How to build value for customers with the Internet of Things has been saved
How to build value for customers with the Internet of Things
For businesses, the Internet of Things (IoT) is much more complex than connected devices. It’s a suite of technologies and associated processes that allow us to track and count, observe and identify, evaluate and act based on previously untrackable behavior. As IoT permeates people’s daily lives, potentially useful information can now be created every time someone adjusts a thermostat or turns an ignition key or pedals a home-gym exercise bike. These data have the potential to dramatically change the relationships between customers and companies. It offers customers the ability to make more informed decisions, and it offers companies the opportunity to differentiate themselves from competitors.
But sometimes customers, companies, or both can find themselves either failing to benefit from or potentially disadvantaged by various IoT deployments. By understanding the forces that could distort the benefits of these new technologies, we can shape how they are used in more mutually beneficial ways.
The first challenge in capitalizing on IoT data is the data sources themselves: your customers. Customers can feel violated if the information they share is used without their knowledge. This can happen if they feel they or their information has been exploited, if they feel they are not getting some value in return for sharing potentially very personal, private information, or if they didn’t feel fully aware of what exactly they’re sharing. Tip the balance too far, and many consumers may be sensitive to what they may perceive as manipulative uses of the data they generate—or to reminders that a faceless corporation controls those data—and may be leery of engaging with a brand because of it, spurring a backlash.
There is also the question of who owns the data—the customer or the company? The customer generates it through their behavior and may feel they own the data, but the company aggregates and analyzes the consumer’s use of their product, so they too may feel they own the data. As experts on customers, marketing executives have a responsibility to advocate for finding and maintaining an acceptable balance as connectivity becomes more and more the cost of doing business.
The key point is that companies should seek to create a non-financial value for consumers in order for them to feel comfortable giving up their information. This helps achieve a balance between getting the information the business needs while making sure their consumers feel like they are getting something in return.
The information value loop
Information value loop and the Internet of Things
In order for IoT to be successful and valued for both companies and consumers, it has to be included as part of a broader information value loop. The graphic above illustrates how its sustainability depends on both parties gaining sufficient value.
Rather than see this value loop as an obstacle, there are limitless opportunities to complete the information value loop with customers. IoT technology is creating opportunities for companies to create and capture this value in unexpected places and ways, including Internet-connected wearable fitness monitors, insurance policies, pill bottles that know when you’ve opened them, retail supply chains, and even tennis racquets. For example, a tennis player doesn’t just value the stiffness of a racquet’s frame, the string tension, and its weight and balance. She might also learn to value it as a source of information about her tennis stroke and how to improve it.
Value capture can also extend to companies in the form of ongoing customer interaction. Smart automobiles now drive off the showroom floor with remote diagnostics and system monitoring capabilities pre-installed. By linking maintenance programming to the dealership, customers are encouraged to return for tune-ups rather than go elsewhere, leading to continued purchases in the long term.
Balance the value of Internet of Things with customer needs
Businesses have some leeway in the give and take of the information value loop depending on the type of data, customer, and industry they are working with. Some areas, such as those included in smart home technologies, face a gridlock of actually aggregating customer data from multiple devices, using it, and applying value for both companies and customers. There are also technological constraints such as interoperability and mismatched technological standards. These complications, not to mention the high cost for adoption and integration, create a barrier for customers to see where the value is for them.
In other industries, like automotive and home insurance, customers have less of a say in how companies use their data. On the opposite side of the coin, some industries such as retail are extremely influenced and potentially restricted by their customers’ say. Marketers should help their companies seek a balance that creates business value while also giving customers, at the very least, a perception of choice and value.
The right balance depends on your industry
Striking that balance looks different, depending on the industry. Retailers have perhaps tapped into the IoT capabilities of consumer collection with the most enthusiasm—but they are perhaps the most inclined to do so, in an industry where customers have a lot of choice and maintain more power over data sharing. They’ve found balance in the information value loop by offering customers relevant and customized offers and the best available price. The retailer benefits through sales, increased customer satisfaction, gathering more customer data for future shopping encounters, and converting a browser into a buyer—all enabled by the data their customer provided.
On the other hand, for automotive insurance, customers do not have much of a choice in how their data are collected or used by insurance companies. IoT data are more accurate and personalized than the previous forms of data collection used to determine their premium, usually proxy indicators such as credit scores and demographic data, but absent insurers striking a balance in what information they collect and use, customers may potentially still feel violated or out of control of their data, leading to resistance of IoT data collection and hostility toward the company trying to collect it.
How to make data from the Internet of Things work for your company
Before creating and deploying a functional and successful IoT marketing strategy, it is wise for organizations to evaluate the following:
1. Analyze which types of information can benefit your company’s purposes the most, using the information value loop as a guide. Is it scale or scope? Frequency? Timeliness? Security? Or some combination?
2. Understand how to use the data to tease out what matters most to your customers, and determine how you can tailor your offerings accordingly to make the data exchange worth their while.
3. Take a hard look at who benefits most from each IoT-enabled transaction. Companies may have some flexibility based on their industry, but understand when a lopsided value-capture outcome tips too far and becomes unsustainable, and take steps to correct it.
4. Conduct an honest assessment of where IoT investments may not have an appreciable benefit—or may decrease potential value capture.
Read more about how to capitalize on IoT opportunities in the recently published Deloitte Insights collection: Internet of Things.