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The Internet of ThingsA Guidance Report on Consumer-Facing Connected Objects

May, 2017

Introduction

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Humans crave connection. Over thousands ofyears, our ability to connect with each otherevolved from the spoken word to the printingpress, the telegraph to the telephone, themainframe to the pocket-sized supercomputerknown as the smartphone. With eachadvancement, we’ve become more connectedwith one another and the world around us.Conversations are no longer between people -the physical world is starting to communicateback with us in new ways that are both fun anduseful.

Now, at the dawn of this new era defined by theInternet of Things (IoT), we find ourselvesconnecting with other humans like never before,but also with the physical objects that surroundus in our everyday lives.

The physical world is starting to communicate

back with us in never before seen ways.

For marketers like ourselves, this instantly expands our worldview, capabilities, andopportunities. The purpose of this introductory whitepaper is to provide brands, retailers,and agencies a baseline understanding of the opportunities created by the IoT. We’llexplore how IoT is being deployed today in ways that can benefit an organization’s entirevalue chain while creating new opportunities to better understand customers and drivefuture commerce.

Those companies that jump into the IoT now will quickly gain a competitive advantage overtheir peers. They’ll increase customer satisfaction and product adoption, while streamliningbusiness operations with new, actionable data.

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Machines have communicated with other machines for decades. From your TV remotecontrol to a motion-activated light switch, simple, transactional communication has been apart of modern life.

What makes IoT radically different is the “Internet”. When device-to-device communicationoccurs over a local network and then into the powerful, distributed global network knownas ‘the cloud’, something magical happens: Data, often lots of it. The contextual, behavioral,and mechanical data that was previously confined to functional silos can now be affordablystored, shared across systems, and analyzed in ways that inform decisions large and small.

The analyst firm Gartner predicts that, starting in 2017, CMOs will spend more ontechnology than CIOs, with tech spend exceeding 3.4% of company revenue. Why has thetorch been passed? As digital-native consumers adopt technologies that are powerful andaffordable enough to be deployed broadly in new facets of life, that technology givesmarketing departments access to live-streamed data that was previously inaccessible,including the critical details of how consumers consider, buy, use, and repurchase theirproducts.

Of course, raw data is without value. Data that is collected, intelligently transformed intoinsights, and made actionable through visualization and recommendations will havetransformative power for products, services, and - most importantly - the brand-consumerrelationship. Expect the availability of new behavioral data around consumer store visits,product usage, effectiveness of marketing campaigns, and attribution. Connecting billionsof devices to each other via the Internet creates trillions of data signals.

While the Third Industrial Revolution was marked by embedding electricity into almostevery object, the Fourth Industrial Revolution belongs to the data generation capability ofthe IoT. We’ll share examples below of how this already happens today.

Consumer attitudes and behavior are shifting rapidly, and marketers must embrace thisinescapable trend quickly. Used wisely and appropriately, this new flood of data createsopportunity for the bold and fearless, those willing to jump head first into the unknown.

The purpose of this introductory whitepaper formarketers, brands, retailers, and agencies is tohelp you build a framework for thinking aboutIoT and the opportunities that now exist toleverage these streams of contextual, timelyreal world data. Now is the time to learn and getacquainted with this new ecosystem, and wepromise, it will be mostly easy. You’re likelyalready very familiar with the big trends shapingtoday’s retail economy: mobility, connectivity,and sensors. The Internet of Things enhancesyour physical products with these elements.

When device to device communication occurs

over the net and across the cloud

something magical happens: Data

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About the Internet of Things

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Today’s IoT is easily visible in the connected home. Each month, new products emerge toconnect appliances, security systems, lights, blinds, and thermostats to the Internet. In theworkplace, the IoT also enhances manufacturing and asset tracking, providing real-timeanalysis of equipment performance and supply chain logistics. Regardless of whether theproducts are consumer facing or industry specific, these objects generally connect to theInternet directly via WiFi or cellular, or via connections to smartphones via Bluetooth orNear-Field Communication (NFC).

Tomorrow’s IoT will be characterized by a flood of sensors integrated into everydayobjects. Already in 2017, companies like AMI and inMarket have deployed sensors in 23,000jukeboxes across the U.S. -- creating the infrastructure for on-premise IoT activations andcontextual, second-screen experiences. Connected products and smart packages, fromfood and beverage to FMCG, can trigger meaningful, contextual conversations withconsumers both at the point of sale and the point of use, providing the exact information aconsumer needs at the moment they make a purchase (or re-purchase) decision.Connected clothing and wearables can provide individualized health care at the personallevel, while aggregated data can be used to spot larger medical trends in communities,such as early onset diabetes.

The Internet of Things brings what marketers love about the digital

world - tracking, measurement, accountability,

increased customer touch points - into the

physical world.

Decision-makers must understand the fundamental distinction between the marketing value of IoT deployments and the general benefits of the IoT. Your CFO will no doubt value a technology’s ability to increase revenue, reduce cost, or reduce risk. Marketing leaders, however, must view the IoT through an additional lens: the Internet of Things brings what marketers love about the digital world - tracking, measurement, accountability, increased customer touch points - into the physical world.

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Internet of Things - Today & Tomorrow

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The runaway success of the Amazon Echo, reaching over 5M units sold in the first twoyears, points to a growing customer appetite for connected devices. Controlling your homewith voice commands seems novel today, but will be commonplace in a few short years.The lesson here is that there is demand for IoT products and consumers grow morecomfortable each day with connected products in their homes and workplaces.

Millions of connected objects represent an exciting early validation for the market, butdon’t hesitate to think big! Imagine the possibilities when billions of everyday consumerproducts are intelligent enough to assist consumers throughout the lifecycle.

Consumers will also embrace smart products and packaging that inform them why to buy aproduct, how to use it properly, and how and where to repurchase. They’ll delight inproactive customer service. Companies can monitor product performance on customers’behalf, notify in advance of product failure, and reach out when a product ceasesfunctioning correctly to diagnose, troubleshoot, or order replacement parts.

Marketers will quickly realize that they’ll need updated or new key performance indicators(KPIs) and metrics to see where IoT can increase revenue, cut cost, or reduce risk in theirbusiness. With smart measurement, they reduce time between digital touches to theconsumer, for the consumers’ benefit. They can increase a customer’s digital engagementtime in meaningful ways. They can, as mentioned above, make significant improvements tocustomers service and simplify the path to reorder and repurchase.

According to Pew Research, 77% ofAmericans now own a smartphone,with 92% of 18-29 year olds owningone. These devices have becomeeven more reachable by IoTinfrastructure technology -- withbeacon detections increasing by370% during holiday 2016 versus thesame period in 2015. Additionally,broadband internet adoption in theUS now reaches 73%. These factorsform the foundation for massadoption of IoT solutions. Broadbandaccess enables higher volume andfaster data transfer. Near ubiquitoussmartphone adoption, and the abilityto control connected devices with it,creates the remote control for lives.

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Why Consumers Will Care, and Therefore Why You Should Care Also

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Source: Surveys conducted 200-2016. Internet use figures based on pooled analysis of allsurveys conducted during each calendar year.

PEW RESEARCH CENTER

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% of U.S. adults who…

100%

80

60

40

20

0

2000 20162005 2010 2011

Use the internet

Havebroadbandathome

Usesocialmedia Owna

smartphoneOwnatablet

1

52%

5 3

35

88

777369

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The Evolution of Technology Adoption and Usage

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Brand & Retail Areas Affected by IoT Touch the Entire Value Chain

IoT brings with it new capabilities to proactively monitor manufacturing equipment,and predict when service is needed. This will streamline production operations,reduce maintenance cost, and increase throughput.

While asset tracking already exists, IoT enables entire supply chain monitoring fromfactory floor to consumer door, all the way down to individual items. The old will bemade new again.

The rapid growth of the proximity marketing industry points to a new wave ofmarketing possibilities with interactivity at the point of sale and point of use.

The Tech• Beacons• RFID• NFC

Use Cases• In store promotions & offers• Indoor navigation• Simplified checkout• Product information

We’ll see streamlined payment options both at physical locations and whileshopping at home. Connected products themselves can be revenue generators,prompting orders when running low on supply or encouraging complementary andupsell items when appropriate.• In store: touched upon above• At home: simplified digital re-order via connected product, such as Amazon Dash

By analyzing the data generated by consumer visitations, measured when theyinteract with IoT devices in the physical world, we’ll see new forms of audiencetargeting and measurement, including greater ability to demonstrate online to offlineattribution. This mobile data can also be matched with other devices, such as alaptop or smart TV, to sync messages across devices. It will also inform new digitalout of home advertising innovation.

MarketingMarketers can use the location of mobile devices as a way to bridge the gap between the physical and digital worlds. By measuring where devices visit, marketers can uncover the physical path to purchase, redefine audiences based on location profiles and predict their purchase behaviors They can also view usage trends to encourage different behavior.

Product DevelopmentView usage trends to spot patterns of product usage or non-usage; real-time data capture from customers while using the product, which can uncover what’s working/not working

Customer SupportOne of the best “marketing” efforts a company can support! IoT enables customer service teams to proactively reach out after an issue occurs. In the future we will predict when an issue will happen, contacting the customer to take preventive steps to limit downtime and provide troubleshooting advice.

Manufacturing

Asset Tracking

In-store & Omnichannel

Marketing

Payments

Retargeting

Data Analytics

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The IoT Value Chain

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Consumer

• In store: interact with everyday objects to instantly and easily unlock special offers, read trusted reviews, and launch pre-sales support channels (chatbots, FAQs, trusted bloggers)

• At home or on the go: get tips and tricks to get the most out of a product, verify product authenticity, monitor safety recalls, and connect to after-sales service and support channels

• Trigger effortless reorders and refills to ensure you’re never without your favorite products

Retailer

• Connect your physical space to the personalization and flexibility of the cloud. Provide reviews, cross-sell recommendations, and more

• Create endless aisles by transforming out-of-stock events into commerce opportunities. Interactive aisles trigger fulfillment via your company’s e-commerce channels when a store’s stock is depleted

• Transform the world into your showroom. Connected objects trigger discovery, re-orders, and cross-sell/up-sell opportunities with user opt-in via voice command or Near-Field Communication (NFC)

Brand

• Bring the benefits of digital marketing to the physical world: analytics, personalization, attribution, digital retargeting, and more

• Build direct relationships with individual consumers through uniquely identifiable objects. Because each item has its own history, gain insights into consumer purchasing and usage patterns while building customer satisfaction and loyalty

To begin seeing these ideas in action, consider the following real-world case studies.

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Table: Value Propositions for Connected Objects & IoT

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Searching for unique consumer brand building experiences, Spyder wanted to elevate theirconnections with skiers and consumers alike. A solution was created through Spyder’s USSki team jackets, which are equipped with specially-designed logo patches embedded withNear Field Communication (NFC) technology. Using a mobile device, users could tap thelogo to immediately receive real-time and dynamic content, such as Spyder’s social mediafeeds, featured videos, ski event countdowns, and information about the U.S. Ski Team. Theexperience was further enhanced by the inclusion of contextual and location-basedinformation such as snow conditions, trail maps and points of interest. The jackets evolvedinto a direct link between the brand and consumers past the point of purchase.

The data captured by the Blue Bite platform through user interactions prove to beimmensely valuable. It provides brands with key insights on consumer usage, which in turnleads to intel for production cycles. For example, captured data includes the locations of allski jacket engagements. Spyder is able to adjust future sales distribution to correlate withhigh-activity zones to maximize sales. Understanding the types of content users spend themost time with can improve future marketing campaigns and communications. Finally,interaction times provide insight into when people are most and least engaged with theproducts, helping to form best practices on product launch schedules to maximizeresponse rates.

C o m p a n ySpyder

C h a l l e n g eTo elevate Spyder performance

product experience

S o l u t i o nCreate dynamic mobile

experiences accessible anywhere and anytime through wearable

technology

Case Study 1: Blue Bite

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This upscale shopping center in Cary, NC does right by its tenants when it drives more foottraffic to their stores. Given how much time their shoppers spend on their smartphones,they wanted to reach a target audience on mobile devices.

Reveal Mobile, the marketing agency, and WRAL partnered to install 20 beacons at ParkWest Village, not to send push notifications, but to build a retargeting audience of previousshoppers. Additionally, the companies made creative use of location data. Instead ofbuilding a geofence to target anyone opening the app nearby, they created a targetaudience of residents that lived within 2 miles of the shopping center. Combining previousshoppers with nearby residents created their ideal mobile audience.

The baseline click-through rate for mobile advertising was 0.44%, based upon non-targetedads in the WRAL News app. Park West Village saw a 75% lift in their campaign’smeasurable success, with the click through rate increasing to 0.77%. The sales team atWRAL also increased their campaign revenue 100% by selling targeted audiences.

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C o m p a n yPark West Village Shopping

Center

C h a l l e n g eDrive repeat visitors to this upscale shopping mall, and encourage new visits from people living and working

nearby.

S o l u t i o nDeploy Bluetooth beacons and mobile geofencing to capture

mobile devices visiting the location, and also those that live

and work nearby.

Case Study 2: Reveal Mobile - Leveraging Beacons to Build Target Audiences

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Hopsy is a pioneering craft beer home delivery service in the San Francisco Bay Area. Thecompany partners with a wide variety of local brewers to bring the freshest and best craftbeers directly to the homes of discerning - and thirsty - consumers.

Thanks to the explosion of interest and investment in craft beer, consumers have morechoice than ever. Over a thousand breweries worldwide can produce up to a dozen beerseach. As consumers - and especially Millennials - tire of national and global megabrands,they love the idea of getting to know both the beer and the people who created it.

Craft beer fanatics make a point of visiting their favorite breweries to taste the freshestbrews and meeting the people responsible for creating them, so a delivery service needs tobring the experience along with the beer. Fortunately, NFC technology allows Hopsy andtheir breweries to deliver the personal connection with the simple touch of an NFC-enabledsmartphone.

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C o m p a n yHopsy

C h a l l e n g eBring the authentic experience of visiting a craft brewery into

the consumer's home

S o l u t i o nIntegrate NFC-enabled labels

into each 'growler' (container) of beer and link to exclusive digital

content via the user's own smartphone.

Case Study 3: Thinfilm - Connecting Craft Brewers to Consumers

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Hopsy applied a Thinfilm NFC OpenSense label to the exterior of the container, known as a'growler'. To trigger a digital tasting experience, consumers simply touch their NFC phoneto the label. Prior to opening the growler, the NFC tag label will trigger a short videopreview on the smartphone, so the recipient has an idea of what's inside. Once the growlerhas been opened, the NFC label's sensor detects the opening and will then trigger the fullmobile-optimized virtual tasting experience with the brewmaster himself. The recipient andfriends are treated to video content - as if they were in the brewery's tasting room -explaining how the beer was made, why it's so special, and what food pairings make themost sense. The goal is simple: to increase brand loyalty and ecommerce activity (includingreorders and cross-selling within a brewery's line) based on a heightened emotionalconnection between the consumer and the brewery.

Behind the scenes, marketers can take advantage of the rich analytics enabled by theunique characteristics of NFC technology. Because each NFC label is uniquely identifiable,brands can see when a single bottle 'goes viral' as it's passed around a group of friendswho each want to participate in the digital experience. By encouraging and rewarding real-world and digital social sharing, brands can use NFC technology to become the life of theparty.

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Case Study 3 (cont'd)

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Any new innovation brings with it both new opportunities and new challenges. One of themost pressing fundamental questions that the IoT ecosystem must answer is how tomanage end user privacy and device security. The ultimate goal is the consumer’s trust.

Being able to track individual products through their life cycle while they’re in theconsumer’s possession will be a huge benefit to all. We must proactively establish our ownindustry standards, reaching across numerous industry and government institutions, tosafeguard consumer privacy and build trust for these new solutions. This takes the form ofensuring a connected object’s own security, but also the information about the end user.Companies must continue to follow best practices for de-identifying and anonymyzingconsumer data.

As we witness more IoT devices being vulnerable to hacking and exploited for massiveDDoS attacks, security can not be an afterthought. Instead it must be intentionallyarchitected and designed from the beginning.

Due to the rapid expansion of the field, many companies launching new IoT products arealso unaware of regulatory obligations required to bring those products to market. Privacymatters a great deal to consumers as well as regulators. Products and solutions that gatherpersonal data should be designed from the start to respect customer expectations as wellas regulatory requirements in target markets. Recyclability and disposability requirementsvary by jurisdiction, and the use of batteries can complicate compliance. Make sure you’reaware of relevant regulatory requirements at the beginning of a new project andincorporate them into your product design to streamline approvals and accelerate time tomarket.

Even with an early test, companies should think holistically about how this new data can, orcan’t, integrate with their current systems and external data sources. A little bit of extraeffort upfront can ensure higher quality data, easier work flow, and an increased likelihoodof adoption.

While IoT applications can fit within the product, market, and customer strategies of anycompany, smart marketers will build internal teams around use cases and product lines thatare open to experimentation and deployments that are clearly measurable. A strongevaluation team consists of a diverse group of employees extending far beyond theinnovation or technology evaluation organization including members from:

Product management and marketing

Packaging and industrial design

Information technology

Retail activation

Data science / business intelligence

Innovation / technology evaluation

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Key Considerations

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Conclusion

Now that you’ve seen how Connected Objects and the Internet of Things are building new bridges between consumers, retailers, and brands, remember that this is just the beginning. Think about how you can benefit from triggering direct, contextual conversations with your best customers both online and in the physical world. Imagine the insights unlocked by the data generated by your prospects when they interact at the moment of maximum purchase intent – when your product is literally in their hands!

Leaders are boldly experimenting now in order to create a sustainable competitive advantage for the years to come. While digital content can be created quickly, it takes time to craft both omnichannel strategies and optimize the use of new tools in support of your objectives. Just as the Internet’s first banner ads are nothing like the personalized, contextual, A/B tested networks we know today, IoT-based marketing will evolve quickly as leaders continue to innovate.

It’s simple to get started. All you need is an idea and the right tools. Contact an MMA member company to discuss your business objectives and how the IoT can help you improve revenue, loyalty, and customer satisfaction. Whether you want to bring a physical space to life or create digitally interactive products and packaging, Connected Objects and the IoT can make it happen.

Acknowledgements

The MMA wishes to thank members of the Internet of Things Incubation Council and specifically the members of the IoT Connected Objects Working Group. The Working Group consists of members from the following companies - 3Cinteractive, L.L.C., AccuWeather, Inc., Blue Bite, Dstillery, GroupM, Hathway, Immersion Corporation, R/GA, Reveal Mobile, Samsung, Tapad and Thinfilm (Thin Film Electronics ASA). Finally, this Guidance Report is indebted to the dedication and writing skills provided by Matthew Bright of Thinfilm and Matthew Davis of Reveal Mobile.