What is “phygital” and why you should care about it

[Image by Gerd Leonhard under Creative Commons. Image cropped from original]

Tennis fans were in for a slightly different experience at the 2016 US Open Tennis Championships. Even as they followed the game, they could check real-time statistics, match analysis and score updates on an artificial intelligence-backed (AI-backed) app on their smartphones. For those who watched the matches at the stadium, the app extended their experience beyond just the game by offering a concierge service: Ask it “Where can I buy a sandwich?” or “Where is the closest washroom?” or “Where is the taxi stand?” and it would show the closest one.

This merging of the fans’ physical and digital worlds to extend their experience of the tournament was made possible by what is called “cognitive analytics”. It is touted to be the latest trend in marketing analytics. It uses AI to learn from the cluttered and complex real-time Big Data and offers consumer insights that are contextually relevant and personalised. It promises better understanding of consumer and competition buying habits, and thus better redesign of consumer experiences.

IBM Watson offers a solution in creating such “phygital” consumer experiences. The US Open app was based on its technology. The Royal Bank of Scotland also piloted a cognitive chat bot based on IBM Watson technology. It helps customers resolve simple problems quickly and redirects them to human advisors for more complex problems.

This is complex decision-making at its current best.

But whether the insights into user behaviour are Big Data-driven, or smart data-enabled (where algorithms find patterns and make sense of data), or whether they are based on hands-on qualitative understanding through face-to-face interactions, the core narrative remains the same: Understand your customers to better deliver products and services that meet real, unmet and latent needs. 

David Ogilvy once famously said, “The consumer is not a moron, she is your wife”. And that is never truer!

The consumer is each one of us—at once wanting liberation and control; connection and solitude; to be with the “in” meme or trend and stand different; find best value and best experience. Add to this the trend among millennials (those born after 1980) of valuing freedom over structure, experience over possession, sharing over owning, and ‘staging’ over ‘being’.

How in the face of such conflicting demands, should a company look at crafting a differentiated digital experience? Mind you, this is no longer an imperative just for e-commerce companies; even bricks-and-mortar companies need to do this.

Gone are the days when simply the search for a “deal” forgave the need for sharper, more intuitive interfaces or an ecosystem approach. 

True, good experience often begins at the edges, in the smaller firms than in the larger ones. Jaypore.com can offer a more evocative experience than, say, Myntra.com. But as the consumer experience gets richer, more sensory and better connected, consumers start to expect more from all providers. Those who remain standing are either left behind or get crowded out.

Streaming music sites such as Saavn.com and Gaana.com are already using playlists, multiple categorisations and personalisation as a way to bucket and showcase content, allow for better navigation and discovery, and thus enable consumers to make better choices. In contrast, video on demand apps like Hotstar and VOOT have a cluttered dashboard that does not allow navigation, directed search, and personalisation. Netflix relies on genre-based categorisation and predictive analytics, which the Indian video on demand sites do not offer yet. How long before the savvy consumers start demanding more from Indian video on demand players?

Baby care products site Firstcry.com not only offered a better user interface and better search and discovery of products, but it created a cohesive online and offline ecosystem to create awareness; build a community of consumers, paediatricians, influencers and baby service providers; drive two-way communication between the company and its consumers; and create moments of trial through hospital tie-ups and physical company-owned and franchisee stores. In contrast, erstwhile competitor Babyoye had not innovated as much, even after being acquired by Mahindra, and lagged in consumer acquisition. Babyoye has recently been acquired by Firstcry.

Clearly, better user experience leads to better adoption and higher sales. But user experience is not simply a visually attractive interface as bricks-and-mortar companies think, and it is not the deal of the day as digital companies think.

Understanding consumers

The answer to better consumer experience design, as always, lies in the basics. In not just defining unique advantages, but in also realising that enclosed in this ever-enveloping digital ephemera, humans still crave belonging, acceptance and recognition.

In contrast, most firms tend to think from an internal perspective and focus on products and not the people who will use them. Or, if they think of consumers, they limit their understanding to lead users (early adopters). They do not consider the fans and the ones who barely use their product (extreme users) or the multiple personas among their target audience (the frequent buyers, power users, active users who like to share feedback and engage, and so on). Even within lead consumers, companies find it easiest to envision and understand the generic urban “aspirational” consumer—whether women or youth—rather than sharply defined sub-segments, especially rural consumers and those looking for affordable products. 

The most crucial realisation, however, can be that the world is not binary—it is not just physical or just digital. Both bricks-and-mortar and digital companies often think that consumer experience equates to interface design or digital campaigns. Digital products and services do not remain in the digital realm—they intersect with our real worlds. At the same time, physical products and services are not consumed in isolation—they interact and are shaped by our digital footprints. So, creating an entire consumer ecosystem is essential.   

How do you do that? The model outlined here considers a four-step process to design better consumer experiences.

Step 1. Understand and work with the changing shape of consumption

Demand patterns for products, services or content are evolving faster than ever, with many niche segments coexisting with mass ones. Hence, marketers need to better understand the changing shape of consumer perceptions, need states, beliefs, and wants and understand how to integrate those into their offerings.

Consumption arises from inventing desire and encouraging discovery. Desire, in turn, links to attributes of a product, its design and consumer perception of the product.

a) Make your product desirable

Perception: In crowded consumer products categories such as biscuits or oils or staples, in the absence of real differentiators, uniqueness is often crafted.

Innovation: But beyond perception, what if innovation could be used to create true differentiation? Innovation could come through better sourcing, better ingredients, or better manufacturing. In segments like hair oils, flavoured water and health supplements, brands are evoking the benefits of Ayurveda. Global consumer durables brands such as Samsung and LG are embedding Internet of Things and artificial intelligence in traditional products to create distinction. In India, companies like Havells, Philips, and Crompton have stated that they are exploring Internet of Things. MTV India leverages consumer insights to shape its content, change the tonality of existing content or even considers new anchors to better reflect the ethos and tone of voice of the changing viewer.

Premiumisation: Traditional consumer packaged goods companies rely on becoming premium as a strategy to drive value. The booming milk and value added milk products industry is an example. But if everyone targets the same upper middle and premium consumer, rather than convert the unbranded and unorganised segment into the branded one, they all compete for the same consumer and her limited wallet. Brands would do well to recognise that India has a graded scale of consumer segments. More growth would come from going deeper and wider into the target market, as well as taking each consumer segment to the next-level of premiumisation.

Consumer Journey Mapping: Established mass market and traditional products need to change to meet evolving consumer needs. These changing needs could include focus on health, fitness, source, ingredients, sustainability, environment, transparency, back to roots, global mindsets, and many others. On the other hand, digital products or content, or traditional products with embedded intelligence such as home automation and home security devices, have a small current potential user-base. For both types of products, competition comes not just from within the category but from cross-category products, services or experiences.

For example, streaming music or video on demand products are competing not just against traditional radio or television. They compete against social media and other forms of entertainment or socialisation. Hence, brands would do well to closely understand different consumer segments and need states, look at their journeys to understand the voids and thus identify the slices of time or options where opportunities sit. This will help them devise better products, drive adoption, and help the consumer transition from other segments to this new one.

Trend Spotting: Identification of trends is critical to understanding shifting consumer mindsets and emerging niche segments. This comes not from any quantitative survey asking consumers what they want. Steve Jobs had said that the consumer doesn’t know what she wants, and that is true. But how consumer desires and beliefs are shifting can be interpreted from direct conversations and from the groundswell of conversations and images on social media.

For example, recent observations of content reveal that Bhojpuri is one of the fastest growing languages in India. Thus, brands would do well to create content that serves that market. Regardless of whether or not it fits within the frameworks of “coolness” as perceived in the corporate headquarters in Mumbai or Bengaluru.

However, social media can be both boon and bane in understanding consumers. Online conversations and comments of real users can tell brands how their world is changing. But there are more poseurs and voyeurs online than actual buyers or users. Consumers can be reactive or meme-of-the-moment driven, thus distorting real trends. The once-famous example of Google Analytics predicting flu epidemic by looking at online search patterns has now been proved to be an epic failure. Till we improve predictive algorithms, simply relying on Big Data-based decision sciences for future gazing can be misleading. Instead, a combination of qualitative research through face-to-face interactions and social media mapping can help inform us on broader shifts in consumer perception and sentiment.

b) Make your product discoverable

Discovery derives from better design—understanding what to evoke and how. For example, an Ayurveda-based product can demystify the category and offer easier digital navigation for consumers to understand its benefits and elicit sensory desire. Or a streaming music service can look at trends to understand current and future shifts in behaviour and values to create playlists, build in predictive capability, or source new content.

Companies are paying attention to better UX (user experience). This is critical to allow consumers to navigate the product portfolio and discover not just the hero products, but also the entire long tail.

In retail shelves, discovery is achieved through unique design of product packaging and marketing materials, and store layout design. Increasingly, an important way to drive discovery is through online channels. For example, a traditional jewellery brand can create awareness and generate sales, whether online or in stores, by allowing consumers to navigate their product portfolio through collections, occasions, jewellery type, or crafting style. It is essential to create cross-navigation to create a better user experience to enable discovery.

Step 2. Allow users to contribute to the brand

For most of recorded history of consumption, communication was a one-way process, from the company to its consumers. Today, of course, it is an established notion that consumers want to engage with the brands they consume. But then again, simply engaging with consumers through contests and campaigns or creating a platform to offer opinions is not enough.

Consumers are seeking real contribution. It is not just about positing opinions. Consumers are keen to see how their ideas can shift the needle for the product or for the category. How well a company can integrate user-generated content and transition it from the social to the business domain, will determine the degree to which it can leverage consumer contribution.

For example, food-related companies, or media or digital channels on food-related content, can engage with consumers to showcase user-generated recipes. Maggi and Kellogg’s showcase consumer-generated recipes on the back of product packaging and online. While not every media firm can become YouTube, companies can leverage user generated content—either to create dialogues, as MTV India did with its cybercrime feeds and live events; or to create new content, as the new digital e-zines do with a network of vetted and curated freelance contributors. In essence, these companies straddle being producers as well as marketplaces, thus opening the doors to broader opportunities.

Consumers are also transitioning into being “prosumers”, and contributing to the product itself. This is not confined to digital influencing and content creation. It is not about customisation either. Ikea uses insights effectively in its product innovation process. Starbucks used consumer feedback to create peach green-tea lemonade.

Step 3. Build a community

As digital platforms proliferate, consumers more than ever want to feel that sense of belonging, and companies have been creating platforms to bring together sub-groups of like-minded consumers to interact, engage, and share ideas.

Social media marketing builds communities easily and effectively—these can be used to create circles of influence, spread awareness, cross-sell and build stickiness.

Virtual communities become stronger when they extend into the real world. For example, car and motorbike manufacturers create online communities that engage online and meet in the real world.

But community building can go beyond engagement and conversation.

Drive Innovation: Companies can use communities of early adopters to drive innovation. This used to be called beta testing, conducted with a select invited list of clients. Today companies are eager to conduct live tests on real consumers and consumers, in turn, are open to early-stage experimental products. Software companies already do this through bounty hunters, and entertainment companies do it through digital focus groups.  

For example, agriculture in India is fast adopting technology to source materials, monitor equipment, understand weather and soil patterns, and improve process flows. At this stage, early adopters are driven by novelty or the desire to be tech savvy. Understanding how these lead and early users interact with the new product or service and the hierarchy of features from most used and most relevant to least used and least relevant, can enable companies to better design the next-stage product or service and drive mass adoption in the future.

Influence: Influencers are not always celebrities. Early adopters are also often the best influencers, and by singling them out, companies can both feed into their desire for contribution, and enlist their effort to expand the community itself.  This need not just be the user of the latest smartphone or wearable device. As digital technologies change areas such as farming or insurance or home automation, using these early adopters can be crucial in monitoring and shifting behaviour patterns and creating use cases for others to adopt. These digital communities can be extended to create offline engagement drives.

For example, again looking at the farming sector, by creating platforms or competitions where lead farmer users can share their stories, they become influencers and their stories of real usage and benefits achieved help convert new potential users. The offline community meet-ups can be occasions to swap stories and feel part of a real, vibrant community that gains through shared solutions.

Step 4. Find the offline-online connections and build a network

It’s easy to think that the community of a product or a service within its segment or specialty is enough to create traction, generate awareness or drive usage. But the digital world for a product in a category often collides and interlinks with many other digital worlds. Understanding these arterial connections and creating both physical and digital threads to bind them is essential to crafting a truly unique phygital experience.

Companies such as Harley Davidson and Royal Enfield have long relied on the concept of building tribes. Today these tribes straddle the physical and digital worlds and expand to create a network of riders, enthusiasts, event organisers and local community outreach programmes.

Other brands, too, are adopting this strategy. Fiskars, the tools company, curates physical communities through its Fiskar World events and Project Orange Thumb programme, and online communities through the Fiskateers social platform. Lego is another company that creatively uses real and virtual communities—Lugnet to feed lead user insights into product design and usability, and global Lego Leagues to bring together participants, trainers, and event managers to create enthusiasts.

Usually, business leaders think of creating a community within a category. Pharmaceutical companies create communities of doctors to engage on common challenges and solutions. But we need to expand the definition of community.

For example, a smart farming product or service can engage not just with farmers, but also with insurance companies, brokers, advisors, farm consumables and equipment companies, microfinance institutions, agricultural produce market committee (APMC) officials, Panchayati leaders, gram sevikas, and more. The more networked a product or service is within its digital and physical ecosystem, the more resilient is its offering and richer the experience it can offer to its consumers.

Business leaders need to think beyond the obvious, and see how the need for a specific product or service interconnects with other need states in a consumer’s world and then make those connections possible in the real and digital worlds.  

In the end, companies would do well not be consumed and swept by the changing technologies, channels, products and social landscapes. User experience in the phygital world needs to go beyond in-store displays, digital interface design and social media marketing.

Companies would do best by tapping into the basics—the unmet or undiscovered or changing needs of niche or mass consumers; how to provide for them in a networked, collaborative, digital-meets-physical manner; and, better understanding the gaps and opportunities along the consumer journey.