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Insight: Marketing the Smart Home

NZ Security, June/July 2017

University of Otago study sheds light on smart home consumer preferences.University of Otago study sheds light on smart home consumer preferences.

 

The widespread adoption of smart home technologies by New Zealanders seems almost an inevitability, but the market remains far from convinced that smart homes are worth the investment… and the risk. Recent Otago University research provides important insights.

 

Published in May 2016 by the University of Otago’s Centre for Sustainability, Smart Homes: What New Zealanders think, have and want explores consumer awareness, knowledge, and attitudes about connected smart home technologies, and the opportunities and barriers for widespread uptake. Authors Rebecca Ford and Rana Peniamina, based their research on a statistical analysis of a national survey of 1636 respondents.

According to Ford and Peniamina, the market for smart home technologies and services has been gaining momentum since 2005, with US$550 million in venture investment between then and 2014, and a projected investment of US$380 billion by 2025. Juniper Research projects that spending on smart home devices and applications will reach $195 billion by the year 2021, more than double the projected $83 billion spend in 2017.

Although an estimated 30 million households in the US are expected to add smart home devices and applications during the coming year alone, the smart home market there remains dominated by early adopters. And in New Zealand, the market is even less mature.

"Although households in the developed world are beginning to embrace connected home solutions, providers must push beyond early adopter use," states Amanda Sabia, principal research analyst at Gartner. "If they are to successfully widen the appeal of the connected home, providers will need to identify what will really motivates current users to inspire additional purchases."

 

How familiar is the Smart Home?

It turns out that not too many people actually know what a smart home is. Only five percent of respondents to the Otago study were ‘very familiar’ with the concept of a smart home, with another 30 percent ‘somewhat familiar’.

In response to the question “What do you think about when you hear the term smart home”, “security” ranked 17th out of 19 responses – well behind energy efficiency, sustainability and automation, but ahead of the responses “scary” (19th) and “unnecessary technology” (18th).

 

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How desirable is the smart home?

Unsurprisingly, the study found that people interested in purchasing smart home products were younger (by an average of four years) and higher earning (by an average of $20K pa) than others. Nearly 30 percent of these already own other smart home products (smart appliance 21.1 percent, smart lights 7.6 percent, smart plugs 5 percent, and smart thermostat 4.5 percent).

38 percent of respondents agreed that they were interested in purchasing a smart home product, with the main perceived benefits including saving money, better control of energy, and improving comfort and security. The main desired capabilities were remote control of appliances, remotely monitoring appliances, and scheduling appliances to run at pre-defined times.

But security remains a relatively under-acknowledged benefit of the smart home. Asked what they thought were the benefits and capabilities of smart home technology, “Protect home from theft/vandalism” was only the fifth most popular response among respondents, behind saving on energy bills, reduced energy use, better management of energy use and making the home more comfortable.

Interestingly, this looks somewhat different to the picture in the US, where a Gartner survey, Connected Home Solutions Remain in the Early Adopter Stage, found that home security alarm systems have nearly double the adoption rates (18 percent) of other smart home solutions, such as home monitoring (11 percent), home automation or energy management (9 percent), and health and wellness management (11 percent).

 

Who owns smart homes?

The survey found that a very low proportion of respondents actually currently own smart home products, with less than five percent owning smart thermostats, bulbs or plugs. Around 12 percent say they own smart appliances, although around the same number were unsure as to whether they actually owned own one or not.

The main demographic difference between those who own smart home products as opposed to those that don’t own was their age. Respondents who own smart home products were, on average, older than the respondents who don’t, and there was found to be very little difference in their average levels of education.

The study also found that people who already own smart home products are more likely to be interested in purchasing smart home products, and they are also more likely to believe their peers want to own a smart home than people who don’t own smart home products.

 

Barriers to uptake

There’s a big numeric gap between the number of people who own a smart home and the number that want one. This is a true sign of a burgeoning industry, but there remain significant barriers to pushing uptake beyond the early adopters.

The most common barriers to uptake were stated to be lack of readily available information and lack of knowledge about where to buy these products. The main concerns holding those interested in smart home technology back were around data security (40 percent), difficulty of installation (38%) and value for money (34 percent).

Difficulty of installation is a rather ironic barrier considering that the drive to adopt smart home technologies is so much about the desire to make life simpler. The OECD notes that even one device, such as a smart heating controller, “can be complex to programme and manage.”

But the biggest barrier appears to be a lack of information about smart home products and a lack of knowledge about where to buy them. Only a small percentage of respondents strongly agreed (2 percent) or agreed (21 percent) that information was readily available, while a large percentage of respondents (38 percent) disagreed or strongly disagreed. Almost half the respondents did not know where to purchase smart home products and a further 38 percent ‘appeared to be unsure’ about where to purchase them.

 

The target market

Those who are interested in buying smart home products – the target group –  are, on average, younger than the group of respondents who already own smart home products, and they earn more than the average household income.

A high percentage of the target group had a household income of more than NZ$120,000 per annum (26 percent, compared to 16 percent overall). Just over half of the target market group had a household income of NZ$80,000 or more (compared to 39% of the overall sample).

So, what did the target group see as the benefits of a smart home? Saving money on energy bills was highest on the list at 86%, then improving energy management (82 percent), reducing energy usage (85 percent), making the home more comfortable (72 percent), equipment alerts (62 percent), protecting the home from theft/vandalism (60 percent), reducing negative environmental impact (54%), and saving time (52 percent).

Smart home capabilities identified by the target group as most appealing were about remotely controlling (79 percent), remotely monitoring (73 percent), and scheduling the operation of devices and appliances (71 percent).

 

Promoting smart home uptake

The Otago study suggests that promoting smart home technology uptake is about focusing on “marketing products that give households advanced monitoring, scheduling and remote control over appliances such that they can better manage their energy use and power bills, improve comfort levels, and increase security.”

It’s a suggestion reflected in a New Zealand Fairfax Media Future of Business Trend Report Opening the Gate to Smart Homes.

Colleen Ryan, Head of Strategy at insight agency TRA, states in the Fairfax report that it’s important to focus on the lifestyle enhancement that smart homes offer, particularly given the lack of concrete knowledge around them. “It’s important to convey the lifestyle benefits of smart home products,” she writes. “For example, how a smart washing machine enhances life and saves money will resonate more than focusing on the technology behind it.”

This resonates with the Gartner report. "Messaging needs to be focused on the real value proposition that the complete connected home ecosystem provides, encompassing devices, service and experience," said Jessica Ekholm, research director at Gartner. "The emphasis needs to be on how the connected home can helps solve daily tasks rather than just being a novelty collection of devices and apps."

Findings by ABI Research support the idea that it’s the functionality of the technology, rather than the technology itself, that will win over consumers. According to its Internet of Everything Research Service, “The long-term expansion of the market will be dependent on wireless technology becoming invisible so that the consumer will be oblivious to which technology is used and only know that it works.”

The Otago study also recommends the provision of better information about smart products and where they can be purchased. Ryan suggests that the media has a big role to play in educating, inspiring and reassuring people about the technology. “Whereas word of mouth might inform you about which is the best phone to buy or entertainment network to sign up to, it plays a lesser part compared to the media when it comes to smart homes.”

There are also key recommendations around the provision of support and compatibility. “Smart homes are often built incrementally,” Ryan points out, “so setting up a foundation with many options is not only convenient but promotes further smart home activity.”

She also suggests that bundling “may be a good launch pad”, and that a comprehensive eco-system or hub will also help to address the perception held by many that the technology “won’t be worth the effort it takes to install it.”

The Gartner report notes that respondents to its survey saw the value of one app for integrating their connected home services, as well as the importance of brand certification. More than half of their respondents (55 percent) showed preference towards one app integrating connected home devices and services, while 58 percent rated in favour of the importance of hardware and services being certified by a specific brand.

Lastly – but by no means least – the Otago study stressed that increasing adoption of smart home technology is dependent upon addressing concerns around data security. Cyberattacks on smart appliances are still relatively uncommon, but the threat landscape is changing, and consumers are fearful of handing control of their homes over to criminals.

 

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