Playing to win requires a major investment

A decade ago, if you asked someone how many connected devices were in their home, they may have listed a small handful of items at the most. Today, that same person’s home is far more connected than they might realize.

Even the least connected home likely has several computers, tablets and smartphones, plus a gaming system and a smart TV. At the other extreme, a home could have as many as 50 connected devices —everything from health trackers to smart lightbulbs and robotic vacuums. There is an endless gamut of useful connected items like thermostats and video doorbells, and more novelty products like smart grills that tell you when your steak is done, or smart infant onesies that send data about your baby’s breathing, temperature, sleep and body position.

For all the “wow factor” each might produce, connected devices for the home cannot stand alone and expect to stay relevant. In this solution-rich era of the Internet of Things (IoT), product survival doesn’t depend solely on the usefulness of the product itself, or even the strength of its brand. Products must also be able to communicate seamlessly with management software, payment systems and various ancillary services, creating a seamlessly beneficial consumer experience.

See: The One Tech Device Consumers Can’t Live Without

Playing to win in the IoT space requires a major investment for brands. For those that get it right, the value lies in monetizing connected devices in two distinct ways that build brand loyalty:

1. Making the service that complements the product so invaluable that consumers can’t imagine living without it and will pay for the service through a subscription.

2. Becoming the conduit through which regularly replenished products — water filters, for example — are automatically purchased and fulfilled.

By increasing solution integration, brands can continuously add value for customers and increase monetization opportunities.

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Connection Overload

In the IoT, buying a product is simply the start of a brand-customer relationship. And people can only handle so many relationships with brands.

A home with a dozen connected devices requires interactions with at least as many different applications. You can talk to Amazon’s Alexa, use your iPhone to select a new hue for a Philips light bulb, or cancel this week’s Blue Apron order before it ships and sits outside your door while you spend a weekend in San Francisco.

All of these interactions involve payments and subscription management, each through a different account, with its own username and password, and a specific interface to learn and navigate. With all these touchpoints and complexity, it can quickly become overwhelming. When that inflection point is reached, certain services are no longer convenient and may be abandoned.

See: How Brick-And-Mortar Is Crucial In Selling The Smart Home

The challenge for brands is to find ways to aggregate these services and integrate solutions to keep customers satisfied. That means continuing to add value every month and through every interaction consumers have with the services that complement your product, allowing you to build brand loyalty and monetize your device.

Providing Seamless Communication

“Siloing” is another issue facing connected devices. Google is to some extent app agnostic, but Amazon has every incentive to keep consumers within their ecosystem. For example, Alexa knows you’re running low on light bulbs once you say, “Alexa, order light bulbs.” More often than not, the first recommended product is for an Amazon-brand replacement bulb.

It’s more than just how connected a device is, or how smart and easy it is to use, but also how interconnected the solution is with other related solutions. For example, consider kids watching Disney programming on their iPad during a road trip, and when you get home, they can pick up where they left off using a smart TV.

This seamless communication involves not just functionality, but payment systems, database management and coupling the products consumers want with the right services. In this new ecosystem, brands compete to own the customer relationship and provide the best value. The most successful brands will not only position offerings to function seamlessly with other solutions, but will monetize those functions in a way that adds value for consumers.

See: Meet The ‘Switzerland’ Of Smart Speakers

Monetizing Aggregation Tools

Tools that allow you to aggregate solutions into one spot exist. Amazon Echo, Google Home and Logitech Harmony can help, but they still don’t minimize the number of apps required to manage all of these services. For example, you’ll still need to program your Nest thermostat using the company’s app, even when you use Amazon Echo to turn the temperature up or down within your home.

These aggregation tools add value for customers through increased solution integration. But monetizing these tools may require aggregate manufacturers to partner with individual solutions providers. Negotiating with individual vendors may be cumbersome, but the convenience value to consumers and additional revenue opportunities will pay off in the end.

Companies have their work cut out for them. The IoT leaves traditional brand-consumer relationships in the dust, and replaces them with a digital relationship that is both challenging to implement and demanding in its scope. The companies that show ongoing value through subscriptions and build relationships with other solutions to create this seamless ecosystem will be the ones that survive and grow.

James Gagliardi is VP and chief product officer at Digital River, a global provider of commerce-as-a-service solutions.

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