Consumer electronics, IoT and marketing as we know it set to converge at CES 2016
CES has always been one of the biggest consumer electronics events in the world, but did you know that for the past two to three years it's also been one of the largest Internet of Things (IoT)-focused trade shows?
At CES you will find connected appliances, smart TVs, wearables, intelligent cars and more. Every company that has IoT as a product category, or something consumer-facing, will be at CES introducing the latest and greatest. It truly is a sight to behold, if you like crowds and electronics. I like the latter, so I’ll likely be spending the bulk of my time at the IBM suite, talking to our clients and partners about IBM IoT and how things like weather, our new cognitive capabilities and our rapidly evolving portfolio of offerings can benefits their organizations.
But electronics isn't the only arena IoT is impacting. It's also changing more traditional fields and industries like marketing.
The value of A/B testing
On the recent Planet Money podcast from NPR the topic of A/B testing was featured, and it got me thinking about how A/B testing and IoT will converge, which has always been a subject that fascinates me. I first learned about the A/B concept in college during statistics class, but never paid much attention. We all have regrets!
Years later I read about how Google would constantly tinker with their home page. You know the one right? The page that just says “Google” with a search bar? I remember thinking “how can they tinker with that? There’s no change, it’s so simple and plain.”
But it was true, they were constantly testing with the website, changing colors, changing pixels, anything to test against a hypothesis. I’ve read that Facebook, Google, BuzzFeed and the majority of popular websites are constantly tweaking their webpages and letting sample groups view the new page without knowing, in order to see if a variable objective outcome is met at a greater rate than the normal version.
In marketing and business intelligence, A/B testing is the term used for a randomized experiment with two variants, A and B, which function as the control and the variation in the experiment. In the digital world, like websites and mobile apps, the goal is to identify how changes can increase an outcome of interest.
Here’s a great example: A company with a customer database of 2,000 people decides to create an email campaign with a discount code in order to generate sales through its website. It creates two versions of the email, with the different calls to action which encourage customers to make a purchase after identifying the promotional code.
- To 1,000 people it sends the email with the call to action stating: "Offer ends this Saturday! Use code A1."
- To another 1,000 people it sends the email with the call to action stating: "Offer ends soon! Use code B1."
All other elements of the emails are identical. The company then monitors which campaign has the higher success rate by analyzing the use of the promotion codes. The goal here is to determine which is a more effective way to encourage customers to make a purchase.
Companies do this sort of stuff all the time, its safe to say that every single form of digital communication you receive from a company that’s selling things or wanting you to do something, are A/B testing. Where this gets interesting is when additional layers of data get inserted into the equation, things like customer segmentation, region, weather, zip code and property values. Even historical data from the stock markets or time of year is great to use as variables in your A/B test models.
I have been and still am of the belief that as IoT matures, so too will the marketing and sales departments within the manufacturing organizations of those connected devices. I like to think about it this way: When I’m marketed to, it’s often a banner ad that follows me everywhere I go. I look up a TV on Amazon, and suddenly that TV is following me everywhere I go, calling to me in the news sites I read, waving to me from Twitter or popping up in my news feed. But that’s not how I buy—does anyone?
I buy after I’ve learned about something, then I’ll go to Google, search and find where I can buy it. Then, I’ll look at prices and compare. The money spent to advertise to me has been a waste, because ultimately my intent to buy turned into a sales conversion because of things outside of the advertiser's sphere of influence. In fact, I’m likely not to buy from a company that bothers me, wastes my time with an advertisement before my YouTube video, or makes me wait five seconds to view an ad before I get to read something. It’s obnoxious and intrusive.
IoT may very well change all of this. Imagine your smart oven reminding you that Thanksgiving is two weeks away, and since it’s synched with your smart refrigerator and both are synched with a grocery delivery service it’s known you haven’t bought a turkey. Perhaps that message from your oven comes with a promotion from a local butcher, or a free range turkey supplier that can deliver a turkey two days before Thanksgiving. All that’s required of you is to press a “buy” button. The question I ask folks when I describe a scenario like this is, is that really advertising or is it a value-added service?
From the smart appliance manufacturer, or whoever is orchestrating these capabilities, this is without question a marketing and sales channel for them to upsell and cross-sell. If you needed more oven cleaner, the manufacturer could remind you when it’s time to clean the oven and a promotion for cleaner and other home supplies will likely be waiting for you in the notifications section of that mobile app or on the interface of the actual oven. If you have a connected car, your car could know that you hit the slopes over the holiday break every year. You might get a promotion for some new winter gear in November and a real time notification to buy chains if conditions change on the road.
Again, I ask, is that marketing or a value-added service?
Originally, the intent of marketing has always been to inform buyers of a product that would benefit their lives. Over time, in an unending battle for the consumer's time, eyeballs and, ultimately, wallets, virtually all companies have pushed the limits and risked bothering those they wish to sell to just to stay top of mind. I do hope this changes as IoT evolves.
But what does this have to do with A/B testing?
These manufacturers will likely begin to perform A/B tests against the users of their products and appliances, in an attempt to reach the outcome they desire. A/B testing will become incredibly valuable for the manufacturers, who have never had the relationship with the end users. They’ll have to learn the methods of the digital marketing industry, or find companies to help.
My hope is that things end up as value-added services, and that we as consumers and buyers of IoT devices and appliances don’t view these notifications and promotions as intrusive, but rather view them as enhancements to the overall experience of the product. I hope it gets there, and I think it will.
At IBM we’re working with all sorts of companies, across multiple industries, helping them ingest IoT data and analyze it to derive valuable insights which will directly influence business decisions and strategy. One clear trend is toward the use of product and device data to sell and market more, and better. Create efficiencies wherever possible, build up a two-way relationship between end user and the brand. This is good stuff, and I love to watch it happen. My hope is that in 20 years we won't be interrupted by commercials or bothered by banner ads. Instead, marketing and sales will come in the form of IoT-related promotions, so contextual and personalized that my children couldn’t even imagine a world where television commercials existed, let alone spam or junk mail. A guy can dream, right?
I’ll be at CES January 5-9 in Las Vegas. If you’re there, let’s meet up! Find me @peter_ryans.