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Smart home market: A natural gateway into customers’ homes
The smart home market continues to grow and is expected to reach a global revenue of $141,220 million by 20231, almost doubling its 2019 results. Utilities, OEMs and HVAC companies are, or should be, racing to capitalize on this
unprecedented opportunity. With a household penetration that’s supposed to go from 7.2% (2019) to 16,7% (2023), smart devices and systems present a great way to enter customers’ homes, to strengthen and lengthen relationships.
Here are some key success factors providers should consider as they step into the smart home market.
Relevant product range
Intuitive sales channels and triggers
The right partnership models
Motivation based positioning
Flexible pricing models
Customer experience for the life of the relationship
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Striking a balance between customer wants and what they need
Creating awareness Hitting just the right note when it comes to product offerings is always a difficult proposition. Understandably, when asked what they want, customers often favour options that fit within their current knowledge of what’s available on the market.
That said products and services are constantly evolving and consumers may not be aware options that will make their lives easier or save them money already exist or are just around the corner.
When consumers are made aware of the existence of a product or service, their interest often rises. This was clearly demonstrated by the Engagement Opportunity2 survey which showed almost 60% of respondents were interested in a Home Assistance service despite a low level of awareness about it initially.
Building on existing relationshipsSmart home connectivity presents an opportunity for providers to position themselves as both suppliers of existing smart devices and sources of information about upcoming innovations and additional service opportunities helping to forge deeper, more meaningful relationships with customers.
McKinsey’s Connected Home Market3
survey shows consumers are highly interested in utilities management devices and systems but have an average-to-low willingness to pay for them, suggesting the value propositions are misunderstood. Educating customers on the benefits of smart home connectivity opens a door to a lucrative market that’s been largely ignored by big tech giants.
Interest in smart home devices
HomeServe 2017 study based on 20,000 customers across 20 countries. % who would be interested in controlling elements of the home via an app
41%
31%
28%
43%
39%
49%
Heating / cooling
Appliances
Door opening
Lighting controls
TV and audio
Home security
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Applying reverse thinking
A customer-centric approachUnderstanding what drives customers’ interest in smart home devices could help strike the right balance between product range and services opportunities. Rather than use products as a starting point for segmenting and positioning, providers should reverse their thinking and use motivations as a more efficient way to understand consumers. It’s a customer-centric rather than customer-focused approach.
Most consumers have neither the interest nor the time to understand how their homes get powered or how their boiler works. As a result, 72% of consumers4 rate the ability of their Utilities to provide products and services that enable them to manage
their “energy consumption using digital tools e.g., mobile applications, smart thermostats, etc.” as “very or somewhat important” on their willingness to buy additional products and services.
At the same time, only 66% see their provider as doing an “excellent or good job” on that front so, room for improvement and opportunity.
Baltimore Gas and Electric Company (BGE5), a subsidiary of Exelon Corporation, has taken a proactive approach using smart capability to help reduce customers’ energy bills through home energy reports and high usage alerts. 55% of customers engage with the communications and the Utility has seen a 6% increase in customer satisfaction as a result.
Reaching out to non-usersThis shift in approach could also help providers reach consumers who are non-users of smart technology. In their connected homes report, McKinsey identified several common behaviours in non-users that could create sales opportunities, such as:
• Leaving the lights on (51%)
• Leaving the TV or an appliance on (41%)
• Leaving the AC running (35%)
Underlying motivations in every slice of the Smart home drivers’ wheel (below) is a yearning for peace of mind. In fact, HomeServe’s Engagement Opportunity survey found that almost 70% of homeowners list peace of mind as their top reason for being interested in Home Assistance cover.
Customer motivations behind the interest in smart home
Detection devices and smart appliances
Home automation
Smart thermostats and valves, home entertainment
Energy management, smart meters, solar
and battery
Home security
Smart home drivers
Helping my home run smoothly
Reducing effort
Making my home more comfortable
and enjoyable
Saving money / energy
Keeping me safe
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Partnerships are the way of the future
Traditional energy providers have “a window of opportunity in the connected home to partner, test and learn,” says Accenture6. “This window will rapidly close as competitors take advantage of early adopters and rapidly evolving technology to establish strong value based offerings.”
Currently, the market is being driven by:
• Tech giants: Amazon, Google and Apple are flooding homes with smart ecosystems. Amazon alone had sold more than 100 million Alexa devices as of early 20197.
• Home specialists: In the shadow of giant tech manufacturers are thousands of much smaller companies focusing on task specific devices. For example,
Tado8 and Climote9 are smart thermostats that allow people to control and monitor the temperature in their home via an app on their phone or from a computer.
• Appliance and electronic manufacturers: Manufacturers like Viessmann10, Bosch and Phillips are enhancing their products with smart capabilities such as self monitoring boilers and refrigerators with screens.
Does that leave any space for Utilities? Absolutely! Especially since the McKinsey’s Connected Home Market survey shows service provider brands have a marked advantage when it comes to awareness over manufacturing brands.
Some energy providers, like Enel11, have already joined the fray. It was the first company in the world to introduce smart meters and by 2019 it should have installed 21 million units.
Data-driven services on the cardsIn the near future, we should expect a shift away from a device-driven smart home market towards data-enhanced services, according to Accenture. This is good news for providers who can leverage their billing relationship and connection with long-time customers to offer added-value services. That said it will be critical that any development in smart home offerings allows for integration with the technology mentioned above.
Service providers at the forefront of customer education
Partnership opportunities also exist with smart home specialists and home services providers – installation and maintenance being a market gap. “Providers of ongoing products and services have domain-specific knowledge and credentials which
they must use to build out services and secure their presence in the connected home,” argues Accenture.
Energy supply, installation, maintenance and repairs all provide relevant meaningful moments for
connection that come with the potential for education about smart products and services that could benefit both the customer and the provider.
Partnerships with those who have their finger on the pulse will play a role as they allow providers to cover more ground, retain the relationship with the customer and push back against device-centric tech disruptors.
Trigger opportunities as channels for smart home services
Direct demand
Energy supply
Smart meter installation
HVAC installation and maintenance
Home repairs and maintenance
Solar, battery and vehicle charging
Home efficiency consultancy
Trigger based
demand
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One-time fees or monthly subscriptions?
Pricing also plays a crucial role in the success of smart home offerings. Stand-alone one-off payments, bundles of core products and services, rentals and subscription services are all possible options for Utilities allowing them to build and maintain a sustained connection with their customers. The key is to ensure the perceived value of the ongoing service remains high while bundling it with broader home services offerings, including smart devices.
Monthly services also offer the potential to collect data about customer preferences, which in turn allows providers to fine-tune their offerings in a way that meets customer expectations even more. And if the price of devices is a barrier for consumers, why not give it for free?
Giving it for free?Utilities could learn a thing or two from the home entertainment and telecom sectors when it comes to creating the conditions for long-lasting relationships with customers in this new environment. Satellite suppliers Sky for example, focused on free hardware in order to gain penetration for subscription services. In a similar way, phones are distributed at a great discount when customers sign up for longer contracts.
Some Utilities are already on the right track. Spanish energy provider Iberdrola7 for example, is giving their Netatmo8 smart thermostat for free (a value of nearly €170) with any boiler replacement. Smart products that require monitoring provide a great opportunity to stay in a customer’s home long after the boiler has been repaired or replaced. They also help reduce consumption.
Customer experience
Smart thermostats, connected appliances, AI assistants… It’s difficult to imagine how the average consumer can keep up with all the innovations and understand the pitfalls of buying non-compatible technology, let alone have the knowledge to connect it all together and collect any meaningful data out of it.
In that context, providers who can help customers make sense of it all or can take on the burden of making it all work together could endear themselves to consumers and gain their trust. Right from the beginning, providers need to communicate the benefits of their products in a way that’s easy to understand.
Stripping away the complexity and jargon from the moment of purchase through the installation process, and continuing by supporting the customer post set-up to ensure they are getting the most from their system, could transform a purchase experience into a lifelong relationship with the customer.
Here again, the benefits of partnerships could be invaluable to establish a connection at the right touch point.
Leveraging success factors
Relevant products, at flexible prices, supported by a readiness to inform and support at the right time and place are all key factors of success for Utilities interested in taking advantage of the bounty that is the smart home market. By 2023, according to Statista, the number of households involved in the smart energy management segment alone is expected to reach 322.4 million.
Partnerships, such as home services, can help maintain an ongoing relationship with the customer, increase communication and touch point opportunities, and allow providers to leverage connected technology and data in a pro-active
and meaningful way.
References1 https://www.statista.com/outlook/279/100/smart-home/
worldwide2 https://www.homeserveglobal.com/insights/3 https://www.mckinsey.com/spcontent/connected_homes/
pdf/mckinsey_connectedhome.pdf4 https://www.accenture.com/fr-fr/_acnmedia/Accenture/
next-gen-5/insight-new-energy-consumer-2017/Accenture-NEC2017-Gets-Personal-POV.pdf
5 https://www.global-energy-elites.com/articles-2020/innovation-drives-savings-for-maryland-utility
6 https://www.accenture.com/gb-en/_acnmedia/PDF-56/Accenture-Heating-Up-For-Energy-Providers-UK-Connected-Homes.pdf
7 https://techcrunch.com8 https://www.tado.com/us/thermostat-heating9 https://www.climote.ie/10 https://www.viessmann.co.uk/residential/smart-home/
viessmann-apps/vicare11 https://www.enel.com/stories/a/2016/08/smart-home-
smart-city11 https://www.iberdrola.com/home12 https://www.iberdrola.es/en/services/equipment/smart-
thermostat
HomeServe
Founded in 1993, HomeServe has become a global leader in Home Services solutions with over 8 million customers worldwide. Working closely with partners in many markets, HomeServe delivers a range of Home Services to homeowners that include maintenance and repair for heating, electrics, plumbing and drainage,
HomeServe’s propositions help our partners acquire and retain more valuable customer relationships by extending their relevance within their customers’ homes. For more information about Home Services opportunities, get in touch!
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