How to make money from connected home products

1. How to Make Money from
Connected Home Products
Connectivity
Return on
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2. “ Smartphone ownership has more
than doubled in two years. ”
Source: Nielsen
“ By 2020 there will be
50 billion
connected devices. ”
Source: Ericsson
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3. Consumer
Safety. Protect home investments with
affordable remote monitoring.
Savings. Save money by decreasing energy
usage from home products.
Comfort. Maximize time with remote home
product and appliance management.
Smart Service. Take advantage of remote
diagnostic testing and advanced customer
service programs.
Green. Reduce energy consumption and
protect the environment.
Connectivity Trends
Driving Business and Consumer Benefits
Business
Diversify. Diversify revenue strategies and
earn income from new sources.
New Markets. Engage current and high
potential mobile customers.
Efficient Diagnostics. Save money with
remote product diagnostic testing and
monitoring.
Quality Customer Service. Provide best-in-
class customer service with new product
information and advice.
Brand Reputation. Build brand reputation for
product innovation and leadership.
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4. Connected Economy: Consumers
Consumers are leading the charge to connectivity across the globe. With soaring
mobile web usage rates, the products of the future must be connected or risk
obsolescence. Mobile apps offer brands an opportunity to engage target customers
where they are actively deciding, controlling, learning, and purchasing.
“Nearly half of consumers interact
with brands online.” Source: IBM
“The movement to mobility is
at full throttle.” Source: Accenture
“Smartphone sales in Brazil
grew by 165% in 2011.”
Source: Nielsen
“49% of smartphone owners in the
US frequently use their device while
shopping.” Source: Nielsen
“62% of smartphone owners have
downloaded apps, 87% of which
have used daily deal websites.”
Source: Nielsen
“Over half of 45-54 year olds act
on mobile ads in South Africa.”
Source: Nielsen
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5. Connected Home
Armed with smartphones, consumers are eager for products and apps that enable
them to monitor their homes from anywhere and save money on energy bills.
Manufacturers and retailers are responding with connected products, features, and
apps to meet the emerging demand.
“8 billion devices will be
connected on the home
network by 2015.”
Source: Parks Associates
Lowe’s launched Iris in 2012,
a customer portal and mobile
app for their connected
products.
“Smart appliance market to
be $26.1 Billion by 2019.”
Source: Pike Research
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6. Connected products offer manufacturers, retailers, and service providers
monetization opportunities. The next few slides will show how today’s most
innovative companies are earning money from connected home products and
mobile applications using these five revenue strategies:
Revenue Strategies
for Connected Home Products
Premium Product Sales$
Mobile Advertising Revenue
$ Complimentary Product Sales
$
Subscription Revenue$
Additional App Feature Revenue$
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7. Overview
Connected products command a higher price point in the
market by offering new features, featuring smartphones on
packaging, and enhancing customer value. A quick scan of
the market proves industry leaders are already testing the
market with a wide range of high priced connected
products and earning a generous margin to cover new
costs.
The Money
Demand for smart products is pushing prices up 20-300%.
If Zowie normally sells 50,000 widgets/year at $100/widget
earning $25/widget in profit, a connected widget selling at
the same rate with a 50% mark-up and $20/widget in profit
would yield $1M or an additional $500K. This model
provides for a small increase in COGS per unit, but delivers
200% more profit for a high value, connected product.
Best Practices
• Raise prices moderately to establish the product value, but ensure high volume sales.
• Leverage other monetization strategies such as follow-in sales and advertising.
• Great fit for connected products without their own mobile app.
“ Increase customer
value with a
connected product
and earn 20-300%
more.”
Revenue Strategy
Premium Product Sales
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8. Smart thermostats exemplify the emerging market for mobile home energy management. One of the
leading new products, The Nest Learning Thermostat, offers a sleek product and app to remotely
monitor and adjust the temperature of your home. Retailing at $250, this premium product is setting a
new bar for elegance, functionality, and price - breaking open a new market for smart thermostats and
shifting the existing market.
Premium Product Sales
Smart Thermostat
4 out of the top 10 Consumer Reports’ rated
thermostats offer mobile energy management
and include generous mark-ups.
(See Appendix for more Thermostat prices) Nest is selling for
3-5x’s the competition.
Example:
Example
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9. Overview
Connected products deliver data that can be translated into
follow-on sales. Utilizing new data and mobile engagement
points, marketing teams can identify new customer needs,
develop products to meet their needs, and cheaply test ads.
This strategy is focused on getting new and existing products in
front of their connected customers and earning a percentage of
the final sale (See Appendix to learn how to market new products
using Closed Loop Marketing).
Complimentary products could be connected or non-connected
products - built by you or a partner.
The Money
App owners with advanced targeting are able to advance
additional sales with little to no cost and at least 30-40% retailer
margins. This is a great way to diversify revenue and meet
customer needs without increasing costs.
Best Practices
• Top revenue strategy for companies with a mobile app.
• Learn, test, and evaluate new product ideas and marketing in short, fast cycles with a mobile app and
Closed Loop Marketing (See Appendix).
• Limit the use of outside ads if you have the opportunity to sell complimentary products for a higher return.
“Leverage data and
customer interface to
sell follow-on
products.”
Revenue Strategy
Complimentary Product Sales
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10. Monster Power’s suite of smart plugs and surge
protectors put energy control into the consumer’s
hands. The company’s Power Control App enables
customers to “manage power consumption from their
smartphone anywhere, anytime.”
By monitoring the power consumption of devices
connected to Monster Power products, Monster can
inform users of “Vampire” devices on standby that are
driving up electricity bills and recommend related
Monster Power products that can save consumers
money. The app features a built-in “Market” where
users can then buy these complimentary products.
Follow-on product ideas:
• Garage door Thermostats
• Security system Smoke alarm, sensors
• Weather monitor Irrigation Control
Complimentary Product Sales
Smart Home Power
Example:
Example
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11. Overview
Demand for digital advertising is quickly outpacing the growth of
traditional television, radio, and print ads. Mobile consumers are
engaged and receptive to new information and opportunities.
Companies with a smartphone or tablet app can open their
interface to advertisers, earning money from display ads,
including banners or videos, or integrated product
recommendations.
The Money
Advertising rates vary depending on the level of targeting.
Connected home products can assume a premium ad rate
between $5-10 per thousand impressions. An active app with
user visits of 3x’s a week and 50,000 devices can yield $65,000
in ad revenue/year with zero costs. App owners will offer a
compelling platform for anyone looking to get in front of
connected home owners and renters.
Best Practices.
• Utilize ads to bring in revenue from a free or freemium app.
• Optimal for usage rates of at least 3-4x per week.
• Accumulate demographic and usage information to ensure advertisers pay a premium for your unique
demographic.
Revenue Strategy
Mobile Advertising Revenue
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12. Highly trusted apps such as Mint.com (personal finance) are
pulling big revenue from mobile advertising.
Mint charges partners a premium based on lead generation
(PPL) and cost per action (CPA) based on seamlessly
integrated referrals. Mint is positioned much like a trusted
advisor with highly-targeted, actionable data.
By keeping track of usage statistics and making
recommendations that help consumers save money or
increase convenience, home products companies with an
active user base have tremendous opportunity to create
highly trusted apps like Mint.com.
Mobile Advertising Revenue
Trusted Apps
Example:
Example
Trusted Traffic
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13. Overview
Home service companies have long utilized a subscription-based
revenue strategy, charging customers on a monthly or yearly
basis in exchange for continued services. Common examples
include home security systems, cable television, and internet.
The subscription model may be extended to other connected
home products, especially if the customer is receiving a regular
benefit that requires a continued service.
The Money
A typical subscription rate for connected products is about
$9.99/yr. Rates will depend greatly on 1) how the customer
perceives the value of the service and 2) the usage rates for the
app and home product. Cost of services are very minimal.
Best Practices
• Strong option for companies with a service to offer.
• Companies with regular monitoring could offer custom reports as a service feature.
• Owners may want to avoid selling the app and charging monthly fees.
“Extend the
subscription model to
connected home
products that provide
regular benefits to
customers.”
Revenue Strategy
Subscription Revenue
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14. Companies such as ADT and Comcast have led the
way in carving out stable revenue from subscription
fees.
Thanks to the extremely low business cost of service
for connected products, there is major potential for
disruption in the subscription fee market. At
$8.99/month, Nexia is now offering a highly
competitive connected product at a much lower
subscription price.
Subscription Revenue
Home Services
Examples:
Example
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15. Overview
Once a smartphone is connected and data is generated from
home products, there are innumerable features that can be
added to the app. For example, a connected thermostat could
offer a base subscription of $10/year, and a $5/month “learn and
set behavior” premium feature that tracks usage patterns and
automatically configures schedules for customers. A connected
security system could turn on door locking from mobile phones.
The Money
New app features can be sold from within the app store or from
the retailers site. Rates will most often be smaller monthly
subscriptions, but one-time rates may exist. Cost of services are
very limited.
Best Practices
• Consistently offer software updates and new features to entice add-on pricing
• Perfect for lower price products or apps with a freemium version
• Freemium can be offered to increase usage and then sell upgrades
“Additional
features are
simple to offer –
once your
product is
connected.”
Revenue Strategy
Freemium App Revenue
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16. The Iris platform by Lowes offers an integrated suite
of services and tools. Smartphone features include
enhanced reporting, tracking, and mobile controls.
By tracking usage rates, the company can easily help
a customer optimize usage rates and electricity bills.
Home products’ companies provide continuous
security for people that want to stay connected and
energy savings cost conscious customers.
Lowes is able to charge low upgrade fees, but are
counting on high volumes and control of the whole
home.
Additional App Feature Revenue
Lowes’ Connected Home
Example
Examples:
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17. New Revenue Strategies
Premium Product Sales
Complimentary Product Sales
Mobile Advertising Revenue
Subscription Revenue
Additional Feature Revenue
Business Benefits
Earn more with connected products
Engage mobile customers
Diversify revenue streams
Increase value to customers
Consumer Benefits
Save money and time
Protect assets and investments
Monitor and manage the home
Reduce energy usage
Connected home products help your business
and your customers. Stay relevant. Make money. Get connected.
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18. Arrayent: The Platform for
connected products.
Learn more about our products and services at
www.arrayent.com or email info@arrayent.com
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19. Appendix 1 Closed–Loop Marketing 101 - Description
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20. Appendix 2 Source List
Consumer Trends
Europe Tops US in Mobile Ad Response Rates, eMarketer Inc, March 13, 2012
http://8.10.209.13/Article.aspx?R=1008897
Untrustworthy? How Nielsen Sees The Future of Mobile, Business Insider, Laura Stampler, June 14, 2012
http://www.businessinsider.com/how-nielsen-sees-the-future-of-mobile-display-advertising-2012-6?op=1
How Connectivity Influences Global Shopping, NielsenWire, August 28, 2012
http://blog.nielsen.com/nielsenwire/online_mobile/how-connectivity-influences-global-shopping/
Two Thirds of New Mobile Buyers Now Opting for Smartphones, Nielsen Blog, July 12, 2012
http://blog.nielsen.com/nielsenwire/online_mobile/two-thirds-of-new-mobile-buyers-now-opting-for-smartphones/
From social media to Social CRM – What customers want, IBM Institute for Business Value, IBM Global Business Services Executive Report
Mobile Media Report (Q3-2011), Nielsen, http://www.slideshare.net/victori98pt/state-of-mobile-q32011-by-nielsen
2011 Year in Review, Scorecard for Mobile Advertising Reach and Targeting (S.M.A.R.T.) Report, Millenial Media, January 2012
http://www.millennialmedia.com/mobile-intelligence/smart-report/
State of the Media: U.S. Digital Consumer Report Q3-Q4 2011, Nielsen,
Global AdView Pulse lite, Q 1 2012, Nielsen
Service Providers and the Connected Home, Kurt Scherf, Parks Associates
5 Mobile Ad Trends For 2012, Forbes, Jim Payne, January 4 2012
http://www.forbes.com/sites/ciocentral/2012/01/04/5-mobile-ad-trends-for-2012/
Mobile Reigns Supreme in U.S. Media Consumption, InMobi Insights, Surag Patel, August 16, 2012
http://www.inmobi.com/insights/2012/08/16/mobile-reigns-supreme-in-u-s-media-consumption/
Connected Consumer 2012, Mobile Future Foreward, Chetan Sharma, http://www.chetansharma.com/connectedconsumer.htm
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21. Appendix 2 Source List
Smart Appliances
Connected Personal Objects: Getting Intimate with the Internet of Things, Guthrie Dolin, May 19, 2012
http://www.slideshare.net/gdolin/connected-personalobjects-planningness2012
Ericsson CEO Predicts 50 Billion Internet Connected Devices by 2020, Stacy Higginbotham, April 14, 2010
http://gigaom.com/2010/04/14/ericsson-sees-the-internet-of-things-by-2020/
The Nest Thermostat: Values, Passion & Emotion – A Branding Story, Biquitous, Chris Fernandez, November 17, 2011
http://www.biquitous.com/nest-thermostat-branding-story
Bundled energy management services, Fierce Energy, Tom Kerber, August 2, 2012
http://www.fierceenergy.com/story/bundled-energy-management-services/2012-08-02
Household Appliances on the Smart Grid, Smart Appliances Research Report, Pike Research, Q4 2010
http://www.pikeresearch.com/research/smart-appliances
Networked Home Energy Management Devices and In-Home Connected Displays, Home Area Networks Research Report, Pike
Research, Q3, 2012 http://www.pikeresearch.com/research/home-area-networks
Lowe’s jumps into smart home energy market, Smart Planet, Kirsten Korosec, January 5, 2012
http://www.smartplanet.com/blog/intelligent-energy/lowes-jumps-into-smart-home-energy-market/11801
AlertMe announces strategic partnership with Lowe’s to provide Smart Home technologies to North American consumers, AlertMe
Press Release, January 5, 2012, https://www.alertme.com/press-release/alertme-announces-strategic-partnership-lowe%E2%80%99s-
provide-smart-home-technologies-nor
Can Lowe’s Sell Easy Smart Home Monitoring and Control From Anywhere? Eric Bochtler, Innovation Point of View, August 24, 2012
http://www.innovationpov.com/can-lowes-sell-easy-smart-home-monitoring-and-control-from-anywhere/
Move over Siri. Introducing Iris, Lowe’s smart home hub, Consumer Reports, July 31, 2012
http://news.consumerreports.org/home/2012/07/lowes-introduces-iris-smart-home-management-system.html
On Guard: Next-Generation Home-Security Systems, Consumers Digest, Gregory Scoblete, July 2011
http://www.consumersdigest.com/electronics/on-guard/video-surveillance-systems
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22. Appendix 2 Source List
On Guard: Next-Generation Home-Security Systems, Consumers Digest, Gregory Scoblete, July 2011
http://www.consumersdigest.com/electronics/on-guard/video-surveillance-systems
Panasonic Launches Android App for Smart Appliances, Video World Insider, Tara Seals, August 21, 2012
http://www.videoworldinsider.com/topics/video-world-insider/articles/304192-panasonic-launches-android-app-smart-appliances.htm
Always On, Always Connected, Finding Growth Opportunities in an Era of Hyermobile Consumers, Accenture Consumer Electronics Report 2012
LG Unveils New Line of Smart Home Appliances at CES, WebProNews, Zach Walton, January 9, 2012
http://www.webpronews.com/lg-smart-appliances-ces-2012-01
Mobile Advertising
Amazon Offers Advertising Opt-Out on Kindle Fire, Wall Street Journal, Greg Bensinger, September 10, 2012
http://online.wsj.com/article/SB10000872396390444554704577642591117657990.html
When Freemium Fails, Wall Street Journal http://online.wsj.com/article/SB10000872396390443713704577603782317318996.html
AdMob Network Case Study, Best, Cool, Fun Games
https://docs.google.com/a/google.com/viewer?url=http%3A%2F%2Fwww.google.com%2Fads%2Fadmob%2Fpdf%2Fapps-
bestcoolfun.pdf&embedded=true
AdMob Network Case Study, BackFlip Studios
https://docs.google.com/a/google.com/viewer?url=http%3A%2F%2Fwww.google.com%2Fads%2Fadmob%2Fpdf%2Fapps-
backflip.pdf&embedded=true
iAd, Apple Advertising
http://advertising.apple.com/brands/
Mobile Will Grab TV Advertising’s Crown, Matt Cohler, TechCrunch, September 25, 2012
www.techcrunch.com/2012/09/25/mobile-will-grab-tv-advertisings-crown/
US to Top Japan as World’s Biggest Mobile Ad Market, eMarketer, August 1, 2012
http://www.emarketer.com/newsroom/index.php/top-japan-worlds-biggest-mobile-ad-market/
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