Two Cautionary Product Lifecycle Tales for Smart Home Vendors
In recent months two well known consumer electronics brands were subjected to the wrath of customers due to ill executed product lifecycle announcements. While both had solid business reasoning behind their decisions, the consequence was vocal customer backlash and with it the kind of media exposure that erodes hard earned trust.
I’m referring to Canary and Logitech, whom for different reasons and in their own ways made product and service related changes that impacted existing and otherwise happy customers.
Canary
In the case of security camera maker Canary, customers accused it of “bait and switch” when the company announced that certain service features that were previously free will require a paid subscription. The background for this decision to restrict the service was the unsustainable cost of storing surveillance footage generated by the cameras, largely videos that were never viewed. One would surmise that had these apparent ongoing costs been anticipated, the necessary service limitations to video storage would have been applied and communicated to customers in advance.
Logitech
More recently Logitech announced that it would update the Harmony Link hub, a product customers use to control home theater systems. The company plans to render these units unusable within a few months through a firmware update and will disable the cloud service that supports them. While customers within the 1-year warranty were offered a discount on a newer model, many, particularly those that bought the product recently (and without the required warranty) were quite livid. The reason Logitech will “brick” those devices makes sense from a product point of view as after that planned date the cloud connected devices could have security vulnerabilities. Still, the manner in which this was carried out leaves much room for improvement.
So what happened?
Both companies relented due to the outcry in social media and the resulting negative press. It took Canary several weeks to come out with a free trial offer of the paid service for their users and a promise to increase the value of the free service tier. In the case of Logitech, the company acted swiftly and conceded with free upgrades to all owners of the current model. Even those that already took advantage of the original upgrade discount were now given the option for a refund on their payment.
Why did this happen?
Both of those cases are symptomatic of several challenges faced by consumer electronic product companies, particularly those characterized as “connected devices”.
More and more consumer products these day involve long term service elements. These connected devices often use Wi-Fi and rely on remote (cloud) services to provide ongoing value through functionality, content and the ability to deliver various means of maintenance and support to both fix issues and preserve security throughout the life of the product.
So what?
Even if both speed of innovation and drifting consumer appetite for new and shiny products reduce the average lifetime of products to several years, companies must look at the aggregate costs to operate these services for all that time. These add up and must be accounted for during product planning and included as a cost of doing business in a manufacturer’s business model.
Take for example the unfortunate fate of smart lightbulb socket manufacturer Emberlight who recently announced they are shutting down. Due to intensifying competition this once successful Kickstarter did not experience the growth it expected and could no longer sustain the costs of the platform that allowed these devices to work. As a result these devices will stop working within several months.
Furthermore, current market dynamics illustrate conditions in which both the competitiveness and customer expectations in the connected devices space are increasingly challenging. On one hand, the competitive strength possessed by tech giants like Amazon and Google is no match for most product businesses. And on the other, consumers have been accustomed to expect cheap products with no “strings attached”, at least not visible ones.
Let me explain.
Device makers are between a rock and a hard place
Amazon and Google not only operate the massive cloud services that support many of the products out there (not just those carrying their brand) but also enjoy massive economies of scale and easy access to consumer mind share through their brands and media presence. Their financial strength allows them to subsidize product costs as an investment on their quest to tighten the grip on consumers through better understanding of customer preferences, artificial intelligence and delivery of more services. Amazon particularly also enjoys being its own e-commerce channel, giving it the “unfair” advantage over all consumer electronics manufacturers. Even if companies such as Alibaba, Samsung or Xiaomi step up as serious contenders to Amazon this will only make things more challenging to others.
Consumers, and we’re all guilty of this, are conditioned to think short term. For numerous reasons the useful lives of technology products are getting shorter and for decades manufacturers and retailers have taught us to develop an appetite for “deals” (not only on Black Friday). Secondly, the occasional negative experiences we have with service providers cause us to shy away from contractual commitments or other forms of lock-in. It is well understood that customers, especially early adopters of smart home devices, are attracted to well priced products and their excitement tempers off when they hear “subscription fees”. One commenter using the auspicious name ‘noname117’ on the Canary story linked above wrote “This kind of stuff is why I have a hard time trusting any cloud based service from any company. The users are always at the mercy of the company whose policies could change in a heartbeat.”
Kind of being between a rock and a hard place, isn’t it?!
What can Smart Home vendors learn from this?
It’s said that hindsight is 20/20 but the turn of events should still serve as a warning to other vendors in consumer electronics, particularly providers of Smart Home devices who depend on cloud services or require ongoing support in form of security or firmware updates.
First and foremost, any consumer electronics product company in this day and age has to realize that once their physical product depends on or uses a cloud service, the sale of this product implies a commitment for service delivery and with it certain customer expectations. Such commitments and their limitations need to be clearly communicated not only in the terms and conditions of the service but also made evident in the product features.
Product companies must account for the lifetime product costs into their business model and implement a pricing structure that accommodates a sustainable operation. Such costs can be incorporated in in a one-time purchase price (present value of anticipated future costs), the layering of optional subscription costs for value add services or a combination thereof, for example including premium services in the first year and charging a monthly fee thereafter. Alternatively, the manufacturer should seek other means to offset costs, whether by working with partners to blend the product into their service offerings or explore strategies to monetize product use or the data it generates in a manner that benefits customers. After all, isn’t this what Amazon and Google are doing?
Final words of advice
The dynamic consumer electronics and connected device markets is probably one of the most exciting ones out there and no doubt that a lot of attention is given to the creation, development and launch of such products. Nevertheless, product professionals in reputable companies must consider the whole product lifecycle including the process, consequences and method of retiring a product that incurs non-trivial ongoing operational costs, even if such has to occur prematurely.
Gizmodo aptly write in their coverage of the Logitech device: “Discontinuing support for an aging product is pretty par for the course and more or less inevitable, given it’s impossible to expect companies to commit resources to maintaining old technology forever. Deliberately bricking those products while encouraging them to migrate to a newer model is, on the other hand, a considerably rarer thing to do …”.
Companies that do decide to retire functional products must consider how to communicate this news to their customers, what fair and compelling options to present and keep them as customers. Lastly, by working closely with the organization’s communications, social media and customer support teams, ensure they are ready to handle customer inquiries and properly handle a crisis should one materialize.
