How the Internet of Things Drives Customer Engagement

How the Internet of Things Drives Customer Engagement

6 minute read
David Roe avatar

Now that we've accepted the idea of the Internet of Things (IoT), researchers are starting to look at when, where, how, why and who will use it. They're also looking into potential risks.

Recent research from IDC, for example, shows that retailers are leading the charge to the IoT in the quest for better customer experiences.

According to IDC, retailers see the IoT as a way to improve customer experiences. Specifically, they are using it to pull consumers into one of their channels, where they will entice them with products that have been contextualized and personalized for the customers’ gratification.

Nexus of Forces

The findings are contained in an IDC report entitled Developing IoT Use Cases for Retail by Leslie Hand. In it, she points to five specific areas of technology that retailers are using to provide superior customer experiences.

What emerges from the report is the fact that all the technologies we talk about on a daily basis, like digital marketing, customer experience management, customer relationship management, e-commerce and mobile technologies, are all coming together with the IoT to provide an almost perfect nexus of forces.

Of course, theory and practice are two different things and the reality of customer experiences once the IoT has reached maturity will probably be considerably different.

According to Hand,successful customer experiences with the IoT will require a complete reimagining for brands led by well-trained employees who have both the information and the tools to enable engaging experiences.

But what exactly are we talking about here? According to IDC, the installed base of the IoT will be 212 billion by 2020, which will include 30 billion connected "things" by then. This accords with other estimates by other research organizations like Gartner.

Gartner points out that in 2009 that there were 2.5 billion connected devices. By 2020, there will be more than 30 billion in a variety of shapes and forms — many of which don't even exist today, Gartner predicts. Growth around the Internet of Things will start outstripping growth in traditional IT sectors by 2017.

IDC expects growth will be driven by intelligent systems that will be installed and collecting data across both consumer and enterprise applications.

Of all the investments made in the IoT last year, nearly 10 percent of it was made by retailers and by 2017 this will pass $466 million with IDC identifying five primary areas of IoT investment in retail including:

  1. Product tracking/traceability
  2. Interactive consumer engagement and operations
  3. Mobile payments
  4. Asset management
  5. Fleet and yard management

IoT Advantages

According to IDC, IoTtechnologies will offer four main advantages to retailers:

  1. Consumer technologies: Consumers want to be connected and engaged if its saves money and time. However, retailers also need to guarantee security and privacy.
  2. Radio-frequency identification (RFID): Retailers will get considerable benefits by using RFID, includingimproved inventory management, sample management, loss prevention and on-shelf availability among others.
  3. Convenience technologies: Consumer demand for convenience, product availability, and personalized and contextualized interactions will drive retailers to adopt multiple IoT technologies.
  4. Cloud-based IoT: Many IoT technologies have matured to the point where use cases are well defined. Use of cloud-based versions of those technologies improving return on investment (ROI).

IoT For Retail

According to Hand, retailers will be one of the driving forces in the adoption and spread of IoT technologies that use sensors, analytics and information to create intelligent, automated solutions that generate customer loyalty through better performance.

For retailers, the advantage of the IoT is that it provides them with insights into customer behavior that enables create customer experiences that are personalized and live up to customer expectations.

Moving into the future, though, the customer experiences that are being offered by first adopters is also going to shape the form and the speed at which the IoT will be adopted.

As more and more consumers interact with more and more IoT-enabled retailers, consumer expectations are going to change. Positive interactions driven by the IoT will promote the idea that every experience can and should be a "best" experience.

Omnichannel retail demands will see more consumer focused projects put in place. Responsiveness, transparency and agility are all key elements used to ensure that consumers have all the information they need to make informed purchases. Hand sums this by simply pointing out that“every missed engagement opportunity is a gift to a retailer's competitors”.

Learning Opportunities

For retailers there are five different IoT use cases that IDC sees at the moment:

1. Product tracking/traceability

The IoT offers retailers and producers real time access to inventory, production and shipment histories and removes manual errors from the entire process. These technologies tracks products through the various points in the supply chain from production to point of sale and end-of-life and enables retailers to see what state their product inventory is in.

2. Interactive consumer engagement

The IoT enables omnichannel engagement and interaction enabling contextualized contact with consumers. Some of the abilities that are already being mentioned in this context include content delivery, data collection and the analytics used to create dynamic interactions on digital screens of all sizes.

These interactions are supported by a network that is mining, analyzing and responding to a broad spectrum of real time and near real time data and content. By doing this, retailers have access to information systems and databases that are all tapped and intertwined to provide better customer insights and experiences.

3. Mobile payments

This is enabled through mobile payment technologies that are sensor-enabled with either a tag affixed to a mobile device, or an embedded sensor.

4. Asset management

The IoT offers retailers a way of tracking and monitoring their inventory in a way that has not been possible before. It also enables them to manage their assets, reduce failures, problems and downtime. Itenables retailers provide in-house field service and third parties access to asset data and records, which in turn ensures that the end uses always has accurate, real time data.

5. Fleet management

Not the sexiest end of IoT but still a core service, fleet management and the ability to track and organize deliverers is key to customer satisfaction. Given the speed at which companies like Amazon can deliver products, nothing will sour customers against a company more than slow delivery.

The IoT technologies here include logistics and fleet monitoring and control. In retail, common applications include tracking and directing outbound transportation to distribution points and yard management of owned and inbound vehicles.

In addition, the use of  radio frequency identification (RFID) tagging will drive change in the coming years.

According to IDC,RFID to products remains the most widely applied retail IoT use case to date, but wide-spread tagging is unlikely to happen foranother sever years. By then, an estimated 20 billion products will be tagged every year, as opposed to the two million tagged last year.

There are still many issues to be ironed out around the IoT, particularly security. However, the advantages are becoming more and more obvious, particularly for retailers and other customer-facing businesses that are looking to improve operational efficiencies.

In an omnichannel world, all of these technologies will intersect at the data level providing those that uses these technologies with a considerable competitive edge and insights into their customers. Love it or hate it, the IoT is here already and those that refuse to adapt are likely to be left behind.