About 6.4 billion “things” are currently connected to the internet, and Gartner predicts that this number will reach 20.8 billion by 2020. Not only are there a greater number of devices being connected to the Internet, there are a greater variety as well – everything from wall sockets to espresso machines to lightbulbs are now embedded with sensors and network connectivity that enable the capture and exchange of data.
This diversifying and rapidly expanding Internet of Things (“IoT”) ecosystem is having a profound impact on loyalty programs, creating more flexible payment options, rewarding members for certain behavior and allowing for greater opportunities for personalized communication. However, loyalty practitioners must mindfully manage privacy concerns, keeping in mind the intimacy of the data being collected.
Not All “Things” Are the Same
In broad strokes, the consumer landscape of the Internet of Things can be broken into three main categories: wearables, beacons and home appliances. Each of these device categories will have a different potential impact on loyalty. Companies looking to incorporate connected devices into their loyalty programs must therefore first understand the kind of devices, and then design around the capabilities afforded by them:
Wearables, such as smart watches and fitness bands, point not only to the increasing number of wallets and payment options, but also to the potential of loyalty programs to reward ideal behaviors (for example, going for a run, or walking 10k steps)
Beacons and other geo-locational devices highlight IoT’s power to encourage store visits and enhance the in-store shopping experience through personalized communication.
Wireless sensors within consumer appliances and in automobiles allow companies to reward good behavior and to predict, diagnose and prevent devices from malfunctioning.
Really Big Data
As the number and type of devices connected to the internet grows, so will the amount of data collected by them. These devices will provide a real-time, fly-on-the wall view of what customers actually do, where they are, what they like, and what they don’t – all without them having to actually say a thing. Marketers will no longer have to predict what customers will do; rather, they will simply have to observe a customer’s behavior and understand the context around a particular action. All this data can be leveraged to design better customer experiences, right from their journey through a store all the way through to how the loyalty program perfectly targets them at the right time to encourage repeat purchases. With billions of objects constantly spewing data, IoT will only intensify the need for business intelligence solutions that can comb through this data and provide consumers with immediate and relevant communication.
Rewarding Engagement and Behavior
In recent years, social media has provided a platform to monitor, encourage and reward non-purchase behavior such as posting, sharing and liking. IoT is greatly expanding the universe of potential non-purchase behaviors that can be rewarded – now, companies can incentivize people for staying fit, driving safely or for reducing electricity consumption during peak hours. For example, healthcare insurance company Humana uses fitness bands to reward fitness activities – the HumanaVitality program is offered to nearly 4 million members and encourages them with rewards for participating in over 30 fitness activities, such as taking 10,000 steps per day. A three-year study of Humana employees showed those who actively participated in HumanaVitality throughout the study increased their healthcare savings by nearly 20% and saw a 44% reduction in sick days. Not only does wearable tech result in savings for consumers, but by successfully changing unwholesome behavior on a large scale, insurance companies can significantly drive down costs.
Similarly, utility companies are designing loyalty programs around smart home appliances such as the Nest Thermostat by offering incentives to consumers who reduce energy loads during peak hours.
Seamless Customer Experiences
The growth of IoT is helping to create convenient, fun, personalized and seamless experiences that creates further loyalty. One key example of this is the Amazon Dash button, which lets consumers re-order specific products with the simple push of a button. In stores, beacons are allowing customers to enter the products they are looking for into their phones and get a walking map that leads right to each item (no more desperate searching for a store person to ask which aisle something belongs in) – and also providing them with special offers along their path.
Guests at the Walt Disney World Resort are given a MagicBand wristband, integrated with the My Disney Experience app, which facilitates planning activities such as dining, rides, attending parades, and so on. Disney can use the tracking information and send them personalized messages like what rides they might skip if they are running behind, or, if they are heading toward a congested area, a better route to take. Customers can also tap the MagicBand to pay for things (no cash needed), and scanners read it during rides. This means that after you finish a roller-coaster ride, you no longer need to wait in a long line to find and buy your picture – the image shows up on your My Disney Experience page so you can buy them at any time.
These devices strengthen loyalty by giving shoppers a premium, personalized feeling and an excellent customer experience that ensures they keep coming back. You can’t ask for more in terms of loyalty!
Predictive Diagnosis
By integrating digital sensors and touchpoints with cars, appliances and even the human body, the Internet of Things is shifting the way brands and product owners communicate about the health of the devices they own. For example, Mojjio is a 3G and GPS equipped device that plugs into any car’s On-Board Diagnostic port and constantly monitors the health and status of the car. Whenever it detects an issue, the driver is immediately notified with detailed information, so he or she can head to the repair shop or car dealership with confidence. From a loyalty perspective, the diagnostic capabilities in devices such as these create a strong emotional connection with drivers by reassuring them that they will be informed before things go seriously wrong – for example, by telling them that their left back tire has low air pressure before it’s visually noticeable – thereby making them feel safer and adding to the life of their car.
Don’t Become Big Brother
While the Internet of Things is certainly adding a dimension of convenience to people’s lives, there is a dark side to this technology: the creation and transmission of data opens new opportunities for this information to be compromised. More data, and more sensitive data, available across a broad network means the risks are higher and that data breaches could pose significant dangers to individuals and enterprises alike. Thanks to IoT, data security risks could compromise important public systems. Therefore, vigilantly safeguarding this information is a major concern, and IT investments to ensure that this happens will be a major cost to consider.
Not only do companies have to be aware of sensitive data getting into the wrong hands, but marketers must also be mindful about the way they communicate to the end users themselves. The trust relationship with a consumer is extremely fragile, and once it is broken, it is almost impossible to mend. Also given the scale and the sheer personal nature of the data being collected, the impact if misused can be jarring and downright creepy. For example, just before Father’s Day, the fitness tracking company Jawbone sent consumers a marketing email with the title “Your dad…”. This created an uproar, as many readers assumed something bad had happened to their Jawbone-using fathers, and that Jawbone was notifying them of the situation through an ‘emergency contact’ style communication.
With such sensitive information, companies must ensure that best practices being followed by the financial and healthcare industries are applied to the data generated by these devices. At minimum, companies must offer easy to use and highly transparent opt-in and opt-out mechanisms and clear data use policies.
Conclusion: Those That Do It Right Will Delight
The Internet of Things is very much here, and it’s opening up a huge potential for brands in all industries to capture and retain loyal customers who are genuinely enthusiastic about the products and services being offered. As brand sentiment deeply hinges upon the customer experience – centered around convenience, communication and care – companies who use the Internet of Things to garner greater loyalty will surely win big.
Ritesh Bhavnani, President – Snipp Interactive
This article first appeared in Loyalty360. September 07, 2016.