Unlocking the IoT Potential in Smart Appliances
It’s important to understand what consumers want and how to create value using the Internet of Things (IoT).
Smart home appliances will become increasingly popular with consumers who already enjoy a connected lifestyle. Benefits such as increased comfort, convenience, energy efficiency, personalization and security will all drive purchasing decisions. Ease-of-use, affordability, and advances in enabling technologies will also boost adoption rates. According to Transparency Market Research, the global smart home market could top $97 billion by 2025—a significant increase from revenues of $30 billion in 2016.
For appliance OEMs hoping to capitalize on this trend, it’s important to understand what consumers want and how to create value using the Internet of Things (IoT). Many consumers already own smart home technologies including smart appliances. But notably, adoption of these appliances is trailing other smart home fixtures that demonstrate a more practical value proposition.
Recent findings from Jabil’s 2018 Connected Home and Technology Trends Survey substantiated this claim. The survey asked over 200 smart home solutions providers a variety of questions about where they see the opportunities in this market. Close to half (44%) listed smart appliances – and specifically intelligent fridges, sprinklers and vacuums – as major opportunities. But other smart home technologies appeared higher on the list of most respondents, including connected locks, security cameras and building access (61%), followed by a tie between energy efficiency and smart building solutions, which each registered 54% as top market opportunities.
Consumer Demand and Digital Connectivity
IoT-enabled smart home appliances appeal to busy consumers who want to spend less time doing chores, perform them with less guesswork or just occupy a home that actively adapts to their personal rhythms and preferences. Consider fridges that automatically reorder more milk before the bottle runs out, doors that unlock only for the people authorized to go through them or rooms that automatically adjust lighting and temperature to suit the individuals present.
Busy lifestyles, an emphasis on efficiency and a preference for convenience aren’t the only factors driving smart appliance adoption rates, however. Consumers have already embraced connectivity. According to Simmons Research, almost half of Internet-wired households already own a smart home device. Similarly, in a PricewaterhouseCoopers survey, about one in four U.S. internet users reported owning a connected home solution. Another 15% don’t own a smart home product, but plan to buy one in the next year. Nearly 30% are willing to consider a future purchase.
Smart appliances aren’t new, but many brands have struggled to convey a meaningful value proposition. Sending a refrigerator’s settings to a smartphone is informative, but home owners usually don’t do much with this data. That’s why it’s important for appliance design engineers to develop products that deliver value in three key areas: ongoing customer relationships, revenue streams, and strategic partnerships.
Customer Relationships and Revenue Streams
OEMs need to build ongoing customer relationships because appliances are no longer a once-a-decade purchase. Thanks to smartphones and other types of consumer electronics, buyers expect periodic upgrades providing cutting-edge features. Just because consumers wait a few years to buy a new washer or dryer doesn’t mean they’re satisfied with their current appliances. Today, keeping customers happy means delivering value throughout a product’s lifecycle.
Determining what consumers want is data-driven. Accordingly, smart appliances that enhance the customer experience can provide advice about how to use the product or supply access to related goods and services. Establishing an ongoing customer relationship helps to build the brand, but this relationship won’t work without trust. The good news, according to a Columbia Business School study, is that 75% of respondents are more willing to share personal data with a trusted brand.
If used properly, the data that smart appliance owners share can be used to develop new revenue streams. That’s an opportunity for advertisers to reach consumers through their devices with personalized content that meets their preferences. As the Columbia Business School study also indicates, 80% of respondents are willing to share non-required data for reward points or product recommendations.
Jabil’s 2018 Connected Home and Building Technology Trends Survey further showed 54% of manufacturing decision makers report that they plan to use data to create solutions such as targeted advertising. For example, a smart refrigerator that identifies a user’s favorite brand of ice cream could provide coupons or discounts on future purchases. These aren’t the only potential revenue streams either.
Appliance OEMs that adopt a freemium model could further offer customers free services with the option to pay to upgrade to a premium service. Another potential revenue stream, everything-as-a-service, makes smart appliances an essential service provider instead. Predictive analysis, a third potential revenue stream, enables OEMs to analyze data about appliance performance and take intelligent actions, such as preventative maintenance.
Appliance OEMs and Strategic Partnerships
Appliance OEMs who establish strategic partnerships can also build business value. For example, a smart refrigerator manufacturer could partner with a local supermarket that delivers groceries. Instead of visually checking a refrigerator’s contents and then making a shopping list, a consumer could allow a smart refrigerator to track quantities or expiration dates and automatically re-order items. This model provides benefits not only to the appliance OEM and the smart appliance owner, but also to the grocery supplier.
Strategic partnerships can also help OEMs to fill gaps in the capabilities or features of their smart appliances. According to Jabil’s survey, 63% of respondents said that data management partners are important to their connected home and building solution strategies. A full 60% are seeking manufacturers with expertise in connected devices. Appliance OEMs are also looking to strategic partners for help with the cloud (54%), telecommunications (44%) and payment processing platforms (29%). Only 1% of companies surveyed said that partners won’t be a factor in their strategies.
Appliance OEMs must also overcome technical challenges to leverage IoT-enabled business opportunities. These include ensuring security and data protection, and lowering the cost of smart appliances, and the use of legacy components.
Consumers often cite data security as a leading cause of concern with connected technologies, which means appliance manufacturers must be prepared to implement strong data security practices and enhanced security features in their smart products.
But this also represents an opportunity. According to a PwC survey, 75% of U.S. internet users said that they’d be willing to pay more for extra security. That’s important because according to Jabil’s survey, 99% of manufacturing decision makers report that their connected solutions will collect data – and a full 100% of the respondents said that they plan to use this information. Nearly 35% of decision makers plan to connect to retailer databases for cross-selling and cross-branding. Consumers will take note of how that data is gathered, shared and managed.
The high cost of smart appliances is another potential hurdle for OEMs. Fortunately, hardware prices have fallen, and designers can now package hardware within appliances more readily. But OEMs can also counter concerns over costs by highlighting how smart appliances can reduce energy costs, for example. It cannot be understated how important it is for brands to understand the full potential value that their smart appliances offer to consumers, and to communicate that value. A device isn’t valuable just because it’s connected.
Each smart appliance has a product lifecycle, and so do all of the components used in these devices. As components become obsolete, manufacturers must have a steady supply of replacements or upgrades. Otherwise, a brand’s reputation can suffer over the long term. OEMs would be wise to make product redesign an ongoing part of their strategy to stay ahead of the curve in a constantly evolving industry.