The Internet of Things – Opportunities for Marketing
Published on 27 April 2015 | Author Sebastian Pieper0
The internet of things – the linking of smart products – is tipped off as the next big revolution in the information technology sector. A revolution which has the potential to significantly influence – if not dissolve and rearrange – the structures of whole sectors and supply chains as well as the competition rules. These changes will also have an effect on marketing, particularly marketing communication. The internet of things opens new potentials for marketing communication, but also creates new challenges.
As previously mentioned, the internet of things describes the connecting of so-called smart/intelligent items/products. Smart products are products which in addition to physical components (e.g. a motor) also contain intelligent components (e.g. sensors, processors, software systems or data storage) as well as components which allow a linking, i.e. a data exchange, of the product with one or more other smart products or generally IT systems. According to the current Deloitte study, in 2015, one billion connected devices are to be sold. The internet of things requires a specific technological infrastructure from companies, called Technology Shack. Simply put, this consists of the product itself which is composed of hardware and software, software platforms in the Cloud or as SaaS operation which analyse the data captured by the product or control the function of the product, as well as the network connection between these two levels.
In a recent Harvard Business Review article, university lecturer and “management guru” Michael Porter divides the possible functions of smart products in four areas: Monitoring, Control, Optimisation and Autonomy. These functions can all be combined in one product and each one builds on the preceding one: Monitoring refers to the capturing of data via the status and use of the product itself as well as its environment. Control refers to the remote control of the functions of the smart product via the software platform. Optimisation means that based on the captured monitoring data, the product either improves itself or is improved via the control from the software platform. Autonomy means that products, such as robots, can carry out their functions to a large extent or even fully automatically, i.e. without human intervention.
Use of the Captured Data in Marketing Communication
For marketing, the area of Monitoring is particularly relevant. Successful marketing today is data-driven marketing and the number of marketing-relevant data will potentially multiply through the internet. In B2B, user data can help to gain a better customer understanding which can then be used for a more precise approach. Marketers do not only learn which products a customer purchases but furthermore, they will learn whether he actually uses these products, when he uses them, how often he uses them, how he uses them, in which use scenario etc. Interesting fact: some connected products, e.g. smartwatches, are not only suitable to capture data but also create new touchpoints for marketing communication.
The fitness product market belongs to the B2B sectors where connectivity is most advanced. Wearables which track performance data (miles run, speed, calories used etc.) are available from many sporting goods manufacturers and are becoming increasingly popular with sports and fitness fanatics. Here are some examples to use the captured data in marketing:
- By means of the miles run you can estimate when the running shoes (which are possibly connected themselves and provide the necessary data) are worn off and a new purchase is imminent.
- High performance sportsmen and women can be offered special dietary supplements.
- People who run long distances may have an interest in taking part in a running event, e.g. a marathon.
- Athletic performance can be linked to incentives (1% discount per 10 miles run) and integrated in suitable campaigns (another 20 miles and you can save 10% in our latest fitness collection).
- The tracking of running geo-data allows marketing messages with geographical reference (after the run, quickly pop into our branch on XY street).
- Training schedules or dietary tips matching the performance data are practical services and can be enriched with commercial messages.
However, not only in B2B you can open new potentials for marketing communication via the internet of things. In B2B this topic is often discussed under the term “Industry 4.0”. This can bring benefits especially to the service communication. For example, the continuous monitoring of machines can detect wear and tear and suggest an inspection on time. Or a repeat order of wear parts (screws, metal plates, etc.) can be enquired independently from the production performance.
The Challenge: Data Privacy and Data Security
The internet of things does not only provide new opportunities for marketing communication but also presents the company with new challenges, particularly in the area of data privacy and data protection. The captured data can be highly sensitive. It may contain health-related data of customers in B2C or data on business-relevant processes in B2B. This sets high demands on data privacy and data security. We must bear in mind that with each data-producing device, a new source as well as a new transmission path is created where data must be protected from misuse. Tips on how to legally handle data can be found in our Checklist: 23 Questions on Big Data and Law.