Phygital Retail (And How It Is) Reinventing Retail Customer Engagement In India

Posted on May 20, 2021 by Keerthana Tiwari

The pre-Covid levels of retail revenue in India seem farther away now. While many retailers hoped that 2021 would be the year of recovery, the second wave of infections have dampened their pace. Even the financial services company Nomura has revised its growth expectations for India from 13.5% to 12.6% in the new fiscal year.

Should retail industry too fall for the second-wave and revise its revenue chart? At a time like this, Indian retailers can avoid panic and instead make some wise and proactive measures. A popular Harvard Business Review article called ‘Roaring out of recession‘ talks about how “post-recession winners” came out flourishing from the 2008 financial crisis. It describes how the winning companies reexamined every aspect of their business which will help them reduce their operating cost. When the slowdown turns around, the companies’ efficiency would not be impacted as their operating cost has been lowered before. It is this progressive mindset that can help retailers during the Covid slowdown seen across the Indian subcontinent today. One way to reinvent retail customer engagement is by introducing a new marketing strategy that compliments the current retail scenario – a phygital strategy.

Phygital elements transforming the retail industry

Customers today have grown to love shopping online and show comfort in their own digital spaces for most retail experiences. That said, the touch and feel of traditional retail as well as live demos for product services are irreplaceable. Retailers thus would need a combination of online and offline experiences to build retail customer engagement. This is where the concept of Phygital enters the current retail landscape today. An amalgamation of the words physical and digital, it was coined by the Australian advertising agency Momentum in 2013 as they introduced the word in their motto. In the retail sense, the term has gained prominence recently, referring to the blending of best online and offline features of the shopping experience. An everyday example of phygital retail would be a typical consumer who always shops with a smartphone in hand, often checking product details to help them choose.

An effective phygital retail strategy ideally focuses on three I’s – immediacy, immersion, and interaction. While immediacy and immersion comes from the digital realm, Interaction is from the physical world.

Immediacy: Making the customer experience as fast and as seamless as possible
Immersion: Making the consumer feel connected to the brand experience
Interaction: All possible communication needed during the purchasing process.

The three I’s can be applied in various permutations and combinations in a retail business ranging from the catalogues and the products till the sales and customer service. For example, robotic digital signage and demand sensing in catalogues can help customers find product and immediately check stocks for the particular item. Similarly, chat bots and AI algorithms can speed up the selling process, while targeted marketing campaigns can encourage cross-selling and upselling.

How Phygital is reinventing Indian retail customer trends

Technologically India has been a fast growing country with a big stake in the AI revolution. However, digitization may be a work in progress in the retail industry, as AI solutions are yet to be fully translated in stores across India. Let’s take a look at some customer engagement trends which show that phygital retail needs to be an essential part in every brand strategy in India.

AI will rule the future: Artificial intelligence will make marketing more human-centric. Marketers now have access to advance tools of AI to speedily collect user data and set up a shopping experience relevant to the customer.
Traffic in offline stores will stay low: Even as the second wave of the pandemic has caused customers to order from home, this trend will continue post the pandemic. Some of them will make fewer trips to the store, so each experience should count.
Self-service: Nobody likes the long queues in check-out counters. Definitely not in the time of social distancing. Customers are looking for the quickest ways to find the products they want and one-click checkouts.
Providing personalized experience everywhere: Whether the shopper is online or at the offline store, the experience at both locations should be personalized.
Value-consciousness: Increasingly, customers are going to constantly evaluate the quality, price, and discounts on all the products they choose.

While many retailers in India in the current scenario are trying to compete in the ecommerce space with large players like Amazon and Flipkart, phygital could be a better way to go, as this strategy remains largely unexplored by many brands.

Indian brands that embraced phygital strategy

While some brands in India have already begun applying phygital retail strategies, some are in the exploratory stages. In fact, apparel brands including Asics, Fabindia and United Colors of Benetton have used Capillary’s ‘StoreMax’ solution which allows store managers or staff to engage with customers on WhatsApp. Through this solution, offline stores can send personalized recommendations to customers and accept the orders placed by customers through phone calls, on WhatsApp or online portal. The offline stores then become fulfillment centers where they help in providing minimal delivery timeline.

Phygital retail is not restricted to just apparel sector. Grocery retail and supermarkets are known to be benefitted largely. Brands like Spar and Namdhari in India, have taken up phygital strategies to ensure quick deliveries by recommending products based on their previous purchases and creating a seamless option of same-day delivery of orders.

Predictions on the retail industry’s future scenario shows that offline stores are not dead yet. People like seeking solace by visiting stores and we could see consumers coming back to shopping malls and markets when Covid restrictions would ease. However, contactless retail will be of high importance till the pandemic is over. This emphasizes the need of creating a phygital experience for a brand for its customers. It’s time to go phygital!

A Marketer’s Guide to Enhance Rewards Program Experience in Indonesia

Posted on May 5, 2021 by Keerthana Tiwari

Did you know that there is a better way to make your new customers behave like they have been buying your product for 10 years?

Yes, you read it right! Your brand can attain this from refining customer experiences through an accessible rewards program. A good reward’s program can become the reason for consumers to pick you over your competition. Even for smaller businesses, studies have shown that customer retention is a more effective way to grow business. And this can be achieved by building customer loyalty. Now, let’s study how brands can build this experience for the Indonesian market.

Step 1: Understanding how rewards program can help Indonesian retailers

Several trends say that the Indonesian retail market will see an inferior growth in the next 4 years due to the pandemic. Research by Technavio shows that the market could progress with a CAGR of 4%, whereas pre-covid research had predicted a CAGR of 6%. In this market outlook, customer loyalty plays a major role in establishing a brand’s foothold in the industry.

Step 2: Studying Indonesian Customer Demographics

The next step in building a strong rewards program is to understand the consumer. Before we detail out the demographics of the Indonesian market, it is imperative to consider two factors – (a) what consumers think and (b) what factors determine their consumption. Let’s take a look at some interesting consumer trends in the last year that Indonesian brands can take advantage of:

Post-Covid household income: Due to covid, many Indonesian households have been affected with pay cuts and job losses. The pandemic has given consumers a reason to be frugal with their spending. A McKinsey report showed that almost 60% of consumers have experienced reduction in savings in 2020.
Hope for a better economy: Despite money woes, there is optimism in the air. PwC’s Consumer Insights Survey claims that 64% of Indonesian consumers feel confident that they would be able to spend more in the near future.
Increase in online shopping: Buyers jumping on to online platforms has been the trend across the globe during the pandemic, and this effect has been very prominent in Indonesia. Before the pandemic, shopping through online channels was almost a non-existent option as people preferred shopping at traditional marketplaces.
Memberships and Discounts: Membership programs have been successful in generating customer loyalty in western countries. And it is a feasible plan for Indonesian retail as well. Buyers from the country also prefer lucrative discounts.
Health conscious youth: 85% of Indonesia’s population is under the age of 55. Among these are the young consumers who are also increasingly conscious about health and wellbeing.
More women use multichannel: In a survey by Snapcart global, it was concluded that women between the 25 to 35 age group are more likely to compare best deals across channels before buying. Men over the 35 years age group are likely to be loyal to a brand, as they want to be efficient while shopping.

Understanding that all customers are not equal and have different consumption behavior is the first step in realizing the benefits of loyalty. Knowing these nuances will help in creating an efficient rewards program that addresses the needs of customers.

Step 3: How to build an effective rewards program in Indonesia

Now that we have discussed what choices Indonesian consumers make while making purchases, we can use these pointers to design a suitable rewards program. While building the framework of the program, it is important to keep in mind the brand’s business objectives and aim to provide value to customers. Here are some features that may help Indonesian brands create impactful customer loyalty:

Choose a system of coupons and deals: Owing to pandemic effects, Indonesian consumers are always looking to save more money and therefore want more discounts and deals. So a rewards program involving coupons, discounts and points would be of direct help to consumers. Indonesian consumers are also confident that the country’s economy would get better soon, and this system may slowly push them to spend more.
Boosting online channels: Covid has certainly pushed consumers to online channels, and it is important for brands to consider providing rewards on digital platforms apart from the offline stores. Most Indonesians have moved to online shopping only in the past year, and are gradually warming up to the platform. Therefore, the rewards program must be seamless and easy to use.
Keep the rewards simple: Easy to earn and easy to redeem – this must be the policy of the rewards programs in Indonesia. Customers cannot be inconvenienced and shouldn’t be made to wait too long for their reward. The deals, discounts or points must be immediately available to them. They should also be able to quickly redeem them. One useful idea can be to print the coupon along with the bill so that it is quickly usable. At Capillary, many brands opt for this feature, also known as Dynamic Voucher System (DVS).
Gamification: Gamifying rewards programs is a lucrative idea to boost more sales especially in Indonesia, as people are using the online platforms more often. Spin the wheel, scratch and win, and pick and win linked to discounts and deals would encourage more purchases among Indonesian buyers. This would also help increase the brand’s app usage and website visits.

Step 4: Learning from loyalty frontrunners who achieved enhanced shopping experience

A study of other top programs in Indonesia can also be a good hygiene check while developing the right rewards programs. Here are success stories from two brands who have emerged as leaders in enhancing their brand experience with their rewards programs.

The Erajaya group has an interesting rewards program called the Eraclub program to personalize interaction with customers, understand customer behavior patterns, and reward the customers with the right offers. Their program is a tiered membership, with points and discounts provided on selected products, which is an integrated loyalty for offline and online platforms. They also give personalized instant offers based on customer preferences. This well-developed program helped the company get more than one million new member registrations in 2020, 75% loyalty sales contributed by members.

Kanmo Retail group, on the other hand, launched their Kanmo Circle program, which also provided tiered memberships. The company focused on special birthday discounts and points redemptions. Kanmo ran campaigns with personalized offers based on customers’ historical purchase data. The group achieved 94% loyalty sales contributed by members with 140,000 new members in 2020.

At Capillary, we have helped 100+ create robust loyalty programs with the consumer needs in mind. Our products can directly help increase sales and conversion with its AI-powered CRM software and rewards programs.

Indonesian Rewards Program: The Road Ahead…

Developing a loyalty program is hard in a country where consumers are actively searching for new brands, experiences and promotions. But the landscape is expected to change. With a slow but sure growth in the Indonesian retail market, demand for various goods is also expected to rise. To create suitable rewards programs in Indonesia, it is important to have a deep understanding of consumer behavior in the country and prioritize customer engagement. So, the time is ripe for investment in a loyalty program that can put your brand ahead of competitors.

How Experiential Loyalty Enhances Customer Advocacy

Posted on May 3, 2021 by Capillary Marcom

It is an open secret that brands invest significant revenue to nurture loyal customers (research shows over 70% of brands invest more than 2% of total revenue)— after all, a 5% increase in customer retention can increase a company’s profitability by 75 percent. Today more companies than ever have loyalty programs, estimated to be growing at 9% a year.

But there is another elusive type of customer that brands vie for even more – the advocate.

The term ‘customer advocacy’ should make brands lean in with rapt attention. They are the people who evangelize your brand to their family, friends, and colleagues. Customer advocates contribute to a higher CLV (Customer Lifetime Value), improve brand awareness, and they grow your revenue when they share the incredible experiences they had with your brand. Sound familiar? You might be wondering — aren’t all loyalty programs supposed to be driving higher sales and boosting brand affinity through positive reviews and word of mouth marketing?

In an ideal world, the answer is ‘yes’. A strong loyalty program must also drive customer advocacy. Even though there are more loyalty programs now, the number of customers who actively participate in them continues to remain at only about 50%, highlighting that there is scope for improvement in most programs.

Overwhelming evidence shows that Customer Expectations have changed in the last decade or so. Customers’ behavior and purchase journeys have become increasingly complex and non-linear, but unfortunately retailers are still stuck with a one-dimensional view of customer loyalty. According to research from a global tech consultancy, 97% of loyalty programs rely on transactional rewards, but 77% of transaction-based programs fail in the first two years. The harsh truth is the loyalty programs from the by-gone era simply don’t cut it anymore. To go beyond discounts, brands need to reward loyal members with memorable experiences. This creates an emotional loyalty to your brand far more often.

What Is Experiential Loyalty— and why does it work?

An ‘experientially loyal consumer’ is one who finds personal symbolic meanings in the act of consuming and investing in a brand, and engages around these meanings individually or as a community— in the pursuit of identity (as defined in a research paper by SAGE publication).

Experiential loyalty should go beyond transactions to focus on the larger customer experience and values. Its application can be found across various industries, from supermarkets to high-end fashion brands. For example, the popular American wholesale-retailer Costco charges an annual membership, but helps their die-hard loyalty customers make wise financial decisions beyond just groceries, by offering their own pharmacy, eyewear store, liquor store, fuel stations, and so much more. In more recent years, they’ve successfully been offering ecommerce options. Similarly, Indian companies like ‘Big Basket’ flourish by combining great price deals with the convenience of creating and delivering your grocery list.

Of course, not every grocery store can imitate Costco or Big Basket. But remember your favorite corner store as a college student, the one you could spend hours at with your friends? The memorable ones value their customers, and create experiences— whether it is by serving hot meals when we need it, or delivering groceries when we’re a desperate tied-up parent. Some brands, like US-Canada-based QSR ‘Panera Bread’, state their values clearly in their restaurants and online— making fresh healthy food, with emphasis on high-quality ingredients locally sourced from farmers. Recognizing the importance of omnichannel experiential loyalty, Panera offers a card-based loyalty program (an impressive 50 percent of company transactions occur on MyPanera cards) and a mobile app, and rewards its customers with free food items, tasty nutritious meal recipes, invitations to special events, and more.

The goal of experiential loyalty is to create a unique bond with your best customers by allowing them to enjoy exclusive experiences that are hard to replicate anywhere else. This could include anything from concerts, backstage passes, private events, celebrity meet and greets, personalized products, exclusive training workshops, and so much more. Experiential loyalty boils down to activities, not mere items.

In many cases, experiential rewards rely on FOMO — people’s “fear of missing out.” When people share their best experiences with their friends and family, either in person or through social media, it can powerfully motivate other consumers to learn more about your brand and experience it for themselves, driven by the fear of missing out or the yearning to be part of something exclusive. This grows your market reach by leaps, and your program instantly becomes more valuable. While transactional rewards and dollar savings attract consumers most frequently, it’s the experiential rewards that create long-term impact. The transactional rewards that most loyalty programs offer are rarely unique, but that’s not the case with experiential rewards. The experience your brand provides loyal customers must be different from what other brands can provide.

Combining transactional benefits and experiential benefits is the best way to engage the most consumers with your brand. And keep in mind that excessive transactional and discount-based rewards can have the opposite effect of experiential rewards— it will dilute the perceived value of the brand. Good transactional rewards make your customers feel smart, where experiential rewards let them feel special.

Here are some of the key points of experiential loyalty:

Emotional Rewards: Create remarkable non-discount rewards, such as personalized experiences, value-driven engagement and exclusive services, to help customers feel appreciated and valued.
Reflect your brand’s value: Align your brands values while creating experiences to attract the interests and passions of your customers. Understand the interests of consumers by leveraging relevant transaction history and a single view of the customer across all channels of interaction
Unique Experiences: Unique brand experiences spark heightened customer engagement and build advocacy that permeates throughout a customer’s network, allowing you to build deeper relationships with your customers. Today, many customers (including 72% of Millennials today) choose to spend money on experiences over products
Keep it exclusive, Optimize costs: Depending on how elaborate your reward is, experiential rewards can rack up a heavier cost than traditional transactional rewards. It may make financial sense to offer the high-end perks only to your very best customers — which also lends exclusivity to the experience. Less expensive experiences can be offered to lower tier groups, and the rewards steadily grow for each loyalty tier. Consumers who participate in top loyalty programs are 80% more likely to choose that brand over its competitors, and two times more likely to recommend it to others.
Perfect Timing: Although often overlooked, timing in marketing (just like in comedy) should be perfected— especially by those with small teams and smaller budgets. Brands must be aware of any social movement affecting their products or their customer segments, and modify their message and product accordingly. Additionally, by leveraging digital data and engagement trends, brands must understand when their customers pay the most attention, engage, and make purchases. Marketers can also utilize technologies like geofencing, and send coupons, push notifications or engage when customers enter a certain location area.

Examples of Experiential Loyalty

Sephora: Although the beauty retailer Sephora began as a simple points-based loyalty program, it has now expanded to a community that motivates members to share tutorials, and engage with other makeup enthusiasts and professionals. Sephora’s mobile app even uses augmented reality so members can virtually test products on themselves. Sephora offers free samples of beauty products to loyalty members of all tiers, which strengthens their own loyalty program while promoting other brands. But perhaps the best aspect of Sephora’s experiential loyalty program? For higher-tiered members, they offer one-on-one makeup consultations with professionals.

The North Face provides their loyalty members with tailored rewards for their lifestyles. As part of their VIPeak program, customers can earn points through traditional methods like making purchases, as well as through less traditional ways like attending events, checking-in at certain locations, downloading the company’s app, and more. However, the most captivating factor of The North Face’s experiential loyalty program is the vast array of choices they offer when members redeem their reward. Customers can use their points toward unique travel adventures like mountain climbing in Nepal or excursions in Alaska.

Sony uses their Ultimate Rewards and ShowStoppers rewards program to take their customer experience to the next level. These rewards are larger than life experiences that allow customers to use their points to bid on various exclusive experiences, from Hollywood premieres, to sporting events, to sold-out concerts. Sony allows their customers a shot at making their dreams come true— if they bid the highest! This added level of gamification empowers the consumer to define their own value of an experience. All these factors have set Sony’s Loyalty Program a class apart.

Conclusion

Experiential loyalty really comes down to the fact that when you give customers a positive memorable experience, you create an emotional tie that keeps customers coming back for more. Experiential loyalty programs should offer tailored unique rewards to make customers feel important. This can evoke a much stronger and longer-lasting connection with your customer than transactional benefits— one that gets them to relive their happiness with friends and loved ones, and turn into an advocate for your brand.

The above study is jointly contributed by Maninder Singh (Business Head – Retail & CPG at Tech Mahindra), Suman K Shantaram (Store Consultant RCG Vertical Tech Mahindra), Gaurav Mehta – VP and Global Head, Alliances and Analysts Relations at Capillary Technologies and Rebecca George (Executive Copywriter at Capillary Technologies)