CE Strategies: Cross Platform Functions & Brand Loyalty
Innovation, valuable use cases, and brand loyalty will remain core drivers for new products.
Broadband and connected devices continue to create new opportunities for various industries developing products and services for the consumer. According to Parks Associates research, 26% of U.S. broadband households own a smart home product, and purchase intentions remain high for consumers.
As the consumer electronics (CE) market has matured, CE manufacturers have focused on new product categories and ecosystem strategies to compensate for stagnation in a mature market. CE device manufacturers continue to seek ways to move beyond razor-thin margins on mature product categories.
These manufacturers have seen desktop adoption decline from a peak of 91% to just 61% of broadband households, while annual purchases of flat-panel TVs have fallen from a high of 35% in 2011 to 26% in 2016. With these declines and the plateauing of the smartphone and tablet markets, CE makers must look elsewhere for growth opportunities.
A key strategy for CE manufacturers is to build product ecosystems that have cross-platform functions as well as cross-marketing opportunities. The personal assistant device market and smart watch and wearables markets are big opportunities for the CE industry. Innovation, valuable use cases, and brand loyalty will remain core drivers for new products.
Personal Assistant Device Market
The personal assistant device market is still in its early stages, but voice control is vying to become the primary user interface for the smart home and connected lifestyle. Almost 40% of U.S. smartphone owners use voice recognition software, a figure that increases to 46% of millennial smartphone owners. Siri and Google Now are seeing increased usage for queries and contextual information push.
Voice recognition technologies are improving their accuracy and will eventually be able to interpret voice inflection and emotion. For instance, IBM’s Watson technology can understand natural language questions and search for information; Watson also has the potential to learn over time. Google Now and Apple’s Siri both use natural language to process information requests on mobile devices. Natural language processing is becoming widely available, and voice recognition accuracy is increasing.
Overall, consumer satisfaction with the experience has been positive, leading the push of voice recognition to platforms other than the smartphone.
Amazon Echo, a smart speaker with a voice-controlled personal assistant, has shaken up the connected entertainment and smart home industries. The device streams music and uses natural language to handle a number of pre-programmed retrieval tasks (e.g., alarms, lists, weather, music, traffic) as well as to answer questions based upon Wikipedia. Users can even shop for insurance using their voice.
Amazon is aggressively building a large number of partners for its Echo device ecosystem and Alexa voice-control solution. Its partnerships with multiroom audio manufacturers such as Sonos create a home audio solution with voice control in every room.
Google also has a voice-activated speaker, Google Home, which is powered by Google Assistant. Google Assistant integrates Google search with personal user information to answer users’ questions and serve contextually and personally relevant information.
Apple is expected to offer a similar solution powered by Siri.
Voice control has emerged as a highly desirable interface, and developers in the smart home, entertainment, and connected car ecosystems are pursuing partnerships to add voice control to their solutions.
Alarm.com and Vivint have announced integration with Amazon Echo to provide users with a voice-control experience. Some production home builders now offer smart home systems to their customers—and some of these systems include (or will soon include) audio solutions. For example, Lennar now offers the Nexia Home Intelligence line to its new homeowners. Like others in the smart home space, Nexia has added voice-control capabilities through its mobile app.
Right now, traditional means of control—like the remote control for entertainment devices or key pads for security systems and thermostats—dominate the connected home, with smartphones preferred for remote device interaction; however, more than one billion voice-enabled devices will be sold by 2021.
Wearables and Smart Watches
Wearables and smart watches are expanding as healthcare tools and will continue to be integrated with other IoT applications. The market for smart watches, and for wearables overall, is in the early stages. Only 11% of U.S. broadband households have a smart watch, but there are significant growth opportunities for both manufacturers and app developers. Smart watch ownership jumped when Apple entered this market, and the company currently has approximately 40% of the market.
Connected wearables help implement the new focus from healthcare reforms, which encourage more health monitoring and support outside of the doctor’s office. Consumers primarily use smart watches for health and wellness tracking (58%) and receiving notifications (57%). The next most frequent uses are replying to notifications (43%), checking the weather (39%), and making and receiving phone calls through their watch (37%).
Early consumer data comparing usage of smart watches vs. fitness trackers shows the former currently have an advantage regarding usage with sports and outdoor activities. Among exclusive smart watch owners, 62% use the device while running and 30% for biking. In contrast, 50% of exclusive fitness-tracker owners use the device for running and 21% use it for biking.
Apple has taken notice of these use cases and looks to capitalize on its users’ needs with the Apple Watch Series 2, which has GPS and water-resistant features to enhance these types of activities.
Wearables in general have generated interest in the IoT due to the easy access and immediacy of the platform, with applications in areas such as the smart home, insurance, and mobile wallets. Plus, wearables of all form factors collect some of the most personal and contextually relevant data available.
Going forward, smart watch app developers should focus on notifications and fitness tracking as primary app functions, with an eye to develop solutions in these emerging areas such as device control, insurance data, and mobile payments as adoption expands. App developers will see emerging business models based on utilizing smart watch data to provide insurers with health and location information as auto manufacturers do with vehicles.
Creating an effective, brand-oriented ecosystem is difficult to achieve. Apple is a clear leader in brand loyalty—consumers are more likely to own multiple CE products from Apple than from any other CE brand. This multiplatform ownership is concentrated in the company’s mobile products, the iPhone and iPad, but the company is also seeing a bump in its computer adoption, which recently topped one-fourth of U.S. broadband households after lingering at 10% for many years.
Samsung, Sony, Amazon, and others have sought to develop device ecosystems similar to those created by Apple, though with limited success. Samsung has achieved some success in developing brand affinity within its mobile devices, but that affinity has not extended to televisions or other devices. Amazon has achieved some synergy between its tablet and Fire TV customers.
This drive to establish or be part of a robust product ecosystem is a new stage in CE business strategies, a necessary step to avoid the risks and confines of a single product category, and in this early phase, many new players and product categories are emerging to challenge the traditional players, which have the advantages of deep pockets and established distribution channels. Online giants like Amazon and Google have the scale and technology capabilities to take risks in new areas of innovation, and in some cases, these innovations are transforming whole sectors within the connected home. All players in the CE and smart home markets will continue to feel the pressure to innovate in order to deliver the next seamless, cross-platform experience to consumers.