hands-woman-laptop-workingThe Internet of Things (IoT), or in other words the networking of smart products, is regarded by many as the next major revolution in the field of information technology. It is a revolution that has the potential to significantly affect the structure of entire industries and value chains, as well as the rules of competition - if not dissolving and rearranging them – and these upheavals affect the marketing communication in particular.

The Internet of Things opens new potential, but poses at the same time new challenges. As already mentioned, IoT describes the networking of so-called smart and intelligent objects. Products are dubbed smart if they have, in addition to physical components (such as a motor), intelligent components (for example, sensors, processors, software systems or data storage) and elements that crosslink, allowing a data exchange of the product with one or more other smart products and general IT systems respectively.

Hence, the Internet of Things requires from companies a certain technological infrastructure that consists of hardware and software, software platforms in the cloud or an ASP service that e.g. analyze the data collected by the product or control functions of the product and the network connection between these two stages.

The professor and "management guru" Michael Porter divides the possible functions of smart products in four areas in a recent Harvard Business Review article: monitoring, control, optimization and automation. These functions can all be combined in one product and are based in this order to each other: (1) Monitoring must be understood as the collection of data on the status and usage of the product itself and its environment. (2) Control means the remote control of the smart product functions by the software platform. (3) Optimization means in this case that the product is either autonomously improved, based on the detected monitored data, or improved by the control of the software platform. (4) Automation means that products, such as robots, automate their functions largely or even completely without human influence.

Use of the collected data in the marketing communication

For marketing, monitoring is of particular relevance. Successful marketing is nowadays data-driven and the number of marketing-relevant data will potentially multiply by the Internet of Things. With the help of usage data, a better understanding and more targeted approach of customers can be achieved in the B2C sector. Today, marketers not only know which products a customer has bought, but as well how he uses these products, when and where he uses them and how often. Most importantly, some cross-linked products, such as smart watches, not only capture data, but create new touchpoints for marketing communications, too.

The market for health and fitness products belongs to the B2C areas, in which the crosslinking has advanced furthest. Wearables that track performance data (kilometers run, speed, calories burned, etc.) are already offered by many sporting goods manufacturers and are continually gaining in popularity with sports and fitness enthusiasts.
Here are some examples of how the collected data can be used in marketing:

    • Based on mileage it can be estimated when running shoes (which are possibly linked itself and supply the necessary data) are worn out and need to be replaced.
    • Special dietary supplements can be offered to athletes who provide exceptional high performance.
    • Whoever runs long distances, might be interested in participating in a running event, such as a marathon as well.
    • Sporty performance can be linked with incentives (such as 1% discount per each 10 km run) and be integrated into campaigns accordingly (another 20 kilometers and you can save 10% when buying our latest fitness collection).
    • Keeping track of geo-data while running allows marketing messages with location reference (after jogging, drop by at our store located at …).
    • Practical services to the performance data - like training plans and diet tips - can be enriched with advertising messages.

But the Internet of Things did not only open up new potential for marketing communications in B2C. In B2B, the topic is often referred to as ’Industry 4.0’ in which the service communication in particular can benefit from it. For example, by continuously monitoring machines, the wear lifespan can be detected and the notification of an inspection be given in time; or the reorder of consumables (screws, plates, etc.) may be requested depending on the production output.

Privacy and data security are the big challenges still to be mastered

However, the Internet of Things not only offers new opportunities for marketing communications but challenges companies as well, especially in the field of data protection and data security. We all know that captured data can be highly sensitive, be it health information of clients in B2C or data on business-relevant processes in the B2B, which therefore require highest demands on data protection and security. Not to mention that with any data producing device additional sources and transmissions occur, making data protection the more essential in order to avoid and prevent misuse.

By Daniela La Marca