Over the last few years, companies have asked themselves about the future of physical environments. With the growth of digital channels, customer behavior has changed and several have chosen the convenience offered by technology

1. Figura 1 - The complete Omni-Channel Retail Report: What Brands Need to
Phygital: A new dimension in customer experience
Over the last few years, companies have asked themselves about the future of physical
environments. With the growth of digital channels, customer behavior has changed and several
have chosen the convenience offered by technology.
In this transformation process, cost-effectiveness tips the scale in favor of digital. While physical
channels depend on people, digital ones work 24x7 and are largely automated. Despite that
physical environments are still an important point of contact, where customer relationships are
built, where products can be tested and where memorable experiences, (Moravcikova &
Kliestikova, 2017) that only physical interaction can provide, are enjoyed.
Generalization of mobile technologies have been influencing not only people’s behavior, but also
their expectations regarding interactivity. Being continuously connected in a customized way,
wherever they are, (Delorme, 2015) people start to expect similar capabilities from physical
environments.
Lack of interaction between channels
creates communication flaws and an
understanding gap in customer
behavior. While physical
environments use instruments suchas
packaging, brochures and banners,
digital ones use social media, websites
and email (Moravcikova &
Kliestikova, 2017), most of the time
creating communication models that
are completely different and making
it difficult to have a unified buying
journey.
Other subtler aspects should be
noted. Ubiquity reshapes the buying
process by enabling customers
to compare product features and prices on a global scale; the possibility to check reviews and
opinions increases social conformity, considering one person’s decision and the decisions of a
group that is much larger than its network of contacts (Hassin, Uleman, & Bargh, 2004); and the
customization offered by mobile applications standardizes the expectation that physical
environments and processes can also be customizable, culminating in the need to change
segmentations and fixed service processes to contextual models.
23%
33%
61%
Interact with machines in
physical environments
Prefer to look up for aninformation
on their smartphones instead of
asking someone
Shop in stores they already
searched for online
74%
Expecttoreceivecustomized
offers when visiting a store
84%
Consumer Behavior
Use smartphones while in stores

2. For millennials, the threshold between physical and digital does not exist, 82% want to access
products both on the Internet and in-store (Pastezeur, 2017). This requires the best of both worlds
to create unified experiences so that everything happening in the digital scenario influences the
physical one and vice-versa. For this reason, we have a trend towards finding experiences that
mergedigitaltechnologieswithphysicalexperiences,achallenge Phygitalisready to respond to.
Market overview
The market has been using a wide range of combined technologies to build distinguished
experiences and to improve customer engagement and loyalty.
Engaging experiences in retail include screens, panels, virtual testers, geo-localized offers and
augmented reality to search, review, and compare products and sell them online. To encourage
customer loyalty, there is a trend towards offering gamified experiences (Haehnsen, 2018) as
Starbucks Rewards, which replaced their loyalty card with a mobile app to offer convenience when
buying and receiving discounts (McEachern, 2017).
The banking sector witnesses a large discussion on the future of branches (Luzuriaga, 2018).
Considering that 64% of customers like to visit physical branches and 63% consider having people
working in branches important (Boardbent, 2017), more pro-active environments are being studied
where the customer visits the branch not only to solve their problems, but also to gain knowledge,
learn, acquire, connect and of course, transact (Rocha, Rodrigues, Araújo, Coimbra, & Méheux,
2018).
Concept branches have been created with co-working settings, coffee shops, robots providing
services, consultants available through video-conference, self-service kiosks, digital tables, and
gesture-controlled panels (Maraus, 2015), in addition to artificial intelligence identifying unique
visits, classifying customers, understanding branch flow, and measuring feelings to infer
customer satisfaction and level of interest. Other conceptions, with greater focus on young
audiences, include games, 3D printers, virtual reality, distribution of digital bracelets, and co-
creation environments (‘Phygital’ attracts young consumers, 2014).
The educational sector has been focusing on building more significant and effective interactions
among students, instructors, data, and environments. Experiences range from smart white boards,
integrated with tablets, to conventional tangible elements, such as musical instruments and sports
equipment, to put learning into context (Quigley, Vate-U-Lan, & Masouras, 2016).
Other sectors, such as insurance and industry, have concentrated their efforts into back office.
Insurance has been using telemetry, drones, remote inspections, and artificial intelligence to review
damages and detect frauds. The industry has been using artificial intelligence to build autonomous
robots and cars, manage inventory, calculate routes, monitor machinery and anticipate flaws.
Phygital has also enabled new business models, such as Tesco iconic store, where customers can
buy products in places like subway stations (Meurville, Pham, & Trine, 2015), and Amazon Go,
where customers can simply grab what they want and leave; customers and products are identified
and subsequently charged online (Polaco & Kayla Backes,2017).
Phygital
TheambitiousgoalofPhygital,acombinationbetweenphysicalspaceanddigitaltechnologies,isto
transformstores, offices and industries into more intuitive, smarter and more customized places.
In general, environments are built to meet specific objectives, such as customer attraction (e.g.
more modern façades, video-walls, holograms, etc.), product experimentation (e.g. virtual testers,
digital tables, augmented reality, games, etc.), sharing (e.g. lounges, co-working spaces, coffee
shops, co-creation areas, lectures, etc.) and transaction (e.g. self-service kiosks, remote experts,
virtual rooms for product acquisition, etc.).

3. However, differently from what it may seem, Phygital is not about distributing equipment in a
physical space, but reshaping a customer’s journey, adapting the environment and operating
processes to support a customized experience.
This work starts by integrating physical and digital metrics into customer relationship management
(CRM)systems, extractinginformation fromthesesystems that facilitates customization(e.g.flow,
visits, engagement, conversion rate, cost of acquisition, etc.). By crossing such information,
occasionally including external bases, it is possible to recommend products and services (Ciocca,
2017) in real time, in stores, apps, social media and partners’ channels, increasing the range of
customer-brand interaction (Yvelin, 2017).
To build more intuitive journeys, a merger of sensors should be taken into consideration so that
users can interact with several sensors simultaneously (e.g. using gestures and voice at the same
time) or redundantly (e.g. authentication through NFC and facial recognition), observing security
and infrastructure (e.g. cameras with adequate light intensity, graphic processing units, and
connectivity).
Figure 2 – Examples of sensors and actuators
Operating processes are reviewed to handle non-sequential journeys, interactions coming from
other channels and with no human intervention, besides automatic actuators using artificial
intelligence to organize lines, manage inventory, recommend offers and control the environment.
This new customer experience dimension requires us to rethink how companies will be operating
in the near future. With intelligent journeys and autonomous environments, possibilities are
countless. Our challenge is to offer memorable experiences connected to strategic objectives and
only then phygital transformation will be a sustainable and consistent one.
By Eli Rodrigues,
Digital Experience Manager
everis

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