Control & Automation

Reducing Customer Attrition: Does Modular Home-Technology Hardware Make Better Business Sense?

What if you could add a Z-Wave module to Amazon Echo? Or a night light to Sonos? Or a voice-control pod to TiVo? Would customers stay longer?

Reducing Customer Attrition: Does Modular Home-Technology Hardware Make Better Business Sense?
Modular home technology, including home automation, multiroom audiio and user interfaces from Zipato, Myxyty and Nexpaq.

Julie Jacobson · April 5, 2016

I wrote recently about a new IoT tower called MyxyPod from a company called Myxyty. It reminded me of the short-lived Revolv hub, which promised to be everything to everybody. In the case of Myxyty: “Music, atmospheric lighting, safety, e-health, energy efficiency, home automation … Everything is linked to the user from everywhere.”

But there's a big difference between MyxyPod and Revolv. Revolv wrapped its features in a single box, activating new services every so often, emailing users about updates (and the eventual shutdown this week from new owner Nest). Myxyty, on the other hand, provides new features largely through hardware, which of course includes the requisite software.

Billed as a “smart home speaker,” the MyxyPod starts with a Web-connected cylinder that looks just like an Amazon Echo but a little more fashionable with orange highlights.

From there, users can remove the “lid,” which includes the user interface, and slide in new pucks to add capabilities to the tower. And Myxyty certainly offers, or promises to offer, a lot of these modules -- hard drive, GSM radio, back-up battery, perfume diffuser ("olfactory ambiance"), RGB light that can pulsate with the music, surveillance camera, speech recognition, video projector, subwoofer, and RF technology including Z-Wave, Zigbee, Bluetooth, WiFi, X2D (868 Mhz) and "many more coming soon.”

I can’t comment on the usability of this product, but I like the form factor.

At the end of the day, you can 1) sell a cheaper hub with many of these superfluous features built in, or 2) start with some basic functionality – like a 360-degree speaker – and invite consumers to spend more money to build on it.

I believe modular systems that can be seen and touched by the customer – not stowed away in a closet – could be just the ticket.

Business Prospects for Modularity

I think option #2 is a more profitable endeavor, and not just because the model encourages customers to buy more stuff. Rather, modularity encourages consumers to be more engaged with their systems. They must make deliberate decisions to add more functionality. Those decisions turn into action, which keeps the customers engaged in their smart-home project. The more engaged they are, the more they buy. And, when the monthly or quarterly bill comes in, they remember why they keep writing the checks.

Security dealers know the term attrition all too well. It’s when customers stop paying for service – the life blood of any alarm business. Very often, customers go away because they don’t regularly arm their system or they don’t exploit the home automation features; therefore, they forget why they’re paying $20 to $60 per month for the service.

As home systems integration moves to a more RMR (recurring monthly revenue)-centric model, it will be critical to take lessons from the alarm industry on mitigating attrition.

I believe modular systems that can be seen and touched by the customer – not stowed away in a closet – could be just the ticket.

Let’s say a consumer buys a typical smart-home hub from you. It likely will have some A/V distribution, signal processing, home automation radios, and a variety of I/Os for serial control, IR, relays, etc. They probably won’t need many of the options they just paid for, and they’ll likely want to add new features in the future – maybe a new radio that has yet to be announced, a magical sensor, or some far-field voice control.

Personally, I would love to add a Z-Wave pod or an RGB night light to my own Amazon Echo. In fact, I’m annoyed that I can’t. I see the thing in our family room every day, my household interacts with it all the time, and we want to do more without accumulating a hodge podge of dongles black boxes that may or may not work with it.

Now, imagine a customer starts with a Myxyty-type hub that does music. You could send them a light module to try out, and bill them when they decide to keep it. Then you can keep going back with more goodies. This won’t work with software. Consumers want to receive packages with hardware in them. They understand what they’re paying for. They take the deliberate step of opening the box and adding it to that tower in the living room.

Furthermore, if they decide they don’t need that light anymore, they can exchange it for a discount on a different module, and the dealer now has a business of selling used products. The product-swaps again keep the user engaged with their system and -- dare I say it? -- home-technology becomes fun for the whole family.

And now, imagine what would happen if Sonos or Amazon (Echo) adopted a similar form factor … and used the channel to support it.

More in modularity:

Zipato’s Modular Home Automation System: The Best Smart Home Platform?

Nexpaq’s Modular Framework: How Home Automation UIs and UXs Should be Built

I Was Wrong About Myxyty, the Impossibly Tall Home Automation Hub



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  About the Author

Julie Jacobson is founding editor of CE Pro, the leading media brand for the home-technology channel. She has covered the smart-home industry since 1994, long before there was much of an Internet, let alone an Internet of things. Currently she studies, speaks, writes and rabble-rouses in the areas of home automation, security, networked A/V, wellness-related technology, biophilic design, and the business of home technology. Julie majored in Economics at the University of Michigan, spent a year abroad at Cambridge University, and earned an MBA from the University of Texas at Austin. She is a recipient of the annual CTA TechHome Leadership Award, and a CEDIA Fellows honoree. A washed-up Ultimate Frisbee player, Julie currently resides in San Antonio, Texas and sometimes St. Paul, Minn. Follow on Twitter: @juliejacobson Email Julie at julie.jacobson@emeraldexpo.com

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Comments

Posted by Joseph Kolchinsky on April 5, 2016

Julie - no doubt customers enjoy new shiny objects in the mail - who doesn’t like unboxing a new gadget?  But in our industry the real cost is the labor that goes into supporting this tech when the customer buys it through us, not on their own (and sometimes we’re asked to support it anyway when they buy it on their own).

My fear with an approach like this is that it continues to drive home the idea that the value is in the hardware, not the service.  For example, security systems are effectively sold as free hardware while the monitoring service is sold for a monthly fee - the customer has no doubt that they’re paying for ongoing monitoring (even if the cost of hardware was subsidized with a monitoring contract).  I think this might work for a DIY off-the-shelf product that’s meant to be cheap to make, easy to setup, and require no maintenance.  Those three concepts are rarely combined to make a quality product worth associating with.

With a recurring fee for “hardware” as described in the article, the fee is disassociated with the high-cost underlying labor that is directly involved with the hardware.  The customer thinks they’re paying for hardware, but what they’re really paying for is to have someone set it up for them and show them how to use it and provide ongoing support.  So what happens when they stop paying the recurring fee because they don’t want upgrades - how is support provided?

I’m biased, but I think the best way to maintain client engagement is to a) prove to your clients that you can respond instantly and b) become a reliable source of basic support at no charge.  Customers expect this when they buy hardware from you anyway.  Then, with this trust in place, offer a service plan promising priority on-site support and monitoring - you’ll quickly build up recurring revenue that’s directly tied to the service the client is receiving.  We’re working with home technology professionals across the industry to make this a reality by providing instant triage and basic support remotely and directly to the end-user at a low cost.  www.onevisionresources.com

Posted by Joseph Kolchinsky on April 5, 2016

Julie - no doubt customers enjoy new shiny objects in the mail - who doesn’t like unboxing a new gadget?  But in our industry the real cost is the labor that goes into supporting this tech when the customer buys it through us, not on their own (and sometimes we’re asked to support it anyway when they buy it on their own).

My fear with an approach like this is that it continues to drive home the idea that the value is in the hardware, not the service.  For example, security systems are effectively sold as free hardware while the monitoring service is sold for a monthly fee - the customer has no doubt that they’re paying for ongoing monitoring (even if the cost of hardware was subsidized with a monitoring contract).  I think this might work for a DIY off-the-shelf product that’s meant to be cheap to make, easy to setup, and require no maintenance.  Those three concepts are rarely combined to make a quality product worth associating with.

With a recurring fee for “hardware” as described in the article, the fee is disassociated with the high-cost underlying labor that is directly involved with the hardware.  The customer thinks they’re paying for hardware, but what they’re really paying for is to have someone set it up for them and show them how to use it and provide ongoing support.  So what happens when they stop paying the recurring fee because they don’t want upgrades - how is support provided?

I’m biased, but I think the best way to maintain client engagement is to a) prove to your clients that you can respond instantly and b) become a reliable source of basic support at no charge.  Customers expect this when they buy hardware from you anyway.  Then, with this trust in place, offer a service plan promising priority on-site support and monitoring - you’ll quickly build up recurring revenue that’s directly tied to the service the client is receiving.  We’re working with home technology professionals across the industry to make this a reality by providing instant triage and basic support remotely and directly to the end-user at a low cost.  www.onevisionresources.com