A good business model for companies looking to capitalize on the smart home revolution should contain many, if not all, of the following elements:
1. Personalization is Still King
One thing that will remain constant in the future of smart home technologies is that companies must be prepared to create a unique user experience through engaging content and social media. Using data accumulated by a product, more opportunities exist for companies to craft messaging, plus deliver product and service information that is specific to the user’s tastes, past purchasing habits and product usage.
Companies can provide access to social network-powered communities that generate positive experience feedback and share helpful tips and product recommendations. According to the Jabil survey, 50 percent of smart home and building solution providers expect to create new solutions based on data collected from their connected devices.
2. Programmatic Commerce Generates Passive Revenue
Even though smart home technology is in its infancy, one thing has become clear: consumers are more than willing to delegate routine and repeated purchases of product accessories to their machines. People lead busy lives and letting a dishwasher order more soap or a coffee maker order more beans saves time.
More impressively, the smart appliance can even complete the transaction without any human input by simply accessing account information. Although these types of behaviors will need some time to be fully adopted due to security concerns or pure discomfort, they can significantly add to the long list of conveniences offered by the smart home. Thirty-seven percent of participants from the Jabil survey expect to enable this business model with connected home and building solutions.
3. Sell an Experience and Continual Value, Not Just One-Off Products
Products are being commoditized daily. Over the past decade, the “X-as-a-Service” model or subscription model has changed the way people buy everything from the music they listen to, the movies and sporting events they watch at home and even the apps they use on mobile devices.
It now appears consumers are willing to apply that same model when it comes to making smart home purchases. Rather than simply making a purchase and owning a device until it becomes obsolete or breaks down, they can opt to sign a monthly service agreement that provides for product use and upgrades as smart technology continues to evolve.
This business model provides consumers with the connectivity and technology they are growing to expect and offers services to make family life more secure and comfortable, while generating a predictable, monthly revenue stream for businesses. This model can also offer preventative maintenance through proactive monitoring, which 44% of survey respondents expect to leverage.
4. Freemium is a Business Model
In addition to the subscription business model, highly disruptive companies are transforming their product management approach, and finely parsing solutions such that the base offering might be free, and a cross-sell/up-sell motion with new offers each month are constantly delivered to the user. The home monitoring base station may be “free,” but services such as burglar detection, carbon monoxide detection, smoke detection, etc. can be added as new offers.
Net/net, product managers should shift from long, drawn out BIG products with lots of features, to a lighter “base” offering, parsing out features into “options” that can be up-sold later. Nearly one in three companies are looking to enable this business model through connected solutions, according to the Jabil survey.
5. Offer Savings and Safety
According to Simmons Research, the most sought-after smart appliances by consumers provide increased energy efficiency and greater home security. Today’s consumers want thermostats that not only regulate temperature in the home, but can also make energy purchases on their own when prices are lowest. They want security systems that can be monitored remotely and offer connected motion detectors, surveillance cameras, automated door locks and other security system components that create a safer home. You can’t put a price on peace of mind.
6. Opportunities in Interconnectivity
With any new technology, the growing pains of development can present obstacles, which savvy business people realize are opportunities. This is especially true around interconnectivity. Developing products that can drive technology to closer interoperability between appliances, through advances in hub devices or those that further the development of smart home homeowner recognition (voice, iris or face) can help businesses stand apart from their competitors.
Another issue that will probably offer unique opportunities is transaction integration where companies can create innovative payment experiences, particularly when purchases are initiated by multiple smart appliances and all of them can be managed in one place.