The Internet of Things (IoT) is a rapidly growing industry that is revolutionizing the way we interact with technology. The number of global IoT connections grew by 18% in 2022 and is projected to nearly double by 2027, according to IoT Analytics' State of IoT - Spring 2023. As the IoT space continues to expand and become increasingly crowded, the pressure builds to innovate, stay ahead of the competition and deliver exceptional value to customers. This means getting creative to increase your value proposition and standout from the competition. This is where expanding your product footprint in the digital space can help.
What is the Digital Space?
IoT products and services can be defined in five levels of increasing value to the customer:
IoT or "smart" products bring value by passively digitizing actions that were previously untracked by their "dumb" object counterparts. By connecting smart devices and services to communicate and exchange data, IoT enables a new world of real-time insights, integration and automation. This, in turn, helps streamline customer actions, improve experiences, and boost their productivity. In the digital space, you are creating completely new value from the digitization of these physical actions.
From a competitive standpoint today, it's table-stakes to have an app, support remote control (level 3) and see basic stats (early level 4). Where the opportunity lies is in your ability to create easier, more convenient ways for your customers to accomplish their tasks or goals that fundamentally change their journey. Easy right?
Let's take a look at the customer experience at each level of our smart thermostat example. Keep in mind, this example is on the more extreme side but was inspired from own experience. Imagine it's the middle of summer and the customer's AC unit has been malfunctioning. The unit is running continuously but ineffectively and could be damaged if left running.
The value added at each level increasingly redefines the customer's experience:
| Level | Incremental Features | Experience |
| Before IoT | AC unit stops functioning. Owner returns home to a hot house, unsure of the cause. They find a company, schedule emergency HVAC service, and a technician arrives to troubleshoot and make costly repairs. | |
| Level 3 |
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Same experience - Although the owner could remotely turn off the system to prevent damage, they were unaware they needed to do so. |
| Level 4 |
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Increased run time detected, owner notified with an alert. Owner has options: review data history, remotely turn off AC, schedule service, or investigate further. On the other hand, they may also attribute it to a hot day and the unit working hard. |
| Level 5 |
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Improved monitoring algorithm detects potential mechanical issue, shuts off AC unit to prevent damage. Owner receives an alert and a status report including contact info for top 3 rated local HVAC services, and information to share directly with the technician. |
As a consumer, which experience would you prefer? By leveraging technology to remove friction and solve problems in new ways, the consumer reaps tangible benefits through a radically improved experience.
What transforms a product from interesting to indispensable?
Customer-Centric DesignBy genuinely addressing the pain points and challenges that your customers face, you not only show that you understand their needs but also demonstrate your commitment to providing tailored solutions. It's all about putting yourself in their shoes, empathizing with their struggles, and using data insights to create experiences that truly resonate. |
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Data-Driven InsightsDeliver meaningful and actionable information to help customers make informed decisions. From personalized recommendations to real-time monitoring and analytics, integrating data-driven insights into your offering enables you to provide value in new ways that only IoT products can. |
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Seamless IntegrationMake it as easy as possible for your product to become part of your customers existing ecosystem. By ensuring that your product integrates seamlessly with the tools and platforms they already use, you can eliminate the barriers to entry and provide a frictionless experience that fosters adoption and enhances customer satisfaction. |
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Automation & EfficiencyIdentify areas where technology can make a meaningful impact to your customers. By streamlining processes and harnessing the power of automation, your product becomes a game-changer, empowering your customers to focus on what matters most while saving your time, effort and resources. |
How does this value translate to your bottom line?
Stickier, higher value products with recurring pricing models
Employing this type of customer-centric design is shown to increase customer trust, satisfaction and loyalty, while also being more profitable*. By delivering increased value and experiences customers want to repeat, you're also increasing the stickiness of your products. Sticky products drive increased lifetime value, retention and referrals.
Since digital services bring ongoing value to otherwise one-time purchases, subscription pricing models also become a possibility. Switching to a subscription model can bring increased, more predictable and recurring revenue.
You can choose to capture this higher value through:
- Price increases
- Tiered models and add-on services
- Bolstering your existing value proposition to close more sales at your existing price point
New revenue streams
Data and integrations can be combined in different ways to generate new services and revenue opportunities. The more information you have to synthesize and act upon, the more monetization opportunities you can craft. Some of these opportunities include:
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Creating an IoT Ecosystem Add more smart objects and integrations that can act in concert and be packaged, up- or cross-sold to increase your customer lifetime value (CLTV). |
Captive Value & Paid Partnerships If your digital service is recommending an action, you can recommend other products or services within your ecosystem, or a curated partner list that is value-add for both you and your customer. |
Data Monetization Consider what information you are collecting that may be useful to a third party. Repackaging your existing data for resale, creates a high-margin revenue opportunity. |
Strategic partnerships and sales prospects
Apart from the up- and cross-sell opportunities previously mentioned, integrating with other brands, establishing partnerships and engaging third-party data consumers have positive impacts on your business. These entities can help grow your brand by bolstering your reputation, generating referrals, and opening up new sales channels.
Streamlining operations
By closely monitoring and analyzing customer behavior through your own data, you have the power to unlock a wealth of potential. This includes enhancing product design to better meet customer needs, personalizing sales pitches for a more targeted approach, customizing service touchpoints to create a tailored experience, and ultimately discovering even more opportunities for growth and improvement. Your data assets hold the key to taking your business to the next level.
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