Immersive technologies allow customers to experience the world of luxury retail and hospitality online before they buy. But brands embracing the benefits should also be aware of the reputational pitfalls.
The much talked about 3-D metaverse may still be years away, but we are getting closer to creating fully immersive experiences online through technologies such as augmented reality (AR), virtual reality (VR) and artificial intelligence (AI).
These innovations are already breaking boundaries, making it possible for consumers to step inside and live in the world of luxury retail and hospitality on their devices. AI is also accelerating personalized marketing based on learnings about customer behaviours and preferences.
The potential to get to know customers better and offer unique experiences to them is huge. But along with new technologies come added risks. For example, collecting a lot more customer data could increase the risks of data breaches. Tracking of customer activity could become too invasive, while powerful algorithms could perpetuate bias or cultural insensitivity.
Any of these pitfalls could gain traction and attract negative publicity. To avoid this, companies should involve consumers in the design of systems, test rigorously, implement robust ethical guidelines, and consider risk management solutions to protect against the financial and reputational impact if an incident does occur.
Engaging customers with personalized experiences
Luxury retail and hospitality brands are exploring the potential of everything from virtual try-ons and 3D-product views to virtual tours and concierges.
Immersive web technologies can help engage people and provide seamless personalized experiences, making it easier to find the exact fit and right choice of destination, room or restaurant.
Examples of current uses include Gucci's virtual sneaker try on, which allows customers to see what they look like on their feet without visiting a store.
Balenciaga recently held a virtual reality fashion show providing an exclusive front row experience to viewers, while Four Seasons and Shangri-La offer virtual tours of their hotels and resorts.
Meanwhile, many brands are using AI algorithms to turn customer data into personalized recommendations and customized content, ensuring that messages resonate, increasing engagement and adding to their immersion in the brand.
The dangers for luxury brands
But, as well as the miracles they perform, immersive web technologies can also lead to unforeseen and damaging consequences. In one recent incident, a chatbot trained to respond naturalistically to customer queries was incited to use swearwords and compose insulting poems.
Systems powered by AI can unintentionally perpetuate bias, leading to discriminatory practices or cultural insensitivity that can alienate customers and attract negative publicity.
"Systems powered by AI can unintentionally perpetuate bias, leading to discriminatory practices or cultural insensitivity that can alienate customers and attract negative publicity."
Alexandra Walker | Broker Assistant, WTW
Several luxury brands have been criticized having launched services such as virtual influencers, digital avatars and video games, either because they were poorly executed, lacking in personality and authenticity, or not well aligned with the brand's in-store experience.
Likewise, missteps such as using data unethically, breaching privacy rules and tracking customers invasively can damage the image of firms that rely heavily on prestige and exclusivity.
Luxury brands are often held to a higher standard and can face greater criticism and reputational damage when such incidents happen.
How to avoid the risks and protect your reputation
Review your data security measures
Complex new technologies can change your cyber risk profile. Make sure your data security controls are up to date and adapted to protect against any risks posed by immersive technologies.
Involve customers in system design
Bring customers into the creative process to make sure your experiences meet their expectations and preferences. Where AI is used, be open and transparent about the benefits and safeguards to build trust.
Test and re-test
Test the technology rigorously to make sure it works as intended and delivers the high standards expected by luxury customers. Collect, analyze and act on customer feedback regularly post-launch.
Make your experiences inclusive and culturally aware
Immersive technology should be accompanied by robust ethical guidelines to prevent bias and ensure respectful, fair interactions with all customers.
Monitor social media in real time
Track everything that's being said about the collaboration on social and news media in real time. It could help you pick up on signs that something is going wrong before it turns into a crisis.
Have a plan if things go wrong
Even the best laid plans can't always prevent a negative publicity event. You should have a comprehensive crisis plan in place, covering how to respond to the situation, minimizing financial losses and rebuilding any unavoidable damage to your reputation.
A helping hand: WTW reputational risk
WTW has partnered with some of the global leaders in this field to develop a holistic solution for reputation risk that can prevent a crisis happening and help you recover if an incident does occur.
Prevention: With Polecat we've developed a risk monitoring tool powered by artificial intelligence (AI) that allows you to track live sentiment and get ahead of any brewing story before it hits the headlines. Algorithms synthesize data from online and social media channels into dashboards and risk alerts for relevant media.
Risk quantification: Our Reputational Risk Quantification Model gives you an evidence-based value for the potential reputational damage likely to follow incidents most relevant to your business. This is based on statistical analysis, events data and our experience of reputational risk. The model can also help you map any gaps in mitigation and design a targeted program of reputational risk protection.
Reputational risk benchmarking: Our Reputational Risk Benchmarking Portal provides a picture of your company's resilience against reputation risk. By completing a simple questionnaire, you'll get a report detailing your reputation risk maturity score, benchmarking your approach against some of the world's leading companies, and providing best practice recommendations on how to improve.
Risk transfer: Our reputational risk insurance solution can help cover for a loss of gross profit as a result of a significant adverse publicity event. Perils covered include damage by association with an affiliated business. Immediate interim payments are available to get through the crisis with support spread over up to 12 months to help you stay afloat in the aftermath.
Response: WTW offers access to experienced crisis communications experts who have managed crisis situations of all types around the world, from advice on media handling and strategy to leadership statements and speeches.
Rehabilitation: Our specialists will work with you over the longer term to develop campaigns and communications to help you turn the tide of public opinion back in your favor.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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