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What the Internet of Things Means for Loyalty Marketers

With the rising popularity of virtual assistants, fitness trackers and smart home appliances, the Internet of Things has huge implications for retail and loyalty marketing. This new place in customers' homes offers the chance to capture real-world consumer data. Find out how to use the IoT to improve the customer experience.

Heather Gouinlock, Client Lead, LoyaltyOne Global Solutions

With the rising popularity of the Amazon Dash button, Google Home, Nest thermostats, Fitbit activity trackers and smart home appliances like refrigerators and washer/dryers, the Internet of Things (IoT) has quickly become a hot topic for both consumers and businesses. The excitement has been especially pronounced in the retail industry, where the phrase regularly pops up in online forums, during conference keynotes and in the industry trades. The impact of in-store applications, like scannable packaging, are already commonplace, but despite all the attention, few brands have fully realized the impact the IoT could have on how they interact with customers.

Gartner forecasted that 8.4 billion connected things would be in use worldwide in 2017, up 31 percent from 2016. And that number is predicted to reach 20.4 billion by 2020. Smart home devices alone (smart thermostats, lighting controls, motion sensors, etc.) are now owned in 15 percent of households in the U.S. As smart devices become more prominent, they will allow brands to capture a massive amount of real product usage data and many other useful user stats. In other words, the IoT will allow brands to track actual behavior rather than just stated behavior.

The opportunity

For loyalty marketers in particular, this opens up opportunities to drive device adoption, reward regular usage behaviors and engage customers in new and unexpected ways. That ability is critical. We are moving into an era when consumers expect brand interactions to be contextually relevant and woven into their everyday lives. The connected devices of the IoT, and the continuous insights they provide to marketers, enable that in a seamless way, following the day-to-day lives of consumers beyond the store and online.

IoT also opens up the opportunity for CPG companies and manufacturers of in-home devices to have a direct touchpoint with the consumer, with less reliance on retail partners. That reach means they can access customers and behavioral data, and track the customer journey (both of which are increasingly controlled by tech giants like Google and Facebook). That control means they have better leverage in their negotiations with retail and e-commerce giants, like Amazon.

What it means for loyalty

This new place in customers' living rooms (or kitchens, garages, laundry rooms, etc.) holds huge potential for loyalty marketers. For the first time, brands will be able to capture meaningful data about how consumers use and interact with products in their day-to-day lives. The IoT will give insight into how, where, when and possibly even why customers are interacting with brands. Those details can be used to personalize the customer experience on a one-to-household level. They can also be used to deliver loyalty program experiences to members in the most contextually relevant and impactful moments.

But the space is evolving rapidly, and this new direct access to consumers is valuable enough that all sorts of companies will be vying for their place in people’s homes. To maintain access, companies need to build proprietary data sets and loyalty strategies focused on using the IoT in a fun and meaningful way. They also need to explore partnerships that allows them to interweave behavioral data with other customer insights, which will lead to less one-dimensional, more personalized experiences.

For example, a toothbrush manufacturer could make brushing more exciting by using a connected product to track users' habits, engaging users through a digital app with extended experiences and prompting them with rewards for regular use. This could include special offers and reminders when it's time to buy a replacement brush head, or make a dentist appointment. It could also be combined with an offer for toothpaste discounts.

All this is to say that the world of loyalty marketing can (and should) expand to new brands and categories - something LoyaltyOne Global Solutions, is facilitating for their clients already. Brands, traditionally intermediated from their customers, are now pursuing direct-to-consumer strategies.

Exchanging Value for Information

According to a survey by Intel Security, a majority of people worldwide indicated they might be willing to share personal data collected via smart home devices in exchange for money. Millennials are more comfortable with sharing their behavioral data than other generations. Companies that pair a rewards proposition with a connected device will maximize the potential benefits of IoT adoption in the home.

Some companies are doing this already. Nest offers Rush Hour Rewards where customers can earn payments for saving energy during peak demand periods. To participate, customers opt to allow their thermostat to automatically set temperatures before, and during peak hours, to reduce the strain on the electrical grid and the energy company. The program allows Nest to gather valuable data on energy usage for resale on aggregate to governments and energy companies and the customer gets savings in return.

The proliferation of the IoT is only going to grow, and brands have a unique opportunity to get ahead of the curve by building their capabilities now and/or by integrating with top smart devices. With access to this direct source of data, opportunities abound for new types of brands to explore loyalty programs, and for brands with existing programs to use enhanced data and presence in customers’ homes to provide even more relevant and engaging experiences.

And IoT applications will go far beyond the home, all the way to smart cities. Look out for my next piece in this series, which will explore best practices for the many out-of-home applications of connected devices.