IoT in Home Appliances: How to Unlock its True Potential
An advertisement pops up on the refrigerator’s touchscreen door, informing you that you can buy your favorite ice cream for 20 percent off this week. As you sip coffee, your phone notifies you that the laundry is done. Finally, vacuuming is a chore of the past as the vacuum cleaner begins working as soon as you leave, five days a week.
Connected devices can manage almost every aspect of the home. IoT in home appliances, specifically, could translate into higher levels of customer satisfaction and more business for your company. The smart home is no longer a rose-colored daydream, television cartoon or whimsical speculation. It’s the future, and it’s happening now.
The market for smart appliances is primed. Almost half of internet-wired households have some sort of smart home device, with thermostats, smart home systems and smart appliances topping the list and the global smart home market is predicted to be worth $97.61 billion by 2025. Roughly one in four U.S. internet users already own a connected home solution; 15 percent don’t currently own a smart home product but plan to in the next year and almost 30 percent are willing to consider it in the future, according to a PwC survey.
Despite tremendous technological advances, there is still plenty of progress that must to be made to create a seamless Jetsonian-style home, and well-positioned competitors have the chance to make a significant impact on the smart appliance market.
New Business Opportunities with IoT in Home Appliances
Smart appliances are nothing new. Brands have had the ability to connect these devices for years but have struggled with finding a meaningful value proposition. They can make a washing machine talk to a dishwasher, but so what? Where's the ROI?
Here are some ways developing connected appliances can prove value for brands.
1. Create Ongoing Relationships with Customers
Appliances used to be a once-in-a-decade purchase, but times are changing. The consumer mindset is shifting to expect regular product upgrades as companies consistently produce new, innovative models with cutting-edge features. While the average customer will wait several years to make another appliance purchase, that doesn’t mean they will be content with their purchase. They’ve been conditioned by their consumer electronics to expect new capabilities from devices on an ongoing basis, which means OEMs need to determine ways to increase the long-term value of the purchase.
This perspective marks a transformation in the business-customer relationship. The end of the interactions is no longer the sale. OEMs have an opportunity to become more personalized, data-driven and continuous service providers.
Smart appliances can help develop deeper relationships by contributing to the customer experience in different ways, such as providing tips on how to use the product, gleaning feedback on the product’s quality and supplying access to related goods and services.
According to a study by the Colombia Business School, 75 percent of people are more willing to share various types of personal data with a brand they trust and 80 percent will share non-required data for reward points and product recommendations. This level of trust in personal information presents businesses with an opportunity to display targeted messaging to help customer loyalty, but there is a lot at stake. The misuse of information can lead to the loss of a brand's most cherished resource: trust.
Subscribe to the Jabil Blog
Sign up for weekly updates on the latest trends, research and insight in tech, IoT and the supply chain.
2. Explore New Revenue Streams
This new, continuous relationship also creates new marketing opportunities. According to an IAB report, 65 percent of people with IoT devices have indicated that they are fine with receiving advertisements on their devices, and 55 percent will even pay attention if they can get a coupon in return. Furthermore, according to Jabil’s Smart Home Technology Trends survey, 50 percent of manufacturing decision-makers have indicated that they hope to use data to create new solutions like targeted advertising.
What opportunities for new business models does your company expect connected home solutions to enable? Choose all that apply.
Currently, advertising to smart appliances is more about ideas rather than applications. Soon, companies will start delivering advertising and personalized content through the products we buy. The promise of advertising on appliances is not necessarily just about coupons and commercials. It is about brands interacting with customers after the purchase.
Thinking back to our original example, if your fridge knows your favorite ice cream brand, it has an opportunity to serve product recommendations or coupons as encouragement for future purchases. By anticipating consumer needs and consistently producing value, savvy marketers can secure a customer’s loyalty for life.
Other potential revenue streams include:
- Freemium model and service subscription, where businesses give customers access to a free version of a service with the option of paying a periodic fee to upgrade to a premium account
- Everything-as-a-Service, which in this context refers to the digitization of home appliances, thereby remodeling them from an analog product to an essential services provider
- Predictive analysis to help you organize and understand incoming data, which in turn, allows you to take intelligent actions, such as preventative maintenance
3. Establish Strategic Partnerships
Partnering is a critical strategic skill in an ever-evolving and -expanding industry. It can fill in capability and feature gaps, align solutions with customer-preferred platforms and ecosystems and reduce time-to-market by utilizing another company’s resources and relationships.
It also creates an opportunity to work with the community. For example, a company that sells smart refrigerators can partner with the local grocery store for automatic food delivery; both entities get business and the customer has a more positive experience.
Sixty-three percent of participants in Jabil’s previous smart home survey had agreed that data management partners would be most important to their connected home and building solution strategy. Since connected devices open doors to a world of data, companies need the expertise to make sense of all of it and use it for strategic insights.
What types of technology or business partners are important to your connected home and building solution strategy? Choose all that apply.
Technical Development Challenges of IoT in Home Appliances
Smart appliances present brands with various opportunities, but none of them can reach their full potential without overcoming challenges first. Here are four elements companies must consider as they build their connected solutions and expand IoT in home appliances.
1. Lack of Security and Data Protection
Consumers often cite security issues as a leading cause for concern in connected solution development. Unfortunately, as numerous cyber-attacks have proven, this fear is far from unfounded. Seventy-five percent of U.S. internet users indicated that they would be willing to pay more for extra security, making it the top potential add-on. Companies need to offer enhanced security features if they hope to persuade customers to trust smart appliances with some of their most valuable possessions – home, data and family. Strong data security practices are essential to success.
When a 2017 focus group was asked what they would want in their smart home, the top answer was data encryption. Privacy concerns may be the most difficult to assuage as people try to get comfortable with the increased accessibility of data.
According to Jabil’s 2018 survey, 99% of manufacturing decision-makers say that their connected solutions will collect data, and all of them said that they plan to use it. However, media focus on data privacy had made almost 70% of businesses rethink their plans. The question of where to draw the line in data privacy and how to use the information will be an important one moving forward.
How does your company plan to use data generated by connected home and building solutions?
As the number of smart devices in a household increases, interoperability becomes less of a perk and more of a necessity. It also creates an opportunity to develop a category of solutions to manage a wide array of smart devices, encourage user adoption, supply full data sets and simplify payment for up- and cross-selling opportunities.
Like the human central nervous system, each device will need a common platform (or a “brain”) for consumers to control their devices. Right now, according to the Jabil survey, manufacturing decision makers are fairly split on two approaches:
- a controlled ecosystem, where a single service provider delivers all needed functionality and thus has more control over the customer experience
- an interoperable ecosystem, which would follow generally accepted industry standards to allow for a wider range of devices and vendors
Although there are advantages and drawbacks to both approaches, it is unlikely that a customer will stick with one brand for every appliance or device that they own. OEMs that want to stay competitive will have to ensure device connectivity within a broad ecosystem, either by developing interoperability internally or obtaining it through partnerships or acquisition.
Voice-activated assistants currently serve as that central overseer. Already, they enable customers to control their lights, entertainment settings and even appliances literally without lifting a finger, and Amazon and Google are working to expand the conversational user interface to include personalized responses with contextual comprehension. For example, you could ask your voice assistant if there’s any traffic on the way to work, and because she recognizes your voice and knows your office address, she can alert you to an accident on your normal route and suggest a different one.
3. High Cost
One of the biggest inhibitors to the purchase of a connected home product is price. The good news is that this is becoming less of a problem; prices have already decreased because of lower hardware prices and the ability to package the hardware within the appliance more easily. The price of MEMS (micro-electromechanical systems) sensors, which are used in smartphones, has also dropped 30 to 70 percent in the last five years.
Prices for materials and manufacturing may be decreasing, which could provide some relief, but the conversation doesn’t end with cost. OEMs need to educate consumers on how smart appliances can save money, like lowering energy or utility bills. Furthermore, brands must think about the true value their connected device brings to the customer—just because a product is connected, it doesn’t mean it’s valuable.
4. Legacy Components
The ongoing electronic component shortages are affecting the production of IoT devices. While each smart appliance may have its own product lifecycle, the same concept applies to the components used in these devices. As various components become obsolete, they cripple a brand’s ability to keep up with market expectations and could potentially hurt revenue and profits in the long-term. OEMs must devise a solution to make product redesign an ongoing part of their strategy or risk lagging behind the curve in a constantly evolving industry.
There is plenty of opportunity in IoT in home appliances and it is only a matter of time before brands start taking full advantage of it. The challenges, in the meantime, will be solved as costs come down and standards are further defined.
Download the 2020 Smart Home Tech Trends Survey Report
Insights on technology adoption, industry opportunities and biggest challenges from over 200 IoT decision-makers at smart home and appliance OEMs.