The 2 Phases of Internet of Things and Marketing

In August, it was reported that 51 percent of marketing executives expect the Internet of Things (IoT) “to revolutionize marketing by 2020,” according to a study by the Economist Intelligence Unit.

The question is why?

IoT has been couched as a tool for ‘personalization,’ ‘engagement’ and new ‘customer experiences,’ but these characterizations are too vague. IoT may be worthy of all the buzzwords, but what will it actually look like in day-to-day life?

I argue that IoT will evolve through two phases. In Phase 1, marketers will seek to improve peoples’ lives by collecting data about product use and then introducing services that fulfill unmet needs. By meshing devices with services, they will make products that are more useful and therefore more marketable.

In Phase 2, marketers will attempt to open this system to advertisers. We will see the development of ad networks designed for the Internet of Things.

To illustrate Phases 1 & 2, let’s consider the smart refrigerator, the archetype of home IoT. Yes, IoT refrigerators exist, and yes, some are trying to produce the capabilities I will describe.

When NextMarket Insights surveyed consumers about connected kitchen appliances that would interest them, “a fridge with the ability to monitor food inventory using a smartphone” was the most popular choice. So Phase 1: to improve the experience for refrigerator owners, create a smart fridge with sensors that notify owners when items are running low. To personalize the experience, allow owners to choose which items are measured (some people drink more beer than milk).

Once you collect, aggregate and analyze enough inventory data, you will know what people buy, how often they buy it and how much time lags between running out and repurchasing. You will see all sorts of personal, geographic and demographic disparities among smart fridge owners. That’s a marketing gold mine.

In Phase 2, offer the consumer ways to repurchase goods and introduce an ad network for food brands. Maybe you partner with a grocery delivery service and show a “Reorder” button on the fridge’s touchscreen; maybe you push inventory warnings to a smartphone app that automatically adds items to a grocery list; perhaps the fridge tells the smart TV to run milk ads on its streaming service. If the consumer buys milk at the grocery store using her mobile wallet, the wallet tells the TV to not run milk ads later that day.

Phase 2 IoT will create a new income source for device makers and a whole new marketing channel. However, consumers must have the power to choose how (or if) they are marketed to. Device makers will have to provide opt-in/out options for users, anonymize data and be transparent about what they collect to prevent a backlash.

Phase 1 is in progress. Phase 2 is near. This isn’t science fiction – this is future of marketing and IoT.

Matt Goddard is the CEO of R2integrated.

Photo credit: Robert Scoble via Visualhunt.com / CC BY