How the Internet of Things will fundamentally change marketing.

Published 8 December, 2016 by Seán Donnelly @ Econsultancy —
Seán Donnelly is a Senior Research Analyst at Econsultancy.

A few weeks ago I wrote a post that looked at why marketers need to pay attention to the Internet of Things (IoT).

An Econsultancy subscriber posed some interesting questions in the comments section of that post, so this article is an attempt to respond to his points.

It’s always nice to receive comments and questions on posts as they provide great opportunities for us here at Econsultancy to challenge our own thinking. 

In this case, the subscriber asked about the implications of IoT for marketing and in particular digital marketing. These questions provide a nice opportunity to delve a bit more deeply into the topic that perhaps I didn’t do well enough in my first post.

With that in mind, let’s start with marketing.

What are the links between IoT and marketing?

Perhaps this isn’t articulated clearly enough in my earlier post despite my intent. I would suggest that the link between IoT and marketing may depend upon how one views the role of marketing.

  1.  Is marketing a tactical activity that focuses on the 4Ps of product, price, place and promotion?
  2.  Or is it a broader strategic activity that positions marketing as the key function of a business?

I would take the second view. If the goal of a business is to create and satisfy a customer, then marketing and product / service innovation are the key strategic activities that add to the bottom line.

If we expand on that view even further, then it is up to marketers to understand the market. This means understanding consumer demand and continually observing the competitive landscape.

Clearly this positions marketers as leaders and every other business function as a supporting activity.

Strategic marketing

IoT and the competitive landscape

If we take this second view and then we need to be aware of what impact the Internet of Things might have on our competitive environment.

In my earlier post I provided examples of how GE changed its business model from focusing on transactional relationships to designing systems to tap into closer client relationships, effectively making clients more reliant on GE and so making it difficult for those clients to change provider.

And so I think marketers will need to consider what impact IoT may have in terms of the key competitive forces at play in their own industries. By competitive forces I am referring to bargaining power of suppliers and buyers and threats of new entrants and substitutes.

I mentioned Uber which is effectively mobile software that connects passengers with drivers of vehicles for hire. Before the saturation of smartphone usage, Uber may not have succeeded. Here’s why.

Buyers (of taxi services) had less bargaining power and for the taxi industry, the threat of new entrants was moderate.

In countries with regulated taxi industries, drivers have to study and take tests to be awarded with a license to drive a public service vehicle. They may also have to spend a lot of money to purchase their taxi license and in some jurisdictions, a specific vehicle for taxiing; a black cab for example.

Uber has bypassed much of this red tape although in fairness, regulatory bodies in many countries are scrambling to catch up due to concern about safety and protecting incumbent players. Since its launch in San Francisco in 2010 it has expanded into over 20 countries and significantly disrupted the taxi industry.

In my first post I discussed attending Web Summit. Considering so many companies at Web Summit want to be the next Uber of [insert industry!], then marketers really do need to consider the impact that ubiquitous connectivity of devices with each other, the internet and the wider environment might have on their industry.

They may consider this from a defensive point of view but equally, they may see it as an opportunity to innovate and find ways to create new and better customer experiences.

IoT disrupting industries

While taxi drivers couldn’t see Uber coming, car manufacturers can see self-driving coming. Beyond Uber, connected cars may be the most familiar example of IoT related technology.

Connected cars, autonomous driving systems, artificial intelligence and cloud computing are driving huge changes for car manufacturers. IoT has had a hand in all of these. 

IoT related technologies are going to redefine the automotive industry. Car manufacturers are now finding themselves operating in an environment where they need to keep an eye on the likes of non-traditional competitors like Tesla, Google and Apple. Two of these companies didn’t exist 20 years ago.

IoT can enable new approaches to driving and potentially new business models:

  • A landscape of connected cars could lead to a significant uptake in autonomous vehicles that can communicate with other vehicles, traffic management systems and sensors in the road to manage safety and optimise journey routes.
  • IoT can and perhaps is turning car manufacturers into technology companies. Like mobile phones before cars, could cars, like mobile devices (think Nokia) become secondary to the software that is running them?
  • Like the GE example I provided before, sensors in cars can create new services models, giving owners a better understanding of how their vehicles are running and predict potential breakdowns.
  • Internet-enabled sensors in cars can also monitor driver behaviour and so also be used by insurance companies to charge more appropriate premiums.
  • Car mobility data could be used by marketers to figure out ways to target drivers / passengers with personalised offers.
  • For the likes of Google and Apple, companies which have entertainment platforms, they might also make money from selling in car services and entertainment. This makes sense if passengers aren’t actively involved in driving and so can spend time on other pursuits.
  • If a connected car can recognise that something is wrong, it can diagnose the issue and optimise the driving experience to manage the issue. For example, it could turn off air conditioning to conserve energy. It could also communicate with other cars around it to identify that there is a potential issue and also find the closest service centre.
  • In fact, a new connected landscape could lead to an end to car ownership altogether as more and more peer-to-peer services proliferate. In London at least, there are ZipCars in many neighbourhoods. 

As well as new opportunities, car manufacturers will also need to think about software security and the risk of being hacked.

That changes the paradigm for tactical marketing in terms of producing communications not just about car performance and safety but also cyber security.

Tactical marketing

Let’s bring things back to a more tactical level and look at what IoT could mean for digital marketing in particular.

I mentioned in the previous post that IoT could enable marketers to provide enhanced value and services. I also mentioned that IoT can provide real-time, contextualised data that can come from many touchpoints over a period of time.

Let’s dig a bit deeper. The keywords here are touchpoints and data and could lead to functional changes in terms of how marketers do their jobs.

Econsultancy’s 2016 Digital Trends report found that seven out of 10 respondents identified the mapping of the customer journey as a strategic priority for the next few years. This suggests getting an understanding of touchpoints along that journey, both online and offline.

The beauty of IoT is that the deployment of internet-enabled sensors could provide marketers with real-time, contextualised data from online and offline touchpoints over a period of time. In this sense, IoT may provide marketers with the final piece of the jigsaw that’s been missing to provide a unified approach to marketing activities, online and offline.

Consider that in Econsultancy’s 2016 Digital Trends report, personalisation and content optimisation topped the priority list for marketers this year.

However only 20% of marketers have an actionable ‘single customer view’ that combines data sources about individuals (Source: Quarterly Digital Intelligence Briefing: The Pursuit of Data-Driven Maturity). Clearly there is a huge disconnect between the aspiration of truly personalised marketing communications and the reality.

Analytical marketing

As internet-enabled sensors such as beacons become more prevalent, the implications may be significant. I would suggest that the data from those sensors may be used to enable marketers to more accurately map offline touchpoints and develop a single customer view based on online and offline behaviour.

This could lead to all sorts of functional changes to marketing activities:

  • Real-time market research versus traditional market research methodologies.
  • Access to a single customer view.
  • Ability to deliver real-time, contextualised and personalised communications depending on where a customer is in their decision journey.
  • Access to data that can be used not just for personalised marketing activities but also to inform product and strategic decision making. 

Consider that a million connected devices sending an update two times per second create the equivalent of 333 times the number of tweets per second that Twitter has to deal with.

Then consider that Cisco forecasts 50bn such devices by 2020. That’s a lot of data to slice and dice. 

As organisations continue along their journey to digital maturity, marketers will be expected to deal in proven and impactful metrics. IoT may provide some of those metrics.

IoT and Customer Experience

A world of interconnectivity provides an opportunity to improve products and services in real time.

IoT could provide marketers with the information that they need to improve customer experiences and thereby effectively balance marketing activities between customer acquisition and customer retention.

Clearly this has implications for the marketing function in terms of budgeting, operations, service design and approach to advertising. Interestingly, the concept of Customer Experience (CX) has been gaining traction in recent years as a key strategic priority for many organisations to create sustainable competitive advantage.

Conclusion

Ubiquitous availability of bandwidth, limitless computational capacity via cloud computing as well as near infinite amounts of storage means that we are increasingly going to see new and innovative use cases for IoT.

In fact, I would suggest that the Internet of Things will bring things that we can’t even predict yet.

With that in mind, I recall the words of Keith Weed, CMO of Unilever when he spoke at our Festival of Marketing in October. On the subject of learning, experimentation and success, he said “Pull the future forward and the outside in”.

As we move towards an ‘Internet of Everything’ the only constant left on the table for marketers is that change is inevitable. The goal of this post and my original post is to encourage marketers to think about IoT beyond what it can do to support marketing campaigns today.

With that in mind, as marketers I think we need to keep our eye on the horizon and consider what IoT means for us as professionals, for our business and for our industry.

As always, comments, critique, questions and positive discussion are most welcome. It will be interesting to see how industries will continue to change as consumers acquire more internet-enabled devices and more of our everyday products are connected to the internet.

Econsultancy has published a number of blogs about the Internet of Things as well as these reports:

  • A Marketer’s Guide to the Internet of Things
  • A Marketer’s Guide to Wearable Technology

Readers may also be interested in Econsultancy’s Predictive Analytics Report, published in association with RedEye.

This report looks at adoption levels of predictive analytics and the types of strategies and tactics organisations are using.


By Seán Donnelly @ Econsultancy