Internet of Things (IoT) has changed the way everyday products interact with human beings with the internet directly accessing data from toothbrushes, thermostats and glasses. This technological evolution will impact both the product life cycle and buying patterns.
Analyst firm IDC predicts the IoT market will grow by 19% in 2015. It is no wonder companies are now looking to capitalise on it. Business Insider data claims software makers are set to earn at least 90% of total revenue created by the IoT. As digitally-savvy customers keep moving the goal posts on what good customer experience is, businesses need to adapt their technology to succeed.
Smart companies should focus on providing additional value at every point of interaction. There needs to be a move away from just being product-focused to looking at what complementary services can be provided. An online or mobile service which gives merchants greater customisation options, such as new ways to change the user interface, or providing localised payment methods appeals more than inflexible services.
IoT commerce is already proving popular, with Avangate research showing 64% of consumers want to buy through wearable devices. As new technology creates new revenue opportunities, traditional revenue models such as one-time purchases are being replaced by new models such as subscription, freemium and free-trial.
Consumer-facing industries such as media and entertainment are the most obvious examples of disruption and services such as Spotify, Tidal and Netflix show how modern customers subscribe to services by starting small. Businesses need to consider free or ‘freemium’ pricing models to drive adoption. Once a sizeable market is acquired, they can then convert ‘free users’ into ‘paying customers’.
The Internet of Things creates more new business models but also challenges, specifically around security. As more people put their faith into technology, there are concerns about the security of personal data and networks which businesses should address.
A recent HP IoT report stated 70% of the most commonly used IoT devices have vulnerabilities involving password security, permissions and encryption of user data. Protecting connected devices is a crucial step for vendors, so some have invested in the “Security of Things” technology, aiming to block malware and unapproved agents accessing smart devices, home or work networks.
New business models are created to secure smart devices because there are currently no policies or regulations regarding best practices or security standards for IoT devices. Security vendors are offering tailored packages for data protection software to IoT users which hopes to allay customer concerns. This is a good time for security vendors to think ahead as new European General Data Protection Regulations (GDPR) could mean businesses may have to adhere to strict data protection regulations quickly.
New technology needs to be trusted to gain traction, IoT is no exception and damage of high profile breaches could set back progression within this industry significantly. In this post-breach world, there can never be too much security or cyber threat prevention. This explains why the global IoT security market has a Compound Annual Growth Rate (CAGR) of 32% over the next four years.
Keeping customers safe is crucial but it is also about keeping them engaged throughout the commerce journey. IoT is a market disruptor but still abides by the old rule of presenting the customer with real value. Customers are expecting a more efficient, secure and tailored experience. If businesses can provide this, and are able to monetise, and turn revenue leakage across stages of the digital commerce lifecycle into revenue uplift through clever commerce tools, their revenue stream will be secured for a long time.
