The Internet Of Things: When Products Become Marketing Channels

In the new IoT world, the amount of data available about consumer behaviour will increase dramatically. Marketing departments need to be ready to listen and respond.

The internet of things has been heralded as the next great online revolution since the term was coined over 15 years ago, but until recently it has been seen mainly as an operational, supply-chain concern. Now, however, its importance to marketers is becoming clearer.

Experts see the data coming from the internet of things extending the boundaries of marketing’s operations, while simultaneously increasing the depth of marketers’ understanding of their customers’ behaviour. But, at the same time, the coming revolution will re-emphasise familiar issues surrounding data capture and analysis.

Beyond The Supply Chain

“Five years ago we were talking about machine-to-machine communications,” explained Matt Hatton, founder and CEO of Machina Research, which specialises in M2M, IoT, and big data. “We were talking about efficiency savings and reducing the cost of doing business, and it was all something being done by the IT department.

“With the internet of things, we’re talking about something transformational, something that will permeate through the business. So it’s not just the tech guys talking to the CFO; the additional complexity means it’s now appearing on the CMO’s desk. It’s not just supply chain management any more.”

For Matt Guest, head of digital strategy consulting at Deloitte EMEA, the key change brought about by the internet of things will be the increase in the amount of data that will become available to marketers. That, he believes, will take marketing in two new directions.

“The internet of things allows you to change the role of marketing,” he said. “Rather than just changing superficial things, marketers can gain a greater level of insight into messaging. It will allow them to tune their messages according to how customers actually use the product.”

He gives the example of collecting data about the way somebody uses their oven. That can show how they cook and, in turn, could indicate that a different product might suit them better.

Better Data, Better Products

But Guest also sees IoT data making marketing crucial to new product development.

“Marketing strategy becomes part of the thinking about the product system and how it works,” he said. “Physical products will become channels, so without marketing being part of the conversation, you’d have a much riskier business model.”

Deloitte’s ”Tech Trends 2016 – Innovating in the Digital Era” report gives the example of construction machinery company Caterpillar, which is collecting data from its mining machinery in the field with the aim of developing a better understanding of how it could be made to perform more efficiently, but also predicting how specific pieces of equipment will perform in different environments and on different jobs.

Wrapping Services Around Products

Alex Jones, business design director at Fjord, design and innovation unit within Accenture Interactive, is also watching the relationship between products and consumers change. He sees the future as being characterised by brands wrapping services around products.

“Connected devices are ubiquitous, but the IoT is also about the ability to shift data up into the cloud and crunch it to deliver real-time services.

“In every product there’s a service waiting to happen. When you look at the toolbox that’s now available, you can start to wrap a service round a product that makes it much more attractive to use. For example, a toothbrush could be tied to dietary advice. It becomes a service that’s interested in my health.”

Hatton agrees. “Tracking products will create opportunities for understanding consumer behaviour, or for selling more products and services on top,” he said. “This allows for a lot of innovation in business models. It’s a move from selling hardware to selling services. Take Zipcar, for example.”

As Hatton points out, this approach is not new; he cites Rolls-Royce, which has been leasing aero engines rather than selling them for years. The difference now is that the cost of both the hardware and the communications has come down and new tools have emerged to facilitate the process. The result is that an IoT-based approach is now available to many more companies.

Six-Star Service

For Jones, the other part of the equation is consumers’ rising expectations of the experiences brands provide.

“Function is no longer a differentiator; it’s now expectation and delight. There’s a great quote from the founder of Airbnb that five-star service is now the normal and that we now need to move to six or seven star. It shows how expectations are rising.”

Jones also argues that companies need to stop seeing the solution in terms of technology, but of people.

“It’s about getting people to refocus on what really matters to consumers. What are their problems, and how can you help solve them? At what points in their day can you provide a delightful experience?”

First Steps

So how can marketers take their first steps in this new world? According to Guest, the way to start is by mapping out your customer journey, then taking a test-and-learn approach to simple problems. But he argues that marketers need to start with a hypothesis, rather than just looking at the data.

“You can strategise all you like, but customers will vote with their feet. You need to listen and respond, rather than just thinking.”

Hatton has a warning for businesses looking to apply the enormous amounts of new customer data that the internet of things will generate to new product development. He points out that the approaches used in software development are very different to those employed in the development of hardware.

“The environment in which software developers work is not immediately translatable into the world of things, and that can be a big problem,” he said. “Perpetual beta, for example, won’t fly in the world of hardware. You can’t recall devices every few weeks to update them.”

Guest also sees the need for marketing departments themselves to change.

“A lot of marketing departments understand digital, but they’re still configured for broadcast and campaigns. That’s because they weren’t created digital from scratch. In the future they’ll need to be data-centric and objective. You’re not going to be able to operate in an IoT world without that understanding.”