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?

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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