By: Alonso Vargas, SVP of Product at Flybuy
Published on Forbes Technology Council
Imagine walking into a store and instantly getting personalized recommendations on your phone based on your online browsing history, or ordering dinner through an app, and when you arrive at the restaurant, your food is ready, tailored perfectly to your tastes and dietary preferences down to the tomato on the side with extra dressing.
This is the essence of the “phygital” experience—a seamless blend of physical and digital interactions, where online interactions set the stage to enhance real-world experiences. It’s not just a glimpse into the future but a transformative shift in how businesses will engage with customers.
As consumers navigate a world that is bridging the physical and digital realms, businesses have a golden opportunity to increase engagement and loyalty by leveraging advanced technologies like artificial intelligence (AI) and location technology.
By harnessing the power of data and location intelligence, brands can offer a personalized, efficient and highly satisfying customer experience. This opens up a world of possibilities to delight and captivate, setting a new standard for customer satisfaction.
Challenges In Navigating The Phygital Landscape
In the post-Covid era, digital transformation has accelerated to meet customer expectations. The dominance of the digital ordering experience is becoming more prevalent in this evolving landscape, and industry leaders are highlighting this shift.
For instance, Yum Brands has experienced over 50% of their sales being placed digitally this year; Chipotle’s digital sales hit $3.7 billion in 2023; and Wendy’s digital sales jumped 30% in 2023. In the retail sector, Walmart’s online retail reached the $100 billion mark—a 23% increase in global online sales for the second-largest e-commerce retailer in the U.S. market. In grocery, Kroger’s CEO says that “digital is an important growth accelerator in our business” after digital sales grew to reach $12 billion in 2023. These statistics emphasize the growing consumer preference for easy, personalized digital interactions.
Despite the apparent opportunities, many businesses are struggling to keep pace with these digital changes. The key problem is how to integrate advanced technology effectively and create personalized and engaging phygital experiences. Companies must navigate the complex consumer expectations and evolving technological advancements.
Leveraging AI And Location Technology For Phygital Success
In the phygital era, leveraging AI and location technology can create frictionless, personalized experiences to foster deeper loyalty and satisfaction during real-time interactions. AI is a critical tool in delivering these experiences because it can prioritize a consumer-centric approach while simultaneously running location technology to provide real-time updates and accurately time an order pickup or delivery.
To help deliver the best customer experience, here are four strategic ways to harness technology in today’s phygital world.
1. Implementing Personalized AI Solutions
Utilize AI to analyze consumer insights and create personalized experiences. AI-driven algorithms can tailor product recommendations based on a customer’s past purchases, online behavior and location data.
For example, Amazon uses advanced machine learning algorithms to recommend products to users based on their previous purchases and browsing history, significantly boosting customer satisfaction and driving sales (in fact, up to 35% of Amazon’s total sales).
Similarly, Netflix employs a hybrid recommendation system, using user-based and item-based collaborative filtering alongside content-based methods to suggest new content based on similarities between users’ viewing histories and the attributes of the content itself. This provides highly personalized content recommendations, helping retain subscribers and increase viewing times.
Knowing a customer’s frequent location allows for hyper-targeted recommendations and promotions that are relevant to their lifestyle and preferences, enhancing customer satisfaction and increasing repeat business.
2. Enhancing Real-Time Engagement
Deliver messaging at the exact time a customer may make a purchasing decision using advanced location technology. By providing offers and updates when they are most relevant to the consumer’s current location and activity, such as sending a notification to loyalty members when they are near a store, businesses can maintain consumer interest and drive engagement, effectively bridging the gap between online browsing and in-store experiences.
3. Optimizing Omnichannel Strategies
Develop a smart omnichannel strategy that leverages the customer’s location and AI to provide a seamless customer experience across all touchpoints. AI ensures personalized service across all channels, recognizing consumer preferences across various shopping methods.
For example, Starbucks uses AI to provide personalized drink recommendations based on past purchases, location data and even time of day. This allows customers to receive suggestions tailored to their preferences, whether they are ordering via the app, in-store or at a drive-thru. This AI-driven approach has significantly increased customer engagement and loyalty, evidenced by the growth of the Starbucks Rewards program.
Additionally, location technology guides in-store navigation and syncs online carts with in-store availability, blending digital and physical interactions.
4. Utilizing Data Analytics For Insights
AI-powered data analytics can uncover valuable insights into consumer behavior by integrating location data, enabling businesses to anticipate trends and adapt their strategies accordingly. By analyzing patterns and predicting future behaviors based on location and activity, companies can stay ahead of the curve and meet evolving consumer demands. For example, understanding peak shopping times and popular locations helps businesses optimize staffing and inventory management.
Embracing The Phygital Future
As we move further into the phygital era, businesses should recognize that consumers’ perceptions are shaped by both in-person experiences and digital interactions. The journey toward a phygital consumer experience involves reimagining the consumer’s reality in a dynamic and unique way.
I believe the integration of AI and new technology is not just a competitive advantage but a necessity. By staying abreast of the latest trends and harnessing the power of digital technologies, businesses can continue to navigate the post-Covid world with confidence and success. The future is phygital, and AI can help unlock its full potential.