Smart, connected products (SCPs) open the door to a new dynamic between manufacturers and their customers. Space and time barriers fall away. Products gain new ears and new voices that invite relationships that are richer, more intimate, and more advantageous to both parties. To activate this value, marketing executives must not only boost 21st century marketing skills, they must rethink their marketing strategy in totally new ways.
The voice of SCPs provides marketers with masses of real-time data describing actual usage. Behavioral analysis based on this data is an exceptional tool for understanding customers and creating meaningful segments. Human behavior is very complex. Marketers used to be stuck with inadequate strategies for segmentation — methods such as gut-feelings, past experience, and traditional rule-based methods like parsing by vertical markets. Without behavioral data, marketers will miss important insights (at best), or will be biased and wrong (at worst).
In the article, How Smart Connected Products are Transforming Companies, co-authors PTC CEO, Jim Heppelmann, and Harvard Business School professor, Michael Porter, describe the powerful insights gained by combining data from SCPs with data from other sources. Supplemental sources include operational systems (e.g., CRM, customer service, logistics, and finance) and customer interaction systems (e.g., click streams, search, and geographic data, downloads, or video views). Data can also be also accessed from third parties (e.g., list companies, media, or from databases such as SEC filings).
By integrating data from SCPs with other data, marketers will be able to discover hidden segments with a high propensity to buy, or act in certain useful patterns. They can then use these segments to design more effective pricing strategies, offers, and bundles. For example, a customer who is an active product user might enjoy offers for product extensions. A dormant user would just be irritated by these offers and needs other stimulus to resume use.
Implications for the marketing organization:
- Increase marketing’s role as a data scientist. The digital transformation has put marketing leaders on notice that their teams need new data skills, but SCPs greatly increase the urgency. Data skills of all types are already in short supply. Marketing teams need to use pooled resource teams and knowledge-sharing centers of excellence. In addition, marketers need partners with deep technical expertise. Best-practice companies form “zipper organizations” that link marketing with the information technology (IT) department at every level – starting with the chief marketing officer and chief information officer and moving down to the practitioners. Companies must also significantly invest in data technology, data quality, and especially data integration.
- Increase marketing’s role as an innovator. Marketers must lead their companies into the new territory that SCP data will illuminate. Insights from behavioral sources frequently topple conventional wisdom. However, it is the unexpectedness of the discovery that will deliver competitive advantage. Marketing leaders must create organizations that foster innovation and react to insights in inventive ways. Companies should increase funding and rewards for customer R&D. They must break down both internal silo walls and welcome customers and eco-system participants into the process.
This is the fourth installment in a series of guest posts by leading industry analysts covering topics found in the new Harvard Business Review article, How Smart Connected Products are Transforming Companies, co-authored by PTC CEO, Jim Heppelmann, and Harvard Business School professor, Michael Porter.