In this op-ed, Ciaran Park, executive technology director, Australia at R/GA looks into how retailers can make the Digital Twin of a Customer central to their digital strategy.
It’s fair to say that retailers have been riding a wave of dramatic shifts, with more uncertainty about changing consumer behaviours and supply chain volatility to come. But of course today it’s not about avoiding chaos or change; it’s all about getting ahead of it.
With a swing in consumer expectations, retailers can no longer risk the consequences of a hit-and-miss approach to engaging with their customers. We’re at the point where I believe we’ll start to see strategies that aim to predict, rather than react, rise to the top of the priority list. In a retail environment, digital twins enable a safe space to innovate, and they will become crucial in personalising a richer, more data-driven and captivating engaging customer experience while providing the power for retailers to move from insight to action.
The “Digital twin” began as an engineering term, referring to early digital doppelgangers of complex physical systems. NASA built the first digital twins back in the 1960s, creating data-driven replicas of its space capsules. At the time, they allowed engineers on the ground to quickly test ideas for repairs to the crippled Apollo 13 mission and bring its astronauts safely back to Earth.
Today, the concept has expanded into multiple categories, including the Digital Twin of a Customer (DToC), for when brands can’t afford a trial-and-error approach to enhancing customer experience. DToCs draw upon data from a wide range of online and physical customer interactions to accurately simulate the customer experience.
While engineering digital twins rely on Internet of Things (IoT) sensors to track what’s happening in the real world, DToCs build upon that via a wealth of data drawn from sources like social media, online behaviour, transaction history, customer feedback and other interactions with the brand. Combining this with the advantage of artificial intelligence and machine learning can unlock a new level of actionable insights.
Retail Resilience
Just like NASA, retailers can take advantage of digital twins to quickly understand what’s happening out there in the real world and test out different ideas, all while avoiding any of the risks of getting it wrong in real life.
This all helps build a detailed, real-time picture of a customer, which is far more granular and precise than basic customer segmentation. By drawing upon a wide range of data sources, digital twins also help break down data silos – both within the businesses and along the supply chain – to create a more holistic view of customers. Every organisation has different needs, and brands will want to be considered as they look to implement these advanced capabilities across their business.
Luxury brand Burberry uses digital twins to draw on data from purchase history, social media activity, and other online activities as well as real-world interactions with in-store sales associates. This lets Burberry create a detailed profile of each customer to provide personalised recommendations, offers and experiences. For example, if a customer is interested in a particular product category, such as handbags or coats, Burberry’s DToC recommends products that are most likely to appeal to them based on their past behaviour and preferences.
Bringing your customers to life
A DToC isn’t merely a static avatar, Gartner defines it as a “dynamic virtual representation” of a customer. This includes simulating, and even anticipating a customer’s behaviour, wants, needs and preferences, as well as the ability to test these in different scenarios.
Global beauty chain Sephora builds DToCs to predict products that customers would most likely be interested in, based on their purchase and browsing history. This allows Sephora to make tailored recommendations to each customer, increasing the likelihood of purchase and driving revenue. And on top of this, Sephora’s DToCs integrate with its loyalty program, allowing the company to offer personalised offers and rewards to customers based on predicted behaviours.
Amid increasing privacy restrictions and the declining reliance on third-party cookies, DToCs allow retailers to make the most of their valuable first-party customer data. Many organisations are getting onboard, with Gartner predicting the market for digital twin-enabling software and services will reach US$150 billion (almost AU$230 billion( worldwide by 2030, up from US$9 billion (less than AU$14 billion) in 2022.
And it’s easy to understand why. Working with digital twins offers retailers a virtual safe space where they can hone their efforts to personalise the customer experience. DToCs can also be a powerful tool for supporting new products, services and digitalisation efforts.
A powerful enabler for auto
The benefits of a digital twin to the auto industry are numerous, such as its ability to provide customers with improved access to data and create a more immersive and effective buying experience. It can help car buyers make informed decisions through tailored recommendations and services, such as personalised vehicle settings and maintenance schedules.
By using a virtual environment, car designers and engineers can better understand how people interact within the cabin environment. With real-time 3D, it’s possible to test different in-car displays in various positions based on driver reactions. UX researchers can easily adjust the nature and placement of displays in real-time to optimise information distribution. The instant feedback on interiors, ergonomics and interactions allows for more iterations to modify the design and behaviour, ultimately ensuring a better experience for drivers and passengers
This makes digital twins a powerful tool for meeting the challenges of Retail 4.0, as the physical shopping experience is digitised through the integration of new retail and data capture technologies. Nike, Alo Yoga and Amazon are among those which are using technology to take retail and customer experience to the next level. This will allow them to not just personalise the customer experience – it will individualise it.
See digital twins in action
The enhanced experiences driven by DToCs can extend across the physical and digital worlds. For example, DToCs can assist with the design and planning of retail stores and other physical spaces. By letting these virtual customers lose in a virtual store, retailers can proactively optimise layouts and in-store product placement long before they swing open the doors in the real world.
Swedish furniture giant IKEA uses digital twins in this way. It currently uses DToCs to design its stores, to create more personalised and convenient shopping experiences.
IKEA creates DToCs by analysing data on customer behaviour and preferences, as well as store traffic patterns and sales performance. This data is used to create a virtual simulation of the customer experience, which can be used to test and optimise different store layouts and merchandising strategies.
Building on this, digital twins can also help retailers polish not only the physical in-store experience but also online. By understanding buying behaviours and identifying shopping patterns, retailers can adjust promotions, personalise recommendations and even tweak pricing on the fly which then can be reflected on digital channels, building a heightened experience. Looking forward, they can also create forecasts based on customer preferences and historical trends.
Supply and Demand
Beyond revealing how customers engage with the virtual and physical retail floor, DToCs also help retailers better understand purchasing decisions, as well as how their customers engage with products and services. This level of insight can feed directly into product development cycles, as well as inform production schedules and supply chain logistics based on consumer demand.
Companies such as Siemens are supporting a revolution in food tech with the digital twin serving as the end-to-end applied tool in both the supply chain and product management. Digital twins are timely in their ability to quickly respond to and improve product design, one day potentially anticipating pandemic impacts, or climate, social, trade and geopolitical related implications to food product development and innovation. Digital twins are design thinking in action, emphasising consumer and market-centric innovation ecosystems, which remove the silos between demand signal and production response.
Understanding customers has always been one of the keys to retail success, with Digital Twins allowing retailers to predict customer wants and needs rather than simply react to behaviour. This lets retailers unlock new layers of insight for personalising a proactive customer experience, and then safely testing out their plans before putting them into action.
