As indicated in the first article, the home security and safety segment of the consumer IoT industry is the most sophisticated in the smart home space, and one with a strong ecosystem and established service-based model.
While few services beyond security have yet emerged that command monthly payments, expectations for a “smarter” near future remain high. Some 60 percent of Americans think that for a home to be considered smart, it needs at least three categories of smart products – and most said buying their first smart home product made them more likely to buy another one. The time is right to assess various home management strategies that go beyond a single device and its related application. Here is a run-down of a few strategies:
To date, the retail-based strategy of combining smart home hub and compatible devices with a service plan has not fared especially well. The idea is to offer basic free and premium plans for a monthly fee. Internet-based retailers such as Amazon and Apple may have more success in using the sale of these devices to drive more product sales. One prerequisite is platforms that are flexible, interoperable, and stable. But whether offering premium plans or not, smart home brands should prepare to offer some level of guidance or customer support.
Smart home Analytics
Either as a standalone or as a feature available in premium smart home plans, this service provides actionable information to consumers about home and lifestyle based upon their usage of smart home products. Displayed as a dashboard that aggregates data from otherwise disparate devices, this service could deliver insights on energy usage, reminders about updates, analysis of bills, and tips on products and services. Big data analytics, such as that enabled by Zonoff Insights, can also benefit companies by improving their customer and product knowledge, helping to identify marketing and upsell opportunities and driving product development.
Like a business, a household has inventory to maintain: foods, toiletries, cleaning products, etc. Amazon has enabled its Prime consumers to replenish many of these items with the $4.99 Amazon Dash Button, a small branded device that links a consumer’s Amazon account with the product in question. Smart home brands may have an opportunity to build upon growing customer familiarity with and willingness to pay for tools that automate home inventory management. Integration of Amazon’s voice-controlled Echo device to the Prime customer shopping experience is another example of smart home expansion into the shopping arena.
Platforms that integrate with home services or home repair and warranty providers also generate referral fees. Activation could be automatic (triggered by events such as water detection) or could be homeowner directed. Zonoff’s partnership with HomeAdvisor, a service matching homeowners with service professionals, is an example of this kind of integration, which solves the consumer problem of disaggregated providers of home services with various levels of reliability, availability and specialization.
This tool would monitor energy consumption, even down to the appliance level. It could analyze data and recommend cost reductions, by changing behavior, automating certain on-site functions or recommending the replacement of inefficient appliances or devices. As smart meters proliferate (especially in the EU) and home energy generation grows via solar panels and other means, it could also facilitate “demand response” actions and the sale of excess electricity back into the grid. Monetization models include monthly service fees or taking a percentage of the energy savings.
As noted in the home security discussion, some companies provide professional installation, while others offer a DIY approach. This would be a one-time revenue opportunity for any smart home brand or existing team of in-the-field technicians that wants to support non-DIY customers and/or deploy new devices that traditional installers (e.g. HVAC techs) may not support. A robust application could enable consumers to select products and services and to schedule, change or cancel appointments and track status.
As a corollary to installation, this service would enable the setup, support and repair of products and services, possibly overlapping with telco/cable operator support for in-home (WiFi) networking. Companies such as GeekSquad, Geekatoo and Knowhow are currently fill this role. The business model is either a recurring monthly fee with all incidents covered or a per-incident model with a deductible charged for every incident. Such service plans would help provide “peace of mind” to consumers as smart home technology goes mainstream.
Smart home brands need consumers to buy and continue to use their products. They also need support for the ongoing expenses of running a smart home operation. Some of that financing could come from third parties, including companies in industries with a business interest in home-related concerns.
This strategy could overlap with a service-oriented model. As mentioned above, insurance policy incentives are helping to drive an anticipated nine percent CAGR in home security revenue, and big-data analytics could benefit consumers and manufacturers alike. Other sectors inclined to finance or subsidize the diffusion of smart home solutions are medical services, utilities, and government agencies. Their motivations include risk mitigation, cost reduction, and regulatory compliance or enforcement. Here are snapshots of three such industries:
Property insurance companies already offer discounts for policyholders who state they have deployed home security systems. Smart home systems that reduce the frequency or impact of damages from incidents, such as water pipe breaks, or accelerate the arrival of first responders in the event of a fire also win support. Giving insurers the capability to confirm such installations could boost partnerships. Health insurance companies are also looking to benefit from consumer IoT technologies. Much of their attention is focused on the wearable space, such as fitness trackers, but the potential for new applications, especially among the elderly, is growing.
Healthcare providers are focused on cost reduction and regulatory compliance. A hospital that reduces its readmission rate, for instance, can avoid sizable government penalties. A personal smart home kit that improved patient compliance with follow-up instructions could well be in their interest. The overlap of health monitoring and smart home technologies will drive additional collaboration, especially as the percentage of the elderly comfortable with computer and mobile technologies increases. Smart home systems that enable the elderly to delay live-in facility care could save $3,000 to $6,000 per month, a cost shared by individuals, insurers and the government.
Both individuals and governments have an interest in energy reduction. In between are the utility companies and energy providers. Power companies already encourage “demand response” behavior by consumers, which reduces the load during periods of peak use of the grid. It is in their interest to support smart home systems that further enable such reductions. One use case of particular interest going forward will be the recharging of electric cars. In markets with both stringent carbon-footprint policies and a high percentage of public housing, such as the UK, government agencies will be further interested in cost-effective ways to scale up energy efficiency.
Smart home brands have a monetization challenge. Even if they command huge premiums that far exceed the initial cost of goods sold, the nature of the business entails a raft of ongoing operational expenses, from interoperability and compatibility testing to upgrades to software licensing to cloud infrastructure and more. The remedy for most brands is to step outside the device box and think like a service provider. In particular, we recommend that you:
- Take home security and safety as a model. This reinvented industry now intersects with the consumer IoT-driven smart home. Join any relevant full-service ecosystems and try helping these companies build better solutions and applications.
- Devise new ways to serve the home. Assess existing home management opportunities and create new combinations that benefit consumers. Possible ventures include analytics, vetted home repair, IT-on-demand and more.
- Look for industry subsidies. Running a consumer IoT operation is not cheap. Businesses in allied industries may be willing to cut you a check or otherwise underwrite your offerings if you can help them deliver value to their stakeholders or generate other recurring benefits.