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MarketLoop #10, March 1999

The Smart Home

An earlier ConsumerLoop newsletter looked at how Consumer Fusion was creating new opportunities for manufacturers, retailers and service suppliers. One element that results from this fusion is the increasing blur between home and office. This environment forms one aspect of what we call The Smart Home. On one level, The Smart Home has been discussed for many years and much of this has been in the area of energy savings. More recently, the development of technology is allowing new concepts, products and services to become part of this evolution.

Through the Loop believes that the Smart Home has implications for leisure, media usage, shopping and working from home as well as in other areas. For this reason, its development will impact on many areas of business and marketing. Its evolution will have as profound an effect on consumers' lifestyles as other devices that are now commonplace such as the video recorder or microwave oven.

The Smart Home will offer new opportunities for marketers, not just those that are developing home networking products or network-ready appliances but other companies such as retailers, delivery services, media companies as well as companies that are looking for more flexible ways of managing their workforce. In addition companies involved in the leisure business will discover new opportunities for developing home-based leisure activities.

Changing Fabric of the Home

At the core of The Smart Home is the development of home networks. These are a logical step following the move of the personal computer into the home and the rise in networking through Local Area Networks (LANs) in workplaces and the Internet. While the idea of this may not be especially new, the availability of equipment at the right price and the right level of complexity, i.e. not requiring a computer genius to use, will change this. Systems may not use dedicated cabling but can use existing telephone or electrical wiring or wireless systems.

We can expect to see new homes sold "network ready" allowing multiple PCs, telephones or fax machines to use the same infrastructure. As the development of workplace networking becomes more standard, companies in the sector will look to the home as the next major opportunity. Lucent has already established a dedicated division to work in this area. Intel has also recently announced that it will launch networking products for the home. These include items that allow a home to have multiple Internet access, play multi-user games and share printers.

Microsoft and 3Com announced a joint venture in March 1999 to develop home networking products to be launched towards the end of the year. These are intended to allow shared Internet access and peripherals with future developments said to include wireless data transmission and connectivity over home electrical systems. 3Com had already established its home networking division as a response to the growth of US households with multiple PC ownership. Microsoft is said to be working on shared home applications such as family messaging, distance learning and home audio-on-demand. Other companies that are believed to be developing in the home market include Sun Microsystems, IBM and Philips.

Clearly there will be more opportunity, initially at least, in affluent households or those where there is significant home working. The home network replaces the multiple telephone lines required for telephone (home and office), fax and computer network. In an era of multiple PC ownership at home, there will be the same requirement for shared devices such as printers or storage devices that have made the LAN so successful in the office environment.

From Intelligent Fridge To Intelligent Dustbin

However, the Smart Home will be more than just a smaller version of the office LAN. Increasingly, more and more home appliances will be sold as "Network-Ready." This means that they will work within the home network and will be able to communicate over the home LAN and even further. This could allow automatic replenishment of groceries once the fridge is almost empty or updated programs to be downloaded direct to the microwave. The advent of digital TV is a vital part of this development and will allow consumers to enjoy new types of leisure or educational activities.

Electrolux and ICL have already announced the development of the Screen-Fridge where a screen and bar code scanner are built into the top door. This simplifies grocery ordering as the fridge can be programmed to send orders direct to a retailer when the consumer wishes to reorder a product. The device also allows communication to the consumer so that marketers will have direct access to individual consumers. It may become more viable for food manufacturers or retailers as the message will be delivered to a more appropriate device, in terms of position, than a television. The Screen-Fridge is due to be test-marketed in the UK towards the end of 1999.

NCR's Knowledge Lab in London has invented the "Intelligent Dustbin." This recognises packages that have been thrown away, through an embedded chip in the package, to enable automatic replenishment. The dustbin can then place an order electronically for delivery direct to the home. But will the dustbin actually recycle the product packaging?

Dishes Away

Towards the end of 1998, BSkyB, the satellite TV channel controlled by News Corporation announced a deal with one of the UK's major housebuilders to install digital satellite dishes into 5,000 new homes during the current year. This is a further step towards the smart home and results from the unpopularity of satellite dishes amongst many consumers who deem them unsightly. This is additional to the standard terrestrial TV aerial installed in the home. Installation of the dish at building stage allows it to be placed somewhere that is not intrusive.

Summary

The Smart Home is clearly the next step forward for electronics in the home. However, its success depends on clear communication of the benefits, affordability and usability. It is likely to be adopted first in multi-PC homes or built into the construction of more upmarket new housing. Technology is not the issue. It is about the enabling of consumers through smart devices and the networked home. The technology itself becomes invisible, built into the fabric of the home or the devices inside it. The entire home becomes "plug and play."

It is too early to say exactly how this will alter consumer behaviour but it is an area that Through the Loop is monitoring closely. The relationship with technology has been at the heart of much behavioural change recently, for example in changing shopping habits, working routines or media consumption. The Smart Home will transform existing behavioural patterns with wide-ranging consequences for marketers.

  • What this means is that there are implications across different areas of life. The integration of "smart" devices may have an impact on cooking and eating habits in the same way as the introduction of the freezer and microwave oven. The convenience level rises even further. The chore side of cooking and shopping is further minimised with the automatic replenishment of staple items. Result: more free time, less stress and less pollution from driving to the superstore.

  • In the area of entertainment and leisure, we have already witnessed a move towards the multi-TV household and there is now a move towards multi-PC. The Smart Home takes this further, enabling devices to be linked. Technology becomes more individual than previously. We cease talking about personal TVs but each member of the family has his or her own media choices. Forget arguing over which channel to watch. Result: less stress again but what happen to conversation and family life?

  • What implications does this have for advertisers? Media fragmentation will increase further but this will be an advantage for advertisers not a handicap. It will enable messages not to be targeted at smaller groups but to be directed to individuals in the family. The issue of privacy arises here. Alternatively, will TV move from advertiser-funded to subscription or pay-per-view? Result: will there be a division between rich and poor according to who can pay for subscription services, i.e. advertising-free, and who requires advertiser-funded services.

In the area of services there are further opportunities. The nature of TV programming will change, even if we still refer to the devices as TVs. The multi-channel TV service is already here but how will programmers be able to utilise the capacity and interactivity offered by digital TV? Edutainment, the combination of entertainment and education, is one possible growth area as is the possibility for viewers to become more involved in TV shows, voting in debates, taking part in game shows, etc. Alternatively, to what extent are consumers looking for dialogue? Result: will they immerse themselves in interactivity or will they prefer to remain passive viewers as previously?

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