Data ahead! How smart products are changing the traditional sales cycle

The increasing popularity of “smart” products that interact with users and generate new sources of data for firms is revolutionizing product life cycles and the relationship between manufacturers and their customers. As a result, the sales funnel that has formed the basis of marketing and selling into both consumer and business markets is being transformed. Live streams of feedback data from users is offering businesses a way to extend the sales funnel beyond the initial sale by driving additional sales through a better understanding of customer needs.

The sales funnel marketing and sales tool for steering prospects from brand or product awareness to a final sale. Typically, it comprises 4 key stages: Attention, Interest, Decision, Action (AIDA) and is a largely a linear process where prospects go in the top of the funnel and customers come out the bottom. Much marketing is focused on getting the attention of prospects through clever use of images, video and slogans. Once they have someone’s attention the focus shifts to building interest in the product or service through promoting its benefits and features. Once a prospect has enough information, it is hoped they will make a decision to purchase leading to the final action of spending money.

In 2009 McKinsey and Co. proposed a slightly modified version of this process that added an extra stage after purchase that they called “loyalty.” They argue that firms were increasingly finding ways to maintain a connection with customers after the purchase through techniques such as email marketing, loyalty schemes or other communication channels. This can be particularly useful for products or services that have finite lifecycles and will need replacing or renewing within a defined period of time. Home and motor insurance are good examples.

The data effect

The business world has changed significantly since 2009. The popularity of products such as the voice assistants offered by Amazon, Google and Apple as well as interactive doorbells, video surveillance cameras, smart vacuum cleaners and lighting create data-rich back-channels that companies can use to forge closer relationships with customers, better understand how their products are being used, and sell more value-added services. The subscription element to the business models of many of these products ensure an ongoing relationship that may continue for many years after the initial purchase. 

iRobot, maker of Roomba autonomous robotic vacuum cleaners is a good example of the potential that data can have on extending and deepening customer relationships. Although still a niche product for those willing to spend a premium for the devices, iRobot has explicitly stated that the company sees the floor maps and other data generated by their cleaners as providing better customer service as well as an entry point into enhancing the functionality of future smart home products they may produce. In a recent interview with TechRepublic, the firm’s CEO quipped, “If a robot is going to get a beer out of the kitchen, it needs to know where the kitchen is.” Having a detailed layout of a customer’s house or apartment, down to the positioning of furniture and doors will give the company a head start over competitors that will have to map that information for themselves.

In the B2B space, Bosch is a leader in adding service elements to their range of industrial equipment used across a range of sectors. Their integrated software and services package known as Nexeed is part of the firm’s “Connected Industry” strategy of integrating IoT functionality into their products and on clients’ sites. The advantage for their customers is access to detailed operating data that can be used to streamline industrial processes and logistics. For Bosch, it provides a much closer working relationship with clients that continues long after a sale has been made. 

Pitfalls to avoid

There is a danger to these changes for firms that stray too far, too quickly outside their core competencies. Building and deploying software is a difficult process for firms used to making products that traditionally do not interact with their environments. Toy manufacturers have discovered this the hard way with interactive toys that collect data from their users. The backlash against the smart Barbie dolls from several years ago that uploaded voice data from the children playing with them is a good example. There is also the security issue of smart products that can be hacked due to insecure software implementations and lack of security updates. Businesses need to be careful that they don’t leave customers high-and-dry with products that leak data and open up customers to hackers and malware.

Product vendors also need to be aware of software support issues. Microsoft and other major software vendors spend significant amounts on supporting customers that are running old and obsolete hardware. Sonos, maker of high-end smart speakers, recently upset many of their customers when their latest software updates could not run on speakers bought only several years before.

An opportunity for alignment

As well as changes to the sales cycle, these developments are forcing fundamental changes to organizational structures. The traditional demarcations between marketing, sales and the product design and development teams are becoming less distinct. Building data-gathering capabilities into products that can then be used by marketing and sales to better understand clients and sell more value-added services requires greater cooperation.

A recent job advertisement for a Head of Sales and Marketing at Bosch’s Smart Home division is a good example of these changes, “You create new market segments and build up new marketing communication tools, distribution channels, payment methods and services…..You build the bridge between our development and sales/marketing team.” Marketing and sales departments benefit from the usage data generated by smart products while design and development teams can also use the data to drive innovation in future products.

For many firms the traditional sales funnel approach to prospecting and selling is no longer relevant. The connected home and workplace is fundamentally changing what products can do and what consumers expect from them. For IT managers and CIOs this presents new challenges as well as opportunities to become more strategically aligned with both the sales and marketing functions as well as product development.