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There’s Money to be Made in the Smart Home


December 15, 2015 - 5 Comments

Smart Home Blog_image[1]The race for the smart home is off and running. Almost every global tech brand, from Apple to Amazon to Google and Samsung, to smaller entrants like Canary, August and tado, want to firmly establish themselves in the home.  Why? They see the home as the next big thing to go digital. The market for smart home services and devices is big. And it’s going to get much bigger in the next 5 years. The total smart home market is estimated to be $115 billion by 2019. Service providers can address a good chunk of it – about 55-60%.

There’s definitely money to be made here. To help service providers understand their specific opportunity, we developed the Cisco Monetization and Optimization Index Model for Smart Home. Use this tool to get customized views of revenues, profitability and rate of return for various smart home services.  With the popularity of Google Nest and Dropcam, it’s evident that the smart home is no longer just the realm of millionaires or technophiles.  Strategy Analytics forecasts that 40% of U.S. households will have at least one smart home device in use by 2020.

Cisco Smart Home MOI: North America TAM

Cisco Smart Home MOI: North America TAM

The fact that the smart home is rapidly becoming mainstream doesn’t surprise me. I don’t consider myself a true gadget geek or DIYer. However, just in the last year, I personally installed a wireless home security system and several monitoring cameras. Now, It’s hard to imagine not being able to see my toddler at home with the nanny anytime using my iPhone.

Strategy Analytics recently released the results of a survey of 7000 consumers throughout North America and Western Europe, which assessed interest in smart home services as well as willingness to pay for them.   The results are unmistakable. There is large, pent up demand for residential services that provide security, peace of mind and convenience.  What was surprising to me was the size of the gap between those who currently have a smart home service and those who do not (but were willing to pay for them). For example, in Germany only 2% of respondents had professionally monitored home security. Yet, 45% who did not have the service were very interested and willing to pay up to 17 euros a month.

Consumers clearly see the value in services such as home security, energy management, and elderly monitoring. What has held back purchasing? The market is fairly price elastic, so high price levels have been a deterrent. People are willing to pay for these services, but less than what’s currently charged. Awareness was another barrier. People generally weren’t aware that these services are available. For those who were aware, they had concerns about cyber intrusion and privacy.  Now, what does this mean to service providers who have entered or are considering entering the smart home market?  Recognize that you have unique advantages and assets that can help you take a leading position in this market. Initially, your marketing influence and retail reach can overcome low awareness.

Then your experience “in the home” and customer trust come into play. Your residential customers expect you to understand and solve all of their in-home voice, video, and connectivity problems. If an IP-connected device in their home is not working, they are more likely to contact you than the device manufacturer. You have the tools and the experienced technical and support personnel to handle potential customer issues around the connected home.

Know also that customers want these services from you. The trust you’ve built over time is so important when it comes to services involving personal security. Strategy Analytics found that consumers preferred to get their home and family monitoring services from service providers than from OTTs in the ecommerce, retail, or electronic manufacturing space.

Along with this trust, are the advantages of established billing relationships and the ability to bundle discounted smart home services with rest of your offers. Smart home as the “Fifth Play” makes a lot of sense for both you and your customers.

A tangible advantage is the equipment (gateways, set top boxes) that you have placed in the home – devices that can potentially be used to deliver these new services. Consumers want easy set-up and one single control point for their smart home services. And you can provide it for them. You can help customers simplify how they buy, set up and use their smart home solutions.

Service providers are well positioned to be a leading player in the smart home market. To ignore this opportunity or give it short shrift means leaving large sums of money on the table or worse.   What’s worse? Being dis-intermediated from your customers in the home by aggressive OTT players.

For more information on Cisco MOI check us out here.

 

 

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5 Comments

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  3. Hey Ana, At First I wasn't so sure what you mean't by "There's Money to be made in Smart Home," but after thoroughly reading this piece it brought up many questions in my mind. Your idea is something that not many people have thought of and I love how you used statistical information to really make your blog sound mature. Although there are some questions I need to ask you, Do you think down the road our society will progress more towards Smart Homes? P.S I need to do this for a class project so you don't have to respond, but i did enjoy reading this blog and you did a very nice job. Keep up the good work. :)

    • I believe more people will realize the benefits of having a "smart home". It appeals to basic human needs for protecting the family and having peace of mind. However, prices for services will need to more aligned with perceived value and more work needs to be done by vendors to promote awareness and ease of use.

  4. The handwriting is on the wall, Ana. Most of my friends already have home security systems. Many of these systems allow you to control your lights, cameras, and thermostat from any smart device. I can't wait until cognitive computing allows me to speak with my home automation system like it's a person.