The market of the Internet of Things (IoT) is bursting with potential. Annual revenue in this space could exceed $470 billion by 2020, according to the research firm Bain. Meanwhile, investments in the industrial side of IoT is expected to top $60 trillion in the next 15 years.
Such impressive growth should come as no surprise given how much coverage connected devices are getting. From wifi-enabled kitchen appliances to smart scarves, there seems to be no limit on the imaginative products coming from this space.
Hoping to secure first-mover advantage, many consumer goods companies are either exploring entry or diving into this market. In a feverish attempt not to be left behind, however, many consumer goods companies are creating connected products without fully understanding the views and attitudes of their consumers.
In fact, when I talk to business leaders in this space, many of them admit that they haven’t connected the dots between their product strategy and consumer preferences. Sinking significant resources into connected programs comes with big risks, especially without a clear view of the pain points these devices will address.
Companies serious about thriving in IoT need to take a longer-term view. The most innovative companies know that addressing real problems wins the day. The goal isn’t to build something merely novel.
Companies can’t afford to launch connected programs without a plan and tools to understand their consumers. There are at least three ways consumer feedback can help companies innovate and dominate the IoT market.
1. Launch useful and truly smart products
Despite the buzz around IoT, most consumers aren’t convinced they need connected devices. The 2016 Accenture Digital Consumer Survey found that adoption of IoT devices is much slower than consumer goods companies are hoping for. Purchase intent for smart thermostats, for instance, stagnated significantly from 2015 to 2016.
Joel Hruska, a contributor to the tech website Extreme Tech, says part of the problem is that companies are launching products no one really needs. “The biggest problem with the Internet of Things,” Hruska writes, “is that no one has figured out how to build products that actually do anything useful enough to justify their price tags or enormous security flaws.”
That’s a harsh criticism, but recent studies suggest Hruska is onto something. For example, a study conducted in Scripps Under One Roof, an insight community used by the media company Scripps Networks, shows that consumers want useful smart-home devices. Seventy-five percent of them want smart products that will help keep their families safe and comfortable. Consumers are particularly interested in smart technology for their kitchen, according to Scripps.
The possibilities are endless in IoT because virtually anything can be connected to the internet with the right technology. Companies need to make tough decisions around where and how much to invest by answering the question: Which connected devices provide real value to consumers, and which ones are merely nice-to-haves? Instead of guessing or relying on their gut, product teams need real-time customer intelligence to validate and inspire the direction of innovation.
2. Improve current products
Some early adopters have started to abandon their smart-home devices. Accenture’s study, for instance, found that 18 percent of IoT users have stopped using their devices due to concerns over data security. Likewise, a Gartner study found that almost one-third of wearable-technology users have already abandoned their fitness trackers and smartphones. Angela McIntyre, research director at Gartner, says the high abandonment rate is because people don’t find their gadgets useful enough. Companies, according to McIntyre, still need to define the unique value proposition of IoT devices.
The high abandonment rate is troubling because the IoT space is still in its infancy. Companies can’t afford to lose the customers they already have and the ground they’ve covered. Building loyalty and clearly defining real value at this stage are critical to the longevity of many IoT products.
It’s important to detect potential issues and offer solutions before consumers even consider abandoning their connected product. As product developers test concepts and assess products, they need continuous customer feedback. Current users can provide feedback on what they like and dislike about the product and what’s missing. Because current IoT consumers are early adopters in this space, they can also drive positive word of mouth if brands exceed their expectations.
3. Drive marketing and sales messaging
According to Accenture, 62 percent of consumers find IoT devices too expensive. This perception is consistent across all age groups and countries, suggesting that consumer goods companies aren’t doing a great job of communicating latent value to consumers.
A strategic approach to marketing can help change perception around connected devices, but only if companies understand their customers. More than anything, brands need a firm grasp of what drives perceptions of value. Lowering the price is not necessarily the answer. Value, after all, is defined as the tradeoff between the benefits a customer perceives and the price he or she thinks it’s worth. To boost value, companies need to truly identify ways smart devices can make consumers’ lives easier and more convenient.
A strategic approach to marketing can help change perception around connected devices, but only if companies understand their customers.
Customer insight can help companies craft effective messaging and sales strategies. Tapping into their community of customers, for instance, companies can get ideas on promotion tactics. Asking customers for feedback on two marketing campaign ideas can be an effective way to A/B test go-to-market messaging.
Feedback from customers can also help boost marketing ROI by informing which channels companies should use to reach their target market. A recent study from the Interactive Advertising Bureau and the research firm Maru/Matchbox suggests that consumers learn about connected devices through TV commercials, word of mouth and online articles. But as consumer behavior changes ever more rapidly, companies need to use timely customer intelligence as they decide on which tactics and channels to pursue.
Developing a long-term relationship with IoT consumers
IoT is in the midst of high growth, but unless companies deliver what consumers want and need, the momentum of this space will be stunted. As the market matures and becomes more competitive, it’s important to develop a close relationship with IoT consumers. Ultimately, success in the IoT space will not necessarily be determined by having the best technology, but instead by effectively marrying innovative technology with ongoing and deep consumer understanding.