disruptor or make more incremental advances, again, customers tell the story. What is their appetite for phygital? What do they feel is in it for them? Greater convenience? More fun? Less friction in the customer experience?

With answers to such questions, a company can meet customers where they are. (That should be true, of course, not just for phygital but absolutely anything else a business does.)

Phygital isn't a magic solution and may introduce new problems and risks. For example, the phygital world hit a speed bump in mid-September when supermarket chain Wegman’sannounced it turned off its mobile app that allowed customers to scan, bag and pay for groceries while they shopped, skipping the checkout line, because of rampant shoplifting. The company said it is working on improvements “that will meet the needs of our customers and business.”

The episode shows how important it is for businesses to think through any potential risks before deploying any phygital capabilities. 

No. Take financial services, for instance. According to IDC, phygital “takes the best of both worlds and offers seamless customer experience for banking clients by implementing advanced digital and physical capabilities, including but not limited to biometrics, advanced ATMs, innovative approaches to customer service and comfortable and spacious facilities.”

In healthcare, an EY report says, “consumers are growing much more sophisticated, completely resetting the bar on what they expect from consumer health and wellness companies … Consumer health companies need to create a comprehensive strategy that leverages both physical locations and digital channels — embracing phygital.”

There’s also a misconception that, even within the retail sector, phygital is mostly for traditional companies trying to expand their digital presence. But like Amazon with Amazon Go, other digital-first retailers such as Rothy’s and Warby Parker have opened stores around the country because they recognize the importance of a blended experience.

A successful phygital strategy requires collaboration among all stakeholders across the organization. The starting point needs to be full agreement within the C-Suite on the right phygital approach to drive growth.

In many cases, the chief digital officer will be asked to spearhead the planning and execution. That makes it all the more important for the CDO to have both acute technological and business chops and be able to rally everyone company-wide behind the phygital vision.

By answering the three key questions, companies can rest assured they’re approaching phygital from all angles and positioning themselves to secure customer loyalty in a super-competitive, fast-changing market.