Five Steps for Capturing the Connected Customer: Introduction

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In this six-part series we outline how to capture one of the greatest opportunities of the decade (and beyond): the connected customer market.

The Case for Connected Customers

Connected customers are those consumers that use their smartphones to monitor and control a brand’s physical products. The great promise of connected customers is greater lifetime value: connected customers buy more product and are more loyal and engaged than traditional, disconnected customers.

We owe this opportunity to two converging technologies: smartphones and cloud computing. Smartphones offer a communication vehicle that consumers can take with them anywhere, while cloud computing dramatically lowers the cost of delivering value-added applications. Together, brands can leverage this combination to establish a regular, two-way conversation with their customers while dramatically enhancing the user experience.

A couple of points drive home the significance of smartphones and cloud computing:

  • Smartphones have captured over 50% of the mobile phone market. In light of this, Macy’s CFO, Karen Hoguet, announced that it has become practically impossible to distinguish between in-store sales and mobile sales (Macy’s subsequently stopped the practice of separately reporting these two results).
  • Walgreens’ CTO, Abhi Dhar, reported that 52% of the company’s online refills come from its mobile app.
  • In 2011 a report from the IBM Institute for Business Value concluded that when consumers make a purchasing decision they prioritize Internet connectivity above brand considerations or even product design.
  • Consumers are comfortable with the idea of cloud-based services and are flocking to the cloud for lower-cost, often superior services. Examples are everywhere. Most consumers read their email off of cloud-based email services. Students rarely buy student editions of Microsoft Office, instead opting for free desktop publishing suites like Google Drive. The weakened economy of the last five years has driven millions of households to drop expensive cable TV subscriptions in favor of Broadband Internet and cloud-based services like Netflix, Amazon, and Hulu for $10 per month.

Connected Products Defined

The combination of a physical product that can be monitored and controlled via a mobile app is what we call a connected product. This convergence of physical products with digital interfaces offer superior value in the form of powerful and genuinely useful features such as remote control and monitoring, history tracking, task automation, advice, and hints. Historically, these features had to be crammed into the physical product itself. Now, the consumer’s primary interface is the smartphone, which offers an experience far richer and more flexible than any LED screen and push button combination. Similarly, advanced algorithms and data-intensive computing can be pushed to the cloud, which ensures low-product cost. These state-of-the-art features translate into significant competitive advantage by delivering product uniqueness at a competitive price point and by delivering multiple consumer benefits such as saved money, saved time, newfound peace of mind, and improved safety.

In addition to superior product, the connected product promises increased sales opportunities in two ways: real-time consumer-to-product interactions (adding new features over time to a product), and high-margin software revenue in the form of freemium apps. Freemium apps for connected products have both up-sell potential (e.g. a premium feature that sets a product into energy-saving mode when no motion is detected in the home) and cross-sell potential (e.g. a coupon offer for a partner’s detergent after 20 wash loads).

Five Steps for Capturing the Connected Customer

In the coming weeks, we’ll outline the five steps needed to win the hearts and minds of connected customers. Here’s an overview of the topics:

Step One: Know Your Product

The smartphone is a powerful computer that boasts multiple sensors (e.g. GPS, cameras), a flexible graphical user interface, and an always-on Internet connection. This mobile computer is changing the way consumers think and act. Step one is to asses if a smartphone app is friend or foe, hat is, to evaluate whether apps will disrupt or strengthen your company’s value proposition.

Step Two: Identify Your “Hero Moment”

The world doesn’t need another useless smartphone app. Opportunity lies in finding problems which your customers encounter daily, problems which can be uniquely solved with a connected-to-smartphone product. For example, the LiftMaster app — which can remotely monitor and control LiftMaster garage door openers — gives users the peace of mind that they truly closed the garage door when they left the house. In this stage your task is to think about use cases in which a mobile app, combined with your product or service, can make your product a hero in the eyes of your customers.

Step Three: Build Your Minimum Value Proposition

The smartphone revolution is pushing every company to acquire software development competency. As veterans know, the primary challenge in any software development project is to limit project scope so that the product can be developed and verified in a timely manner. Feature creep is the single biggest threat to success in software; adding last-minute features leads to ever-expanding project timelines, and injects product instabilities into the product experience. Experienced software companies know that successful projects are “victories of verification”.

Step Four: Make It A No-Brainer

To gain broad consumer adoption, your connected product solution needs to be price-competitive with its unconnected counterparts. The key to success here is leveraging the power of Moore’s law and cloud computing to keep material costs, project costs, and support costs in check.

Step Five: Grow Your Ecosystem

Successful software is never “finished”. Engaged customers and partners will push you to deliver extra features which go well beyond your initial minimum value proposition. By listening to customer feedback and extracting insight out of your ecosystem’s data feed you can identify which new features would deliver the most value for your customers, and then carefully incorporate these new features into your product. This feedback loop keeps the product experience fresh and exciting for your customers, eventually converting them from passive, unengaged consumers into loyal and vocal brand evangelists.

By Kayce Basques