How Smart Appliances Can Unlock Their IoT Potential

Smart appliances are no longer science fiction luxury items. But manufacturers still need to design better, more adaptive and iterative products that unlock the full IoT potential of a "smart appliance."

Image of a Roomba and an iPhone controlling it

IoT devices can manage almost every aspect of the home. Smart appliances—IoT-enabled appliances from everyday life—have the potential to increase customer satisfaction and drive more business for your company. The smart home is no longer a rose-colored daydream: a television cartoon or a whimsical speculation. It’s the future and it’s happening now. But to unlock the full IoT potential of smart appliances, designers and manufacturers must first address problems of component cost, data security, interoperability, human-centered design, and the bane of legacy technology in a fast-moving market.

The market for smart appliances is indeed 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 needed before we can create a seamless Jetsonian home. By servicing that need for progress, well-positioned competitors have the chance to make a significant impact on the smart appliance market.

New Business Opportunities with Smart Appliances

Smart appliances are nothing new. Brands have had the ability to connect these devices for years but have struggled to find 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 to develop connected appliances that provide value for brands.

1. Create Ongoing Relationships with Customers

Appliances used to be a once-in-a-decade purchase. 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 before making another appliance purchase, that doesn’t mean they’ll be content with their purchase. That means OEMs need to determine new ways of increasing the long-term value of the purchase.

This perspective marks a transformation in the business-customer relationship. No longer is the sale by any means the end of the relationship. OEMs have an opportunity to become more personalized, data-driven, and continuous service providers.

Smart appliances have the potential to foster deeper customer-brand relationships by contributing to the overall customer experience and journey. For example, they could provide tips on how to use the product, gathering feedback on the product’s quality, and providing 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 while 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 any misuse or compromise of customer data can lead to the loss of a brand’s most cherished resource: trust.

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 2018 Connected Home and Building Technology Trends Survey, 54 percent of manufacturing decision makers have indicated that they hope to use data to create new solutions like targeted advertising.

Currently, smart appliance advertising is more about ideas than applications. Not much is being done to demonstrate how users can unlock the full IoT potential of those smart appliances. Soon, companies will start delivering advertising and personalized content directly through the products we buy. The promise of advertising on appliances is not just about coupons and commercials; it’s also about brands engaging with customers after the purchase and throughout the extended customer lifecycle.

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, in which businesses give customers access to a free version of a service with the option of paying a regular fee to upgrade to a premium account
  • Everything-as-a-Service—in this context, the digitization of home appliances—refashions the OEM from a simple product provider to an essential on-going services provider
  • Predictive analysis to help you organize and understand incoming data, which in turn allows you to take intelligent actions, such as preventive maintenance

3. Establish Strategic Partnerships

Partnering is a critical strategic skill in an ever-evolving industry. It can fill in capability and feature gaps and align solutions with customer-preferred platforms and ecosystems. It could reduce time-to-market for IoT solutions 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 would get business, and the customer has a more positive experience.

Sixty-three percent of participants in Jabil’s recent survey agreed that data management partners would be most important to their connected home and building 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.

Top Four Challenges in Technical Development

Smart appliances present brands with various opportunities, but none of them can reach their full IoT potential without first overcoming challenges. Here are four elements companies must consider as they build their connected solutions.

1. Lack of Security and Data Protection

Consumers often cite security issues as a leading cause for conc

ern 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 th

ey 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 survey, 99 percent of manufacturing decision makers say that their connected solutions will collect data and all of them said that they plan to use it. However, recent media focus on data privacy has made almost 70 percent 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.

With data privacy still such a raw wound in the wake of the Cambridge Analytica scandal, service providers in the smart home and appliance space need to find a way of rebuilding users’ trust around data. Data is ambivalent. It’s the people who collect, use, and re-use it who create problems.

2. Interoperability

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 over these two approaches:

  • A controlled ecosystem, where a single service provider delivers all the 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. They already enable customers to control their lights, entertainment settings, and even appliances lifting only their voice. 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

Price is one of the main inhibitors to the purchase of a connected home product. 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 within the last five years.

Prices for materials and manufacturing may be decreasing as well, 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

Ongoing electronic component shortages are affecting the production of IoT devices and hindering their potential. While each smart appliance may have its own product lifecycle, the same concept applies to the components used in these devices. Various components become obsolete. Component obsolescence can cripple a brand’s ability to keep up with market expectations. It 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. Otherwise, they risk falling behind the curve in a constantly evolving industry.

There are plenty of opportunities left for everyone in the smart appliances space. It’s only a matter of time before brands artfully unlock smart appliances’ true IoT potential. Meanwhile, the challenges will continue to be mitigated by falling manufacturing costs and increased attention on standardization.

Written by Brent Tompkins, Head of White Goods and Appliances Sector, Jabil.

Jabil (NYSE: JBL) is a manufacturing solutions provider with over 260,000 employees across 100 locations in 30 countries. The world's leading brands rely on Jabil's unmatched breadth and depth of end-market experience, technical and design capabil...
Jabil (NYSE: JBL) is a manufacturing solutions provider with over 260,000 employees across 100 locations in 30 countries. The world's leading brands rely on Jabil's unmatched breadth and depth of end-market experience, technical and design capabil...