5 minute read 22 Apr 2024

By employing the right strategy and addressing complexities, companies can benefit from the transformative potential of digital avatars.

Metaverse cyber world technology

How businesses can embrace a phygital future with digital avatars

By Andrew Tan

Partner, Consulting, Ernst & Young Advisory Pte. Ltd.

Strong advocate of robust digital service delivery backed by behavior-driven business solutions. Entrepreneurial and pragmatic. Proud father.

5 minute read 22 Apr 2024

By employing the right strategy and addressing complexities, companies can benefit from the transformative potential of digital avatars.

In brief
  • Growing demand for personalized, interactive digital experiences and better customer support is driving the adoption of digital avatars in many industries.
  • While there are challenges, successful implementation can lead to many benefits for the business.
  • These include lower operational costs, more customer engagement, streamlined workflows and better overall efficiency, among others. 

In the rapidly evolving digital landscape, businesses are constantly seeking innovative ways to engage with their customers and streamline operations. One such innovation is the metaverse — the use of digital avatars. By 2030, the global metaverse market is expected to be worth US$936.6 billion, a jump from US$65.5 billion in 2022.1 Emerging as a prominent trend, digital avatars are making their mark across a broad range of B2B and B2C industries from education, training and entertainment to gaming, retail and even regulated businesses, such as those in health care and finance. The driving force behind this trend is the growing demand for personalized, interactive digital experiences combined with efficient and effective customer support and engagement.

  • What are digital avatars?

    Digital avatars are virtual representations of individuals or entities, crafted using a combination of technologies. They operate within an ecosystem that covers numerous elements and components. These components contribute to their creation, development, interaction and utilization. Key components include computer graphics, augmented reality (AR) and virtual reality (VR) technologies, content generated by artificial intelligence, animation and motion capture technologies, and privacy and security solutions. Additionally, user feedback and experience play a substantial role. Digital avatars can interact with physical objects in the real world, and their integrity is safeguarded by cybersecurity measures.

The recent EY Digital avatars point-of-view document delves into the world of digital avatars with the aim of understanding their potential benefits to businesses and examines how companies can successfully implement them. It also shares how users can connect and communicate with audiences and make them feel valued.

The document notes that the adoption of digital avatars is a strategic imperative, capable of not only elevating a brand but also engaging audiences on a deeper level to stay ahead of the competition. These dynamic virtual personalities pave the way for the future of user experience. They can enhance the interface with customers, providing an immersive experience, facilitating a phygital (physical and digital) purchase journey and extending it to the multiverse. These avatars can also act as agents of change in formulating back-end strategies that bridge geographical and economic gaps, expanding a brand’s reach and enabling intelligent information gathering about consumer preferences.

Digital avatars point-of-view document

This EY document outlines the adaptability and functionality of brand-representative digital avatars across a variety of industries and interaction types. It offers both the context and guidance for the user experience with digital avatars.

Request a copy

Benefits of digital avatars for businesses

Digital avatars can provide businesses with a myriad of benefits. They can act as virtual assistants that offer instant and automated customer support, answer frequently asked questions and resolve common issues efficiently. By automating certain customer interactions and support processes, digital avatars can reduce operational costs, streamline workflows and improve overall efficiency.

In a B2B context, digital avatars can be used for interactive training and onboarding sessions, product demonstrations, data analytics and insights, and collaboration and communication. Other areas of application include customization and personalization, supply chains and logistics, security and authentication, data privacy and compliance, feedback and surveys, and ROI measurement.

Digital avatars can also provide a unique and interactive experience, increasing customer engagement and fostering a stronger connection between the brand and its audience. By customizing interactions and responses, digital avatars can deliver a personalized experience, making customers feel valued and understood.

Digital avatars can benefit businesses in many ways, such as fostering a stronger connection between the brand and its audience, reducing operational costs, streamlining workflows and improving overall efficiency.

Challenges of adopting digital avatars for business 

Digital avatar adoption introduces numerous complexities for businesses. Financial implications relating to the design, development and ongoing maintenance of these virtual identities are substantial. Resistance from employees, the management and customers unaccustomed to this innovation may also impede adoption. Privacy issues are magnified as these avatars often utilize customer information, mandating vigorous compliance with data protection regulations. The technical details of integrating advanced avatars demand professional knowledge and seamless integration with current systems. Moreover, stringent industry-specific regulations, especially within industries like health care and finance, increase the complexity of the adoption process and often require professional guidance.

Embarking on the digital avatar journey 

To effectively integrate digital avatars, companies should employ a tailored strategic approach in line with their specific aspirations and requirements. Such meticulous planning can help rectify potential barriers while increasing the potential opportunities created by this cutting-edge technology. Here are some fundamental steps for companies to facilitate their transition.

1.    Need identification 

Firstly, understand why your company needs a digital avatar. Usage can range from customer support and product demonstrations to data analytics and any other organizational necessity.

2.    Technology selection 

Based on your requirements, choose the most suitable technologies to design and implement your digital avatar. Options could include 3-D modeling, animation software and AR or VR technologies, among others.

3.    Data privacy and compliance assurance

Always prioritize data privacy and see to it that your digital avatar adheres to industry-specific regulations to help avoid legal repercussions.

4.    ROI estimation 

Establish KPIs and metrics to gauge the ROI achieved through your digital avatar deployment.

5.    Feedback collection 

Gather feedback and survey results to gain insights into customer satisfaction levels and requirements. Utilize such information to refine your digital avatar strategy continuously so that its effectiveness remains optimal.

Digital avatars mark a significant progression in the digital landscape, providing businesses with a distinctive and innovative channel for customer engagement and operational streamlining. The continued evolution of this technology is expected to hold immense potential for businesses that can successfully integrate it into their operations.


Digital avatars are transforming how many industries interact with audiences and manage operations. While companies need to address various challenges, effective strategic implementation can yield many benefits, such as lower operational costs, greater overall efficiency and more customer engagement. 

About this article

By Andrew Tan

Partner, Consulting, Ernst & Young Advisory Pte. Ltd.

Strong advocate of robust digital service delivery backed by behavior-driven business solutions. Entrepreneurial and pragmatic. Proud father.