Phygital Marketing, is it more than just a ‘buzzword’?

October 6, 2020by Anitha Smith

If you are still unsure if ‘phygital marketing’ is just a buzzword and not a relevant marketing strategy, this article by WEF – “Phygital – a banking strategy for the new isolation economy” will provide some answers. Digital adoption across industries leapfrogged with the consumer lifestyle changes brought on by the pandemic. There are debates as to which of these changes are permanent and how much of the ‘old normal’ will come back. We will continue to evolve in a hybrid space of virtual and real worlds. We might not yet be ready to settle for virtual holidays or ‘flight to nowhere’ but we have come to accept that future of work has changed with WFH. The biggest and the most consequential change in the recent months has been for the e-commerce sector, across industries. This for sure is a permanent change. Role of physical stores has changed irrevocably. Therefore ‘phygital marketing’ is very much the ‘new normal’, however cliched it sounds. But does it mean that marketing has changed forever or is it that the fundamentals have been ‘readjusted’ to the ‘new normal’?

Over the past couple of decades there have been many iterations to the classic ‘4Ps’ – few additional ‘Ps’, some Cs and a M3 by Econsultancy. But here I will focus on the classic 4Ps and deliberate how it fits into ‘Phygital Marketing’

Product: We have a lot of ‘smart’ products, but still in select categories like electronics.  Yes, there is Oral-B iO, but it won’t start making a dent on the conventional toothbrush category anytime soon. We are also still far away from mass adoption of RFID assisted inventory management or digitisation of supply chain. Less than 10% of manufacturing companies have a fully digitized supply chain. Data driven product development is seen more in industrial companies than in consumer goods companies. But the emergence of online marketplace as a key sales channel is fast tracking the product development cycle. With the same marketplaces developing their own products, the sellers on these platforms need to invest in continuous improvement. This has also changed the packaging and labelling design outlook. Since the products are ‘discovered’ through search queries, the product description and labelling need to be keyword focused. Also, consumers spend more time reading the description while purchasing online. Brands will have to find a way to match the information provided online with the physical labelling. This is an opportunity for brands to provide compelling reasons to buy. Also, companies can segregate their product portfolios between physical stores and online stores/marketplaces. Specific SKUs like bulk orders are more suitable for online stores.

Price: Traditionally Price was a collective effort between different internal stakeholders. It is still a collective effort but external stakeholders have been added. The biggest influencer on price in a ‘phygital’ marketing mix is the online marketplace. The control traditional businesses had over the price is compromised since the online marketplaces dictate some of the terms. This eats into the profit margins. Dynamic pricing and instant offers are now hygiene factors of e-commerce. Cost comparisons by consumers include price of the product and delivery charges. One of the main attractions of online marketplaces is their extended delivery network. But there are specific tactics to win on marketplace. ‘Showrooming’ also impacts the price component. Consumers expect to see a lower price online for the same product they experienced in the showroom. The opportunity brand owners have is the relatively low infrastructure costs to retail online. This is especially beneficial to small/medium brands and private labels. Competitive pricing is easier without added overheads.

Place: This arguably has had the most impact. Earlier the first physical brand experience was inside brand owner-controlled premises. But today the brand lives on e-commerce websites and marketplaces as well and the first physical brand experience is inside the customers’ premises.  Distribution principles like “aisle domination” in the case of CPG sector is still critical. But equally important is the ‘search results’ domination.  The results carousel acts like a ‘virtual aisle’. But the competition does not end there. The path to purchase from the ‘virtual aisle’ to checkout involves many steps. The landing page experience and if through a marketplace the pressures of algorithmic shopping. This is why being eligible for features like Amazon Buy Box is important. Brands will need to adopt omnichannel strategies to compete. With the growth of e-commerce, the role of physical stores will evolve. Providing a rich brand experience along with excellent customer service can increase the footfall. There will be increasing adoption of technologies like AR and VR to provide an immersive experience to the customers.  Real time messaging using location data within the stores improves instore conversions as well as future online targeting.

Promotion: This has been ‘phygital’ for the past couple of decades. It will be interesting to see if the recent surge in TV viewing will translate to a different media consumption pattern in the long run. Offline media still plays an important role in building brand awareness and recognition. Programmatic buying of offline media can further improve targeting. Digital advertising ecosystem continues to evolve. New regulations on data privacy and third-party cookies will make micro targeting more challenging.  Need for a unified ‘phygital’ measurement framework has become more urgent now. It is not about replacing TV driven Share of Voice with Share of Search. It is about correlating these two, among other offline/online metrices to get a comprehensive single view of media effectiveness. Web analytics tools like Google Analytics have options to integrate offline media. But it is still not standard practice.

There is an important ‘P’ to be added to the marketing mix – People. Today consumers control the market. There are many platforms to amplify consumer voice. Consumer generated activations are now the norm in any brand marketing calendar. People’s purchase habits have changed but motivations to buy have not changed much. People still buy brands that make them feel good about themselves.

Developing a ‘phygital marketing’ strategy is no different to traditional marketing strategy. It is as much about the long term as the short term, even though digital offers quick wins and lower barriers for entry. Marketing always used data to guide decisions and actions. But the nature of data has changed with the emergence of Machine Learning and Artificial Intelligence. Predictive analytical models have replaced explanatory analytical models. Our proprietary strategic business framework C.A.R.T. is a data driven framework. By analysing Customer, Architecture, Reach and Transact through different data sets, we are able to provide recommendations for sustainable growth. Not just short-term gains. If you would like to know more about it, reach out to us at growth@phygitalnow.com

PHYGiTALNOW is a digital marketing consultancy in Dubai focused on transforming businesses for sustainable growth. The primary focus is to realise the full revenue potential by providing best-in-class Digital Marketing Services – Search Engine Optimisation, Search Engine Marketing, Website and App Development, Social Media Strategy and Activation, Email Marketing and Digital Advertising. We also provide E-commerce specific services – Online Marketplace Management, Conversion Optimisation and Basket Analysis. We tailor-make our consultancy packages depending on the digital maturity of the business.