• by Jack Loechner , Staff Writer @mp_research, September 29, 2016

According to a new report from Loyalty360, written by Ritesh Bhavnani, about 6.4 billion “things” are currently connected to the internet, and Gartner predicts that this number will reach 20.8 billion by 2020. The ResearchBrief has selected relevant information for our readers, largely in Bhavnani’s words, for review.

Not only are there a greater number of devices being connected to the Internet, but a greater variety as well, embedded with sensors and network connectivity that enable the capture and exchange of data. And, says the report, this diversifying and rapidly expanding Internet of Things (“IoT”) ecosystem is having a profound impact on loyalty programs, creating more flexible payment options, rewarding members for certain behavior and allowing for greater opportunities for personalized communication. 

The consumer landscape of the Internet of Things can be broken into three main categories in broad strokes, says the report: wearables, beacons and home appliances. Each of these device categories will have a different potential impact on (consumer) loyalty.

Companies looking to incorporate connected devices into their loyalty programs must therefore first understand the kind of devices, and then design around the capabilities afforded by them:

• Wearables, such as smart watches and fitness bands, point not only to the increasing number of wallets and payment options, but also to the potential of loyalty programs to reward ideal behaviors (for example, going for a run, or walking 10k steps)
• Beacons and other geo-locational devices highlight IoT’s power to encourage store visits and enhance the in-store shopping experience through personalized communication.
• Wireless sensors within consumer appliances and in automobiles allow companies to reward good behavior and to predict, diagnose and prevent devices from malfunctioning.

As the number and type of devices connected to the internet grows, so will the amount of data collected by them. These devices will provide a real-time, “fly-on-the wall” view of what customers actually do, where they are, what they like, and what they don’t. Marketers will no longer have to predict what customers will do; rather, they will simply have to observe a customer’s behavior and understand the context around a particular action, says the report.

 IoT is greatly expanding the universe of potential non-purchase behaviors that can be rewarded, says the report. Companies can incentivize people for staying fit, driving safely or for reducing electricity consumption during peak hours.

For example, healthcare insurance company Humana uses fitness bands to reward fitness activities to nearly 4 million members, and encourages them with rewards for participating in over 30 fitness activities, such as taking 10,000 steps per day. Those who actively participated in HumanaVitality, throughout the study increased their healthcare savings by nearly 20% and saw a 44% reduction in sick days, says the report.

The growth of IoT is helping to create convenient, fun, personalized and seamless experiences that creates further loyalty.

• The Amazon Dash button lets consumers re-order specific products with the simple push of a button
• In stores, beacons are allowing customers to enter the products they are looking for into their phones and get a walking map that leads right to each item
• Guests at the Walt Disney World Resort are given a MagicBand wristband which facilitates planning activities such as dining, rides, attending parades, and so on. Disney can use the tracking information and send them personalized messages along their route
• Customers can also tap the MagicBand to pay for things that scanners read during rides.

 These devices strengthen loyalty by giving shoppers a premium, personalized feeling and an excellent customer experience.

 While the Internet of Things is certainly adding a dimension of convenience to people’s lives, there is a dark side to this technology: the creation and transmission of data opens new opportunities for this information to be compromised. More data, and more sensitive data, available across a broad network means the risks are higher, and that data breaches could pose significant dangers to individuals and enterprises alike.

 Not only do companies have to be aware of sensitive data getting into the wrong hands, but marketers must also be mindful about the way they communicate to the end users themselves. The trust relationship with a consumer is extremely fragile, and once it is broken, it is almost impossible to mend, cautions the report.

With such sensitive information, companies must ensure that best practices being followed by the financial and healthcare industries are applied to the data generated by these devices. At minimum, companies must offer easy to use and highly transparent opt-in and opt-out mechanisms and clear data use policies.

 The Internet of Things is opening up a huge potential for brands in all industries to capture and retain loyal customers who are genuinely enthusiastic about the products and services being offered, concludes the report. As brand sentiment deeply hinges upon the customer experience, communication and care companies who use the Internet of Things to garner greater loyalty will surely win big. 

To view the complete report, please visit here.