The Next Product Frontier
Premise
Today, three main challenges keep companies from succeeding: lack of technology, unutilized data, and mediocre customer experience. Technology and software are vital for growth, leaving businesses that do not integrate technology obsolete. Data has become the lifeblood of companies, with insights extracted from it being essential to understanding how customers behave. Finally, with brand-loyalty at an all-time low, customer experience has meant the difference between success and failure of a brand. Smart products, the integration of physical goods and web-content, are therefore primed to be the next frontier in product design and development. Smart products bring the Internet to physical items, allowing customers to interact by simply tapping their smartphone to a chip embedded in the item. The interaction accesses web content, which is created by the brand, and not limited in type.
What allows the interaction to work is Near Field Communication (NFC), a connecting technology that takes the form of an embeddable sticker. Using an NFC reader, such as a smartphone, simply tapping a phone to the chip unlocks the information on the chip and displays it on the phone’s screen. This kind of technology opens up a new way to tie the physical world to digital content. In particular, by embedding products with NFC and programming it with content built specifically for that product, consumers gain enhanced user experiences while brands enjoy a number of business benefits.
Value for Customers
There are a number of benefits customers gain through the use of smart products over traditional ones. Most simply, is the element of “surprise and delight.” The ability of a product to go beyond its innate function is a primary feature of smart products. With minimal effort, a user need only to literally tap into additional value and functionality of their object. Additional value comes in the form of content. Content can be categorized into two main segments: entertainment and information/education.
Entertaining content can be videos, songs, music-videos, digital tickets, social feeds, articles, and more. For example, an enabled book might allow the user to access an audio version of the book. This provides added value for the user because in addition to being able to read the book during their downtime, they can listen to the book on the go. Another example is an enabled music artist t-shirt that when tapped provides first access to purchasing concert tickets. This gives customers the benefit of first access to ticket sales, ease of purchase, and the ability to store the ticket all in a single location.
Educational content can explain to a user how to properly use a product to get the most out of it. Educational content can also help improve a user’s skill at using the product. For example, an enabled grill can provide tips on how to best char meat using different cooking temperatures, grilling tools, and time estimates. The educational content helps the user become a master griller, and ensures that the user has a positive experience using the product. Another example is an enabled makeup compact which can suggest different makeup looks, and how-to tutorials to show users how to execute those looks. Users gain the value of maximizing the product’s potential and easy instructions on how to do so through associated videos.
Value for Brands
As with customers, brands stand to greatly benefit from smart products. At the basic level, the added product value of a smart product scales at software multiples, not physical ones. More value can be extracted per unit of work input in digital content compared to what can be extracted per unit of work with physical manufacturing, since it does not require raw material, manufacturing, and shipping costs. Smart products also provide brands a new communication channel with customers. Compared to traditional drip email campaigns, new content uploaded to smart products is an incentive for users to continuously interact with their product. What’s more is that instead of content being pushed on to the user, the user must intentionally opt in to view the content, thereby signifying high intent to engage. Smart products can also help create more complete attribution profiles for customers. With enabled products, brands can attribute physical customer actions (such as visiting a store, using a product, etc.) to their online personas.
While the manufacturing of physical products has improved dramatically in the past 100 years the rate of innovation provided by the internet has allowed software companies like Google, Microsoft and Amazon to explode in value, leaving traditional design and manufacturing companies in the dust. Without the burdens of raw material costs, shipping, damage and loss, software companies can grow with unprecedented speed.
While these digital products and services are great, we still live in a physical world and products will always be produced. The next big innovation for physical products is virtualization — taking a product’s core values and enhancing them with digital content and services. We have already seen this innovation work first hand with the invention of the iPhone. Where physical buttons were removed and replaced with a software interface that could change at will. Traditional products are starting to see the same innovation where the experience of using an item is greatly enhanced through embedded digital content and interactivity. Blending physical products with the power of the internet enables brands to leverage software’s great potential and embed it directly into their products.
Brands can utilize smart products to open new communication lines with their customers. The content uploaded can act as strategic experiments to understand what their customers like and don’t like. From measuring the kinds of content clicked, to providing survey forms for feedback, the content has a strong stake in understanding user behavior. Additionally, analyzing the where, when, and who of the interaction also leads to greater understanding of customer behaviors. The data consequently becomes useful to brands who want to utilize product data to inform future development cycles, and it also helps to curate the kinds of content displayed. These adjustments improve customer engagement and lifetime value.
Smart products contribute to attribution through in-store interactions. If a store is outfitted with touch points, and a customer visits the store without making a purchase, their visit can still be factored into attribution models. Interactions with touch points may have led the shopper to learn more about a product, send an item to the fitting room, or see product availability, all factors which contribute greatly to the shopper’s purchase decision. As a result, these interactions lead to lowered acquisition costs, because with a more holistic view of customer attribution, brands can better allocate resources to marketing efforts.
Conclusion
Software has and continues to transform the business landscape. Along with data, it has become the difference between companies that thrive, and those that whither. The integration of the Internet — the digitalization of products — carries many benefits for both customers and brands. For customers it has become the difference of a good product and a great product; smart products are products customers can expect more from. For brands it means more transparency in understanding their customers so as to add more value to products and build stronger customer engagement. With the shift in business towards software, coupled with the major benefits that arise from smart products, this concept will lead the next wave of product development and design. For those companies looking to solidify their presence in consumer minds, now is the time to get started with smart products, and become a leader in the industry.
