Many new appliances at home can be connected to the Internet. But that doesn’t mean you have to – and many customers would rather not.
WSJ recently reported that while appliance manufacturers are betting on internet-connected smart home appliances, many customers are not bothering to connect them. The manufacturers are looking for an ongoing relationship with customers – this is their plan to make more money. But customers are smarter than manufacturers think. They want to get value for themselves, not just help the manufacturers to charge more money.
Put simply, the main benefit for manufacturers making internet-ready appliances is the data that connected devices can send to them. That data allows manufacturers to see how customers are using their products. It also allows them to propose services and spare parts to customers if they see some problems with machines. We have a future scenario where your white appliances are connected to the manufacturers, who can start to control how you use them and also charge extra fees for deluxe features.
However, the problem for the manufacturers is that most connected appliances work fine without internet connectivity. A connected toaster will still make toast even if the Wi-Fi is disabled. And many customers just don’t bother to connect them. LG told WSJ that less than half of its customers connect them. Whirlpool has reported similar numbers.
Manufacturers argue that customers get a lot of value by connecting the devices. Connected devices can receive automatic software upgrades to enhance their functionality and offer better services, e.g. estimating if you need to replace a part or change a filter. In the WSJ article, Whirlpool shared an example from last year of how they added a leak-detection feature to their smart washing machine software.
What manufacturers really want from connected appliances
Manufacturers wonder why customers cannot see the value connected devices and data collection can offer. They are searching for ways to ‘educate’ customers to connect their devices. They also are exploring models to automatically connect devices without any customer intervention, although this is hard to do via a home Wi-Fi network. (Adding cellular connectivity is an option under consideration, but that would mean extra costs.)
The thing is, many customers understand that the data from the device is primarily for the benefit of the manufacturer, not them. It’s a way for manufacturers to make additional revenue in the face of declining sales. Manufacturers admit as much – for example, Whirlpool expects its 2022 sales to be 10% down from the previous year.
We’re already seeing this in the automobile sector, with manufacturers offering payable add-on functionality to cars. One extreme example was when BMW wanted to offer heated seats for a monthly subscription fee to their customers. The seats have all the hardware to offer heating, but the customer must subscribe to it. This hasn’t made their customers in cold-winter countries happy.
Why aren’t customers willing to connect?
To be sure, many consumers are just too lazy to connect them, especially when they see no special value in doing so. But some of them are also skeptical about why manufacturers want them to connect.
Consumers can easily see several issues with connected machines. For example:
- It’s a very asymmetric relationship. The manufacturer collects data from their devices and wants to charge the customer more, but the customer gets little or no direct value from that data.
- Connectivity alters the holistic customer experience. Customers expect a plug-and-play experience with appliances. You take the coffee maker out of the box, plug it in, and it works. Connecting it takes extra effort, to include installing an app on your phone and setting up an account. This becomes even more of a headache when you have more connected appliances, all of which have different features and user interfaces, as well as their own app. At this point, many customers will start to question whether they really want to use their time to connect their washing machines to the internet.
- Customers also realize that smart devices collect sensitive data (e.g., someone can know how much and often I do dishes or laundry). LG says all the data it collects is anonymized – on the other hand, they offer no opt-in or opt-out functionality.
Who gets the value?
However, the situation could be different if the manufacturers addressed all of the above concerns and actually designed their connected devices to offer real value to their customers. Connected devices could be designed to help customers set up their appliances painlessly, while manufacturers could provide apps and services that help customers to use machines better and get insights and instructions to save money when using them.
Better yet, they could let users have more control over which data is shared, and find ways to combine the appliance data with other data, e.g. weather, energy pricing or household data.
Put simply, manufacturers could design connected devices and associated data in a user-centric way to empower their customers to use the machine better and get more value from it, rather than just designing them to help their own business.
For example, if a smart washing machine knows that it is in the home of a family with two young kids, it is rainy autumn, there are football trains twice a week, and electricity is cheaper between 10 pm and 6 am and on weekends, the washing machine app could offer a laundry schedule.
This is just a simple example – there are many other smart ideas on how to use that data. But it requires the customer to get the data, and be able to combine it with their other data (that can be sensitive too) and other sources. This requires an open market approach. It cannot be a walled garden environment where the manufacturer alone gets to decide how to use the customer’s data.
Connected appliances must be user-centric by design
Data collected from consumers cannot be used just to profile customers, sell them more stuff and try to exercise more control over them. This has been the model for various online services, but when it comes to people’s homes, wearables and personal life, customers are becoming more skeptical about sharing that data unless they can see real value for themselves.
There’s no doubt that data from home appliances can offer great value to consumers – but only if they’re designed to do so. This is crucial. McKinsey just published an article on why human-centric innovation is necessary. The key to delivering that value is giving consumers control over which data (and when) they share with manufacturers or other parties, and allowing the data to be combined with data from other smart devices at home and external data.
The old-school approach of manufacturers forcing consumers to give their data to them doesn’t work so well anymore. We are coming to an era where consumers want more value from their own data, and will only share it with companies that enable that value and provide a good user-centric approach to their products and services. Companies that are able to offer this new approach will be able to motivate people to buy connected devices, and also build up better customer loyalty.
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