Let's Get Phygital

This article was featured on the Claro Partners' website: https://www.claropartners.com/lets-get-phygital/

Augmented reality, affective computing and virtual reality technologies are rapidly paving a future that will significantly disrupt key areas of human life.

Indeed, the distinction between the physical and the virtual is collapsing, as the lines between the digital and physical world blur. This breakdown engenders new perspectives on liminal modes – the threshold between one form and another – for our experiences and our daily interactions now straddle both physical and digital spaces mediated by technology. This so-called “phygital world” in which online and offline worlds seamlessly merge, is attuned to today’s youngest generation, Generation Z, for whom life began with a smartphone and the Internet.

In this article, I discuss the shifts in virtual exploration with particular attention to its relevance to Generation Z, and speculatively draw conclusions on potential business disruptions within the hospitality and retail sectors.

Generation DeleuZe

In a recent project at Claro Partners, we interviewed “Digital Natives” across five markets and found few differences in time spent online and offline. The digital world reinforces what happens in the physical world, and vice versa. Friendships are initiated online and then transferred offline, although some individuals prefer online anonymity and the mitigated risk of physical space meeting.

Such convergence of the physical and digital worlds relates to the philosopher Gilles Deleuze’s apt distinction of the actual and the virtual. Foreshadowing today’s technological context, according to Deleuze, the virtual does not possess material form, but its effects can be as tangible as those of the actual. As Lara, a participant in Berlin noted, “I sometimes watch videos of things I’m afraid of, like sharks, spiders and heights, because I can deal with those in the digital world and that helps me cope with them in the physical world”. Akin to Deleuze’s conception of the actual and virtual, for Lara, the virtual image serves as a non-material mechanism to understand the physical world.

Different modes of exploration

Probing further into the liminal space between the physical and virtual, our fieldwork indicates that in the context of travel, online exploration for this generation takes place in three different modes:

(1) Explorers – for this group, the saturation of images on photo-sharing platforms such as Instagram, fuels wanderlust. Users identify destinations to visit in the future and use the online medium to plan offline travel, with the images themselves substantiating the experience.

(2) Sceptics – this group is wary of online photo-sharing platforms, citing falsity of curated, performative experiential images. These images instigate the users’ desire to verify the reality of the physical world against the images they view online. As Haikal, a participant in Jakarta commented, “I like to prove what I see online, check it with what I saw offline, and make sure it's as good as what’s posted online”.

(3) Virtual travellers – for these individuals, the overexposure to images on social media has shifted physical exploration to pure virtual exploration. They no longer feel the urge to travel. On Instagram, for instance, users can search for popular destinations, such as Bali, and view all the images of a global hashtag conversation without leaving the comfort of their homes.

This last category has wider business implications; it spells new challenges for companies within the tourism and hospitality sectors that are hoping to attract today’s “virtual travellers”. While the “explorers” and “sceptics” will hold their positive business value as they are exposed to travel content online and hence, travel more frequently, today’s generation increasingly spends time in “exploration mode” from its own secure environment. João, a participant from São Paolo said, “Why would I want to travel to Paris? I’m happy here in São Paolo and I can travel on my phone”.

Bringing back Baudrillard

Our research showed that Generation Z is generally empathic, inclusive and also encourages diversity. In line with these character traits, as well as tapping into the image-fuelled wanderlust of the “explorers” and the proclivity of the “virtual travellers” towards online exploration, virtual reality technologies are now enabling these individuals to view the sociocultural experiences of people across the world.

Félix Lajeunesse and Paul Raphaël’s VR documentary “Nomads”, for instance, situates the viewer in cultural engagement with the Sama-Bajau in Borneo and Mongolian yak herders. Compared to traditional viewing formats, the immersive experience of the film allows the individuals on screen to author their own cultural experiences. Crucially, then, VR films are adapting to new modes of exploration while capturing the generation’s enthusiasm to understand other people’s experiences — albeit from the comfort of the home.

In a similar vein, VR technologies are also being harnessed in design research to illustrate the experiences of users for a given product or service. Unilever’s CMI Unit, for instance, harnessed new methods to illustrate the experiences of older consumers. As the Harvard Business Review article details, “CMI had marketing executives don old-age simulation equipment and then try to read labels and handle Unilever products such as shampoo. Encumbered by gear that reduced their mobility and vision, the marketers gained a real appreciation for the obstacles the elderly face”.

We are perhaps heading towards a future encapsulating the notion of hyperreality of the French sociologist, Jean Baudrillard: when images themselves become more real and important than the reality they imitate. Semiotically speaking, the sign (comprised of the signifier and signified) is more important than its referent. In other words, one of the effects of the mass production of VR and AR images is that such representations of reality can outperform and supersede actual reality, becoming “more real than the real”. In a sense, such a technological future is not new. Walter Benjamin’s The Work of Art in the Age of Mechanical Reproduction describes the effects of modernity on photography, wherein photographs and reproducible images of works of art became mass-produced and images lost their authenticity. In a similar vein, as we venture further into the Fourth Industrial Revolution, we may no longer discern a difference between what is real and the simulation of the real, thereby leading to a distorted hyperreality.

Herein lies the key shift in the concept of exploration: we can travel, understand new cultures, and develop empathy towards users, without leaving the confines of our homes. But what are the implications of this “virtual exploration” for business?

Preparing for virtual lift-off

Transportation, hotels, rental services, and the entertainment industry, for instance, could all expect to see negative growth if the next generation’s travellers, i.e. “explorers” and “sceptics”, adopt the behaviour of the “virtual travellers” and prefer to explore the world from smartphones.

Hotels are preparing for this level of disruption and recognising its potential. Acknowledging that virtual reality is proving to be an effective marketing tool within the hospitality industry, the Marriott hotel chain found ways to integrate new technologies into guest services. In 2015, the “Vroom Service” was introduced: a pilot tool providing guests with an in-room virtual reality experience of “travelling” to various locations. In the same year, the hotel chain launched “VR Postcards”: a platform offering immersive travel narratives for guests via virtual reality headsets. Later, 51% of respondents said they would stay at Marriott hotels more often.

The Shangri-La Hotels and Resorts chain has also introduced virtual hotel tours to experience 360-degree views of the property. Bowing to the new consumer mindset of the “sceptics” and “virtual travellers”, virtual exploration now appears to be a prerequisite and indeed, prior to the act of physical travel.

When future virtual reality technologies become as engaging, direct and accessible as physical reality, a paradox will emerge: once the virtual is more real than the real, “explorers” and “sceptics” may see no further need for physical experience. If, however, hotels only promote physical travel experiences over this new conceptualisation of travel, these service sectors can expect to lose the sizeable demographic of “virtual travellers”.

The question remains, then: how can hotels and resorts motivate or incentivise people to physically experience their locations, adding value that specifically cannot be derived from the phygital world?

Try before you buy

The implications for the retail industry are also noteworthy. Perhaps new technologies will pave a future in retail wherein individuals will always wish to virtually “explore” a product or service before purchasing.

The “try before you buy” phenomenon has seen traction in cases such as Amazon’s Prime Wardobe, where users can order up to fifteen items of clothing from Amazon, and only be charged for items retained. The rest are simply returned by the user to the Amazon warehouse. Indeed, this concept is particularly effective for reducing typical pain points in online shopping, such as returning items that do not fit or the wait for refunds by the retailer.

Increasing numbers of retailers are creating immersive shopper experiences. Using augmented reality technologies to engage with consumers, IKEA developed an app – Ikea Place – that allows users to see how the furniture would look in their homes. Similarly, Topshop developed an augmented reality dressing room in one of its Moscow branches, allowing users to “try” different items of clothing before purchase and eliminating long queues for changing rooms.

When we purchase commodities or services, we also buy certain psychological experiences piggybacking on the item. The marketing of cameras, athletic wear and travel accessories, for instance, entails the hidden experience of the explorer venturing into the unknown. As Slavoj Žižek, the contemporary philosopher comments, we have been heading in the direction of “material instruments being just an appendix for experiences”. Now, with the added prosthesis of the virtual arm, the levels of experience are three-fold: (i) first-order physical experience of the product (ii) second-order psychological experience of the product (iii) third-order virtual exploration of the product. The convergence of these three levels in hyper-mediated spaces will become more relevant in the future. Indeed, while we have heard that millennials prefer experiences over material goods, with Generation Z acting in some ways as heightened versions of millennials, we can expect the demand for experiential products and services to significantly increase.

Conclusion

Immersive content through augmented reality and virtual reality spells a new era for hospitality and retail. Consumers will increasingly demand experiential services within a long-tail world of hyper-personalisation. Businesses will have to be prepared not only for the current disruptions of virtual technologies, but for the needs of the future clients of Generation Z for whom there will not exist such a thing as online versus offline. Growing up in a “phygital” world, these individuals will expect the convenience of digital to be present even in purely analogue experiences. Indeed, institutions will need to connect to them in their phygital space to develop an engagement.

For a future in which reality could collapse into hyperreality, as reality itself becomes a technological simulation, the words of the semiotician Umberto Eco seem apt: “Technology can give us more reality than nature can”.

Key References:

Baudrillard, Jean. 1981. Simulcra and Simulation.

Benjamin, Walter. 1936. The Work of Art in the Age of Mechanical Reproduction.

Deleuze, Gilles. 1966. Bergsonism.

Eco, Umberto. 1986. Travels in Hyperreality.

Lajeuenesse, Félix., Raphaël, Paul. 2016. Nomads.

van den Driest, Frank., et al. 2016. “Building an Insights Engine”.

Zizek, Slavoj. 2015. Strange Signals.