After the smartphone and the smartwatch, almost everything is becoming 'smart': from flowerpots and lights to Barbie dolls. The IoT offers unique opportunities to deepen your relationship with your customers.
21 billion devices will be connected to the Internet by 2021, according to the market research agency Gartner: from computers and mobile phones to lights and household appliances. This brings with it a whole host of new opportunities in terms of how consumers interact with the things they buy. Take the Parrot Pot, for example. This is a smart flowerpot produced by a French electronics manufacturer that uses sensors to detect when the plant inside it is short of water and alerts the user via an app on their smartphone. Or Mattel's Hello Barbie, which can be wirelessly connected to parents' home networks, and can hold simple conversations with its young owner with the help of cloud-based artificial intelligence. Or the Connected Mascara currently being worked on in secret by cosmetics giant L’Oréal, via which the company intends to send targeted make-up tips to a tablet on the dressing table of the future. The vodka brand Absolut is thinking along roughly the same lines with its 'smart bottles', which are currently under development in the R&D labs of umbrella firm The Absolut Company. Among other innovations, these bottles will in future be able to work together with smart lights (such as the Hue lights produced by Dutch manufacturer Philips) in order to automatically produce more convivial background lighting once the first shot of vodka is poured, for example.
Taken together, all of these examples point towards a kind of model in which the object communicates with the user's smartphone, tablet or computer via a wireless connection (such as Bluetooth, Wi-Fi, or radio chips that enable near-field communication) before storing any data on a cloud service. Other forms may appear in future, however, as all of this is still very new. "These initial experiments, which involve a high level of gadgetry, are only the beginning of the IoT revolution. The real uptake is still to come," says Professor Wouter Haerick, whose research at the University of Ghent covers IoT applications, among other topics. "As the radio chips needed for IoT communication are produced in ever larger volumes, so their price will fall significantly to less than one dollar. And of course, that in turn means that they can be built into more objects."
As the adoption of IoT products grows, they will also alter the relationship between companies and their customers. In traditional relationships, the interaction between the two parties ends once the product is purchased. The product is handed over and paid for, and the customer goes on to use it for their own ends. The last part of that still applies when the product in question has an Internet connection; however, the object will continue to 'talk' to the seller without the owner necessarily being aware. It provides companies with a whole host of valuable data about how their product is used, which they can exploit in order to personalise their products and services even further. "Companies generally don't have a clear idea of exactly how their products are used," says Haerick. "The stream of data that the Internet of Things will build up over the coming years will in future offer greater insight in that regard. There will be an artificially intelligent system behind the scenes that automatically increases its understanding of how the product is used globally. That can help ensure that future products are designed better from the very beginning."
Another benefit of the Internet of Things is that it will also help sell more products, as products with IoT functionality allow companies to sharpen their marketing process. "A connected product that communicates with a smartphone app is an important piece of real estate for a brand," says Bert Van Wassenhove, a venture producer in digital marketing. "That idea contains a lot of opportunities; among other things, it helps to guide people who buy a single product into the manufacturer's ecosystem, which may contain other products and services that could be of interest."
Naturally, end users are also wary of smart objects that constantly transmit data about how they are used. Companies and brands that wish to prioritise IoT applications will need to provide the necessary guarantees that any data collected about the customer will not be misused, and that an 'opt-in' will be applied at every level – meaning that no data of any kind will be shared without the prior consent of the user. That will be just as big a challenge as the technological development. "Consumers share all kinds of things on social media completely voluntarily, but that is still very different to products that communicate via the Internet of Things. When you post on Facebook, you know that you posted it yourself," says Haerick. "Consideration needs to be given to a model in which every user feels comfortable; however, there is a large group of people that no longer lie awake at night worrying about privacy issues of that kind. What's more, there is new privacy legislation on the way in Europe that will address precisely this issue."
Alongside a privacy model of this kind, manufacturers of IoT products will also have to take the common sense of the user into account. A lot of the wild ideas currently being thrown around will not stand the test of time, according to Van Wassenhove. "I've installed connected Philips Hue lights on my home network, and they show that there is a great deal of potential in this new technology. However, at the same time I expect that there will be a lot of intense competition over the coming years. For example, I recently decided not to have a Nest smart thermostat installed in my home as it costs more than twice as much as a normal one and I really couldn't see how it would save me money. The added value must be immediately apparent: it needs to be extremely easy to use, and if it claims to save users money then the saving must be significant. Otherwise, consumers will continue to use their 'dumb' version of the product."
Customer Service 2.0
Poor customer service is no longer an option today. What are the technological challenges facing customer services today? What are the impacts of virtual reality, the Internet of Things and gamification?
PricewaterhouseCoopers have recently examined global evolutions in customer service. As part of this, they asked customers which method of communication they preferred to use to contact companies. Almost half of the respondents specified a combination of digital and 'traditional' methods (such as calling an employee on the phone). Positive experiences appeared to have less to do with the chosen communication channel and more with how quickly and efficiently they received assistance with their queries, orders, comments, problems and complaints.
A number of different new digital solutions aim to increase the speed and efficiency of customer service. The digital transformation of customer service has been underway for several years already according to Professor Deva Rangarajan, head of the Sales Excellence Centre at the Vlerick Business School and an expert in customer experience management who has advised companies such as Atlas Copco, Vesuvius, BNP Paribas Fortis, Umicore, Electrabel, Johnson Controls and Eandis. With Professor Rangarajan's help, we shine a light on the technologies used in customer services today – and in particular, we consider what technologies they will use in the future.
Quicker and more efficient
The rise of social media has radically changed customer service over the last five years. Channels such as Facebook, Twitter and Instagram allow customers to share their experiences of particular services or purchases more quickly with other users, which means that it has become even more important for customer services to function as effectively as possible. "These shared customer experiences have a major impact on the image of a company," explains Deva Rangarajan. "At the same time, customers nowadays are a lot more impatient; they have higher expectations than they used to. That was confirmed in a study by the American Customer Satisfaction Index, an organisation that examines customer experiences in the USA. Customers have higher expectations every year, and they want to be listened to and helped more quickly."
Rangarajan believes that new technologies should never become an objective in and of themselves when it comes to pursuing smart customer service. "The most important thing is to offer a seamless customer experience, regardless of the technology you use to achieve that or the channel the customer chooses to contact you through." However, it is important that their chosen communication channel is available. "Omni-channel services have become a trend, and customers expect companies and organisations to offer these – both in B2C and in B2B sectors," adds the customer experience management expert.
Companies that want to use all these diverse technologies in order to keep their promises to their customers need to make a lot more effort nowadays. According to Rangarajan, "They not only need to understand all of their customers' needs, but they also need to be able to meet them through multiple communication channels such as email, chat systems, telephone, text message, private messages through Facebook Messenger and WhatsApp, and so on." It is also becoming increasingly important for companies to monitor the quality of their own services through internal evaluations, and by directly asking the customer whether they received quick and efficient help. "After all, sometimes customers only think about the quality of a particular customer service when they are asked about it, especially when their experiences have been positive," says Rangarajan. "It's a major challenge nowadays for customer service to keep all of these elements in balance."
Many companies are relatively well-informed of their customers' requirements and expectations in the modern world; yet Rangarajan points out that companies often fall foul of a so-called 'silo mentality' when it comes to customer service. "All too often, companies are divided into departments that are primarily focused on their own tasks. That also applies to the customer service unit, which might communicate inadequately with other departments or be restricted in its freedom of movement, for example. Customers no longer have any sympathy with this nowadays - they don't want to know who is responsible for what in a given company, they just want someone to help them." A smart customer service will therefore practise optimal communication not only with the customer, but also with the other departments in the organisation.
New technologies not only influence how companies communicate with their customers, but also how they communicate internally. As an example of this, Rangarajan cites Microsoft Teams technology, which is an internal chat system for companies. "A brilliant technological tool for breaking down the boundaries between company departments. Employees in different departments can quickly contact each other, form teams and collaborate." Gamification (the application of game principles and techniques in a non-game context in order to positively influence human behaviour) also provides added value, according to the customer experience management expert. "Game elements have proven effective in staff training – for example, in teaching employees how to deal with diverse customers and their specific needs."
Not just science fiction
Rangarajan believes that there is also room for virtual reality in the customer service of tomorrow. "Instead of explaining things, you can demonstrate them instead. That means customers can virtually experience products they want to buy, which will improve customer experience even further. Technologies of this kind are less than five years away. VR technology already exists, and is currently being used successfully for customer applications by a number of companies."
Rangarajan even sees a future for Internet-of-Things applications within customer service. "Machines that communicate with each other online: this technology creates an incredible amount of possibilities. It might sound like science fiction, but it is currently already possible for companies to monitor their products remotely with the aim of improving them, or to implement systems that automatically report faults to the manufacturer or maintenance service, and these things will help to shape the future."
Particularly high expectations are attached to the technology of automated chat robots. This kind of technology does not necessarily have to be impersonal, according to the customer experience expert. "If a chatbot is able to quickly and accurately answer a customer's question, then it might be able to help the customer better than a human could. Human interactions sometimes involve a great deal of variation in terms of the quality of the customer service. The customer service employee might be tired, or having a bad day." What's more, chatbot systems have recently been developed that can gauge the customer's emotions and state of mind. If it detects that the customer is dissatisfied based on the questions it asks, the chat session will automatically be forwarded to a human operator. "The future of customer service is spectacular, to say the least," concludes Rangarajan.
New trend: gamification
How can you make customers feel involved in your product or brand? By literally turning it into a game. Gamification involves adapting techniques from computer games to your customer relations.
More and more companies are turning to techniques from computer games in their eternal struggle to build a long and lasting relationship with their customers. Gamification, as this trend is known, is a concept from the Anglo-Saxon world that is gradually being discovered by Belgian companies too. Brands such as Pioneer, Hans Anders and Mobile Vikings have all applied techniques of this kind in the recent past in order to 'shape' the behaviour of their customers, in a certain sense.
Pioneer, for example, recently placed a simple computer game on their website in order to communicate to users the benefits of the new bicycle computer launched by the company, which is primarily known as a manufacturer of car entertainment systems and DJ equipment. Gamification does not literally have to take place by means of a computer game, however; nor does it have to be tied to a specific product that the company in question wishes to sell. For instance, the mobile operator Mobile Vikings launched its Road Vikings campaign at the end of 2015 in partnership with the Belgian Road Safety Institute. As part of this campaign, subscribers who installed a special app on their smartphones received a continuous evaluation of their driving behaviour. If they drive well then the company rewards them with additional loyalty points, as well as cinema tickets and other products from companies that sponsored the project.
Digital Artis points
The two examples above centre on an actual developed (mini) computer game or an app - but what companies and brands engaging in gamification borrow from computer games is not necessarily digital in nature. In particular, they make use of a sophisticated system of scores, badges, trophies, experience points and leader boards. These components are precisely what make computer games exciting and even addictive, and they hinge primarily on providing constant positive reinforcement. This essentially makes it an advanced digital example of the loyalty programmes that have already been in operation for decades – such as Valois trading stamps and Artis Historia points, or the loyalty point systems used by supermarkets such as Carrefour and Delhaize. However, gamification systems go a step further than those kinds of reward programmes.
"In principle, it's nothing new; however the digital component automatically creates a number of opportunities," says Bart De Waele, CEO of Wijs, a digital marketing agency based in Ghent. "Among other things, it allows you to reward the customer without promising them any free products. What we have learned from computer games like World of Warcraft is that even badges and digital items can be of value to customers. They feel valued by the company or the brand that offers them that experience."
One of the oldest examples of gamification is the social network Foursquare, which issued points and special titles to visitors of public places according to how often they visited – right up the hotly coveted rank of 'Mayor'. When Facebook also began to offer users the ability to check in, Foursquare began to focus more on smaller groups and renamed its most important consumer app to Swarm.
"But they forgot to carry over the most important element: the badges that visitors could earn,”
"Simply checking in was not what motivated the app's users. Above all, this showed us that gamification systems often stimulate customers' extrinsic motivation. By offering extrinsic rewards such as discounts or products you can quickly accumulate a large number of customers; however, they generally only stay as long as they are getting something. If you want to keep them engaged for a longer period of time then you need to try to motivate them intrinsically."
One very specific trick that gamification systems borrow from computer games is the subtle way they latch onto human psychology. Visible progression in particular is an important part of this. For example, the Starbucks Rewards loyalty programme offered by the American café chain assigns a rank to regular customers and also uses a bar to show them how far they are from reaching the next rank. This is just like the XP bar (XP stands for 'experience') used in computer games such as Skyrim. Players can see from this kind of bar that they have nearly reached the next level, and will generally keep playing until they have passed the next hurdle.
"And then comes another goal, and then another one. The player keeps coming back for more," says Van Roy. "It latches onto the pure human need for closure: whatever you start, you also want to finish."
A thriving industry of gamification agencies and experts has appeared across the world, and is already worth over 2 billion euros per year according to market estimates. But many of these projects fail – up to 80% currently, according to the market research agency Gartner. This is mainly because the loyalty and reward systems are incorrectly designed, and do not always serve the correct purpose. For example, the true aim of gamification in customer relations is not to gain new customers, but to increase the engagement and retention of the existing clientele.
"The most important objective of gamification is to boost motivation – but that can only happen if the motivation is already there," says Van Roy. "Of course, it's difficult to intrinsically motivate a customer for a commercial product or service, but there are three avenues that seem to be more successful in that aim than others. These are: giving customers the feeling of belonging somewhere by offering them a new badge or a higher rank; congratulating them on their skills or knowledge; or confirming their autonomy."
And naturally (De Waele adds), that is also a direct help when it comes to using the customers themselves as a medium for marketing efforts.
"I think it simply goes hand in hand with increasing engagement. The advent of social networks has resulted in increased opportunities to allow customers to share your advertising message for free with their friends. They share their achievement, and at the same time they highlight the brand or the product behind it."
Virtual reality is on the rise in customer service
2017 will be the breakthrough year for virtual reality–including in customer service. Nanopixel is well on its way to becoming the Belgian market leader in VR. CEO D. De Blander shares his vision of the future.
Virtual reality involves immersing users in a different world by means of a special helmet or headset. In virtual reality, you can look anywhere in a 360-degree radius. Whether above you, below you, next to you or behind you, everything is made visible in an almost tangible way, or transformed into an experience. This technology has a positive impact on customer experience. For example, the tour operator Neckermann now allows people to test out future travel destinations in all four of its branches. Customers can have a look at a Cypriot beach, take a boat tour around the Statue of Liberty, enjoy a bird's eye view of Manhattan, and much more besides.
The so-called 'try before you buy' principle has also already been applied by certain automotive firms, who use VR to let their customers try out different interior styles and options during the purchase process. Peugeot customers can even take cars on virtual test drives on a mountain road in the south of France. Architects, construction companies and estate agents are also adapting VR technology to benefit their customers. As an example of this, the property development firms Matexi and Re-Vive and the real estate company Dewaele have this year begun offering house-hunters virtual tours of the properties in their portfolio. Potential buyers can virtually visit hundreds of properties in the companies' branches – or even at home – without having to travel to different addresses and regions. And on helpdesks, too, VR offers huge potential. In response to certain (technical) questions, employees can literally show customers what actions they need to take, or which component they should check.
Nanopixel too believes that there is a large range of possible applications for VR in customer services. For a few years now, the product development firm based in Roeselare has been focusing heavily on the breakthrough of virtual reality into sales processes and customer service. "We have been developing custom virtual reality solutions since the end of 2014," says Dietrich de Blander, CEO of Nanopixel. "That happened completely organically, in response to market demand. Prior to that, we mainly created 3D visualisations and renders for property developers and manufacturers. The flooring producer UNILIN was one of the first companies in Belgium to be interested in using a virtual reality application when making contact with customers. We developed a virtual home for them in which customers could configure and view the entire range of Quick-Step laminate floors. The feedback on that was unanimously positive."
Nanopixel's first VR project quickly led to a follow-up project, as the company developed a tool that future shop owners, key figures in companies and consumers alike could use to visit the Uplace shopping complex before the first stone had even been laid. And that's just the beginning. "Once the shopping centre is actually finished we want to convert the tool into a virtual shopping channel," explains Dietrich De Blander. "Customers will be able to shop on the virtual version of Uplace after the 'real-life' shops have closed for the day. I can see a whole host of other possibilities for customer applications of this kind within the retail sector. I also think that almost every economic sector can benefit from using VR technology in its customer services. However, the applications need to be examined on a case-by-case basis and customised for each specific situation."
Zuckerberg also on board
There is another variant technology that stands alongside VR, and that is augmented reality (AR). With this technology, the user is not visually separated from their immediate surroundings. Objects or locations (such as a living room or street) remain visible, but are enhanced with text, images or animations via a special headset. Possibilities include receiving instructions or information projected onto your retina via an AR headset during your contact with a customer service.
Yet the technology is by no means as advanced as VR, argues Dietrich De Blander. "We recently purchased a Hololens – the famous AR headset produced by Microsoft. We definitely don't want to rule the technology out and there will definitely be a lot of exciting applications developed for it; however, at the moment there is very little demand for it on the market. The hardware for it is not quite ready either."
Mark Zuckerberg also believes more in the enormous potential of VR than in that of AR. That is one of the main reasons why the Facebook founder paid over two billion dollars in March 2014 to acquire Oculus VR, a company that developed the Oculus Rift virtual reality headset for PC users. According to Zuckerberg, it will be at least another five to ten years before AR reaches the same technical level as VR.
When it comes to VR applications, Nanopixel is looking to the future with confidence. "The VR market has boomed enormously over the last two years, including in Belgium. What was initially an exciting diversion for us has now become a full-time business area. We can scarcely keep up with the demand for virtual B2C and B2B applications. We are currently working on around ten new VR projects across a number of different sectors, which I am not allowed to tell you anything about at the moment. Our team is growing amazingly quickly, and we currently have five open vacancies for VR developers. It seems as though everybody wants to get on board the evolving bandwagon that is VR."
VR technology is also very quickly working its way towards consumers, with affordable VR headsets offered by HTC, Oculus, Samsung, Google and even PlayStation. "We believe that the VR market will ultimately grow as large as the smartphone market of today. And that will happen very quickly. The more people have access to VR hardware at home, the more useful VR applications will become for companies' customer services. These are exciting times," concludes Dietrich De Blander.
Disruptive innovation: J.S. Bach versus The Rolling Stones
Established companies engage in incremental innovation; start-ups engage in disruptive innovation. It is a fight between David and Goliath, and we all know how that turned out.
Imagine a lush meadow under the spring sunshine. Two professional musicians in smart suits are playing Sonata for flute and harpsichord by Johann Sebastian Bach. Suddenly those sweet sounds are ripped to shreds by an electric guitar. It is the well-known riff from Start Me Up, the hit song by The Rolling Stones. When the bass and drums also join in, the classical music perishes in an orgy of electrically amplified instruments. Keith Richards' furrowed face is lit by a wicked grin.
The fantastic music by J.S. Bach symbolises the established companies here. Their approach is well-considered; their products are polished. They have built a longstanding relationship of trust with their customers. Everyone thinks that they can continue like this for a very long time to come. Is The Rolling Stones' music as great as Bach's? That is certainly up for discussion. In any case their music is different. Rough, less polished, aiming for a direct impact. And certainly not less commercial. The rock songs by Jagger and Richards symbolise the young start-ups here. They disrupt the peace of the established companies and sometimes even bring the biggest players down.
Playing by different rules
The Rolling Stones were innovative. They revamped the old blues, consciously cultivated their bad boy image and made good use of the mass media to put themselves out there in the market. They were disruptive – rupturing and devastating – before their time. Of course, classical music also uses modern recording and distribution techniques, but that is more of an incremental innovation, a gradual change. The product itself does not evolve much anymore. The difference between these two notions – incremental and disruptive innovation – is essential for companies, according to Cedric Donck, business angel and founder of the Virtuology Academy.
"Established companies engage in incremental innovation. They improve their products or services step by step, but they stay in the same business model. In the hotel sector, this means we make sure our rooms have Wi-Fi, we are on TripAdvisor, we have an attractive website and so on.
Start-ups engage in disruptive innovation. They play by different rules. One example is Airbnb. Another are the banks. They try to outdo each other with apps and other digital innovations, which are necessary, but not enough. Disruptive players such as Lendio offer peer-to-peer money lending to companies without the involvement of a traditional bank. This type of 'uberisation' is emerging everywhere. Disruptive innovation cannot be stopped."
How different is disruptive innovation?
- Disruptive innovation never emerges from the sector itself
Spotify was not established in the music industry, Uber was not created by a taxi company, The Huffington Post is not part of the conventional media world and Tesla is not the result of a car manufacturer. Disruption wiping the floor with existing companies does not arise from those companies themselves.
- There is a fundamental difference in the vision of technology
In conventional companies, technology supports the organisation's business or marketing and is often a source of irritation or frustration. The CTO is rarely part of the board of directors. Start-ups are actually based on new technology (big data, artificial intelligence, new algorithms, robotics, etc.) and wonder, what can we do with it?
- The innovation is accelerating
Innovative companies are sometimes beaten themselves. Apple did not see Spotify coming. Google was outdone by WhatsApp in terms of speed. Disruptive companies are not immune to disruption themselves, and this process is only getting faster.
- Start-ups are currently finding it easy to raise money
Starters who can prove that their good idea has great business sense are currently finding it relatively easy to raise money in order to develop their idea. Being large and financially strong are no longer advantages.