Only a few years ago, the idea of networked automobiles, billboards, and whisky bottles seemed like something straight out of a science-fiction novel. But that was then and this is now.
Our world is increasingly framed by smartphones and tablets, sensors embedded in machines and roadways, and ubiquitous wired and wireless networks that stream data into the cloud. Physical objects are emerging as nothing less than a giant digital information system.
This brave new world of machine-to-machine communications is changing everything. An emerging Internet of Things (IoT) provides remarkable insights into a mind-bending array of events and behaviors. It’s redefining the fundamental relationship between human and things. No less important: The IoT creates new opportunities and challenges for marketing professionals and other business executives across a broad swath of industries.
“We are creating a connected world with entirely different touch points,” said Glen Allmendinger, president of technology and business development consulting firm Harbor Research, in an interview with CMO.com. “In the past, a company would sell a product, and it would disappear into a black hole. There was no way to know what anyone did with it or what other marketing opportunities existed. Today, it’s possible to see how a customer uses a device and discover all sorts of opportunities.”
Added Andy Hobsbawm, co-founder and CMO for U.K.-based marketing firm EVRYTHNG, which has invented digital IDs that can be attached to physical objects: “The Internet of Things represents an enormous, disruptive wave that is potentially bigger in impact than mobile technology and social media alone. At some point, the IoT will connect virtually every physical object to the online world. It will create new services and lead to more personalized relationships.”
For CMOs, it’s critical to keep a keen eye on the IoT. Already, an array of products—including workout gear, home thermostats, lighting systems, and automobiles are connected to the Internet. Over the next few years, these systems will grow exponentially. “The Internet of Things will transform static business data into a more fluid and dynamic entity,” J. Walker Smith, executive chairman of The Futures Company, a strategic insight and innovation-focused consulting firm, told CMO.com. “It will change the face of product development, pricing, and the way enterprises interact with customers.”
Making Connections Count
The idea of creating networks of devices is nothing new. As far back as the 1980s, cities and transportation agencies began installing sensors in roads so they could monitor traffic patterns. Today, these systems help regulate traffic signals and provide feedback to motorists through the Web, mobile devices, and in-car navigation systems. Companies also began using RFID to monitor their supply chains and, during the past several years, a growing number of devices are connecting to the Internet and feeding information into databases.
IP networks along with wireless technology have changed everything. Networking firm Cisco Systems predicts that the number of Internet-connected devices—currently 8.7 billion—will reach 15 billion by 2015 and 40 billion devices by 2020. Although much of this data at some point finds its way to human eyes and minds, highly automated machine-to-machine communication is rapidly becoming the norm. What’s more, Cisco has predicted that at some point in the future 99 percent of physical objects will be part of a network.
Consider: Devices such as Nike’s Fuel Band collect data about a person’s daily activities and movement. They typically sync via Bluetooth with a device such as an iPhone and upload data. Consumers can view their progress, and the manufacturer has access to the data. Thermostats such as Ecobee’s Smart Thermostat allow users to adjust temperatures via a mobile phone from anywhere in the world, but they also feed data back to the manufacturer. They can analyze patterns and trends and make suggestions for saving energy.
Automobiles are also getting smarter. Today, many vehicles possess monitors and sensors that feed data to an on-board computer, which, in turn, transmits the data via satellite to remote servers that conduct real-time analysis. This makes it possible to determine when the car requires maintenance, for example. The so-called black box, which records driving patterns, can also be used by insurance companies to lower premiums for good drivers and investigate collisions. Meanwhile, remote diagnostics are becoming a regular component in subways, trains, airplanes, washing machines, and even farm equipment.
There’s almost no limit to the possibilities. Last year, EVRYTHNG introduced a pilot program for Father’s Day in Brazil. It featured personalized QR codes on liquor bottles in conjunction with beverage firm Diageo. This allowed buyers to create video messages and associate them with an individual bottle that was given as a gift. A recipient could scan the bottle and view the personalized message from the cloud.
But the concept doesn’t have to stop there.
“By using smart tags and intelligent identities for physical products, it’s possible to use the infrastructure of smartphones and other devices to make the Internet of Things possible today. The technology allows consumers to personalize a product,” EVRYTHNG’s Hobsbawm told CMO.com.
Although existing networked systems offer interesting and sometimes remarkable opportunities to put data into play, they’re only the first steps in a rapidly changing product marketplace. Within a few years, an exercise band could serve as a mechanism that helps marketers understand a person’s everyday activity patterns in remarkable detail. It could connect with big data and with partners to frame a more contextual marketing approach.
For example, if a person is a runner or cyclist, the manufacturer might suggest appropriate attire and shoes. A business or marketing partner might suggest other gear. And if this data is overlaid with data streaming in from other devices—say, a networked scale, blood pressure device, or diet app on a smartphone—it’s suddenly possible to piece together a much more complete snapshot of an individual. “You begin to understand a person’s behavior and actions in a more nuanced and relevant way,” Derrick Daye, managing partner for The Blake Project, a Los Angeles-based strategic brand consulting firm, told CMO.com.
A highly networked environment could provide an endless array of other possibilities. For instance, a connected refrigerator or forced air heater might send a smartphone an alert when it’s time to replace the water or air filter. The alert could pop up when the person is near a store that sells the filter. A package of frozen bagels or lasagna might include a QR code that lets a person scan the item on a smartphone and have an Internet-connected microwave oven unthaw the product automatically. Manufacturers could gain insights into eating patterns and provide coupons and incentives for new products.
Meanwhile, beverage companies, such as Coca Cola or Pepsi, could enable connected fountain machines in restaurants, movie theaters, and elsewhere and adjust marketing and sales to fit constantly changing behaviors and conditions, including temperature. The seller could then distribute coupons and incentives to smartphones, said Fernando Alvarez, senior vide president and global solutions leader at business and IT consulting firm Capgemini, in an interview with CMO.com.
These capabilities will extend into almost every aspect of life and, at some point, almost every object will possess a digital identity. “There are a huge number of seemingly mundane and currently invisible activities that go on all of the time—underneath the normal activities of the day. Many of these things have value when they are combined with other data,” Allmendinger said. “The Internet of Things is all about brokering data and using big data and analytics to spot the value.”
Stepping Into The Future
It’s no secret that marketing falls in the center of the IoT universe. Business success spins a tight orbit around making sense of numerous data points and putting them to use in new and creative ways. “The data trails are everywhere. There’s the promise of using information to better manage pricing, branding, promotions and incentives, ad buying, and an array of other areas,” The Futures Company’s Smith said. “Once you have real-time data feeds, it’s possible to run a business in a far more dynamic and opportunistic way.”
Smartphones are fueling the revolution. Increasingly, devices connect to phones through audio jacks or recharging ports or use Bluetooth, Wi-Fi, RFID, NFC, and other protocols to stream data to the cloud. Rapidly advancing technology provides the foundation for real-time data streams, analytics, and predictive analytics. “There is an enormous opportunity to understand the way people are behaving, responding to things in their environment, and sharing information with other people. It’s possible to identify small groups or individuals and microtarget ads, pitches, and promotions,” Smith pointed out.
Social media will play a key role as well, Hobsbawm said. “Once a person creates a digital identity and connects to social media, it’s possible to tie products and services together in a comprehensive way,” he explained. “At that point, a person has access to manuals, forums, tips, receipts, warranty information, and more. Marketers have a far more effective way to connect with consumers and help them get more out of a product.”
The Blake Project’s Daye believes that the IoT has the potential to change branding in a profound way. “It can deliver the brand promise at every point of customer contact and deliver a more meaningful relationship. It can help a company create greater brand alignment across devices, screens and experiences,” he said.
What makes this approach so compelling is that customers are typically willing to provide the data in return for convenient features. When they buy the device, download the app, or sign up for the service, they’ve essentially opted in. “It greatly lessens issues revolving around privacy,” Daye added. “The customer loves the product and willingly participates in the business model.”
Amid the inevitable hype, marketers need to focus on value creation, Daye said. This means understanding the ways devices can connect to each other as well as how networks and entire ecosystems of devices can alter data streams and the end value. Increasingly, products must be designed with APIs or connect to third-party APIs that can serve as relay points. In addition, Harbor Research’s Allmendinger said, new brokering models and data ownership models must emerge while organizations remain sensitive to potential privacy issues.
Make no mistake, the Internet of Things is here to stay, and it will profoundly change life—and marketing—in the years ahead. As more and more devices wind up with sensors, chips, and connectivity, the possibilities grow. Concluded Hobsbawm: “We are entering a new era filled with devices that, once linked, create a level of intelligence that was once imaginable.”