Home Toys Article
- April 2007 -
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Business Models for Managing the Digital
We anticipate significant opportunities for hardware and software companies helping service providers, home network and home computer vendors, and CE vendors to develop more proactive customer help solutions.
The rising popularity of residential broadband services, home networks, and digital entertainment products such as digital video recorders (DVRs) and flat-panel televisions will create support challenges for many companies. Customer care and proactive support and management of digital lifestyle technology solutions will not only serve the interests of companies that seek to reduce call-center costs and churn, but also those building businesses around technical support and services. This paper argues that significant percentages of consumers are interested in fee-based customer care, and that industry players - including retailers, service providers, and equipment manufacturers - can build businesses that scale from simple tech support to "digital home advisor" services.
In Q2 2006, Parks Associates performed a study titled Managing the Digital Home: Installation & Support Services. This project involved a survey of more than 6,000 consumers with home Internet service (in the U.S. and Canada) regarding their preferences, attitudes, and usage of support services for home networking. This study unveiled opportunities for service providers to improve customer satisfaction and monetize certain support services. Some excerpts from that study include the following key points:
As residential and portable technology solutions provide end users with new ways in which to access and share content, they likewise create new challenges and headaches. Home computer hard drives often fail; home networking solutions are in many cases not quite as easy to install as advertised; and printers sometimes fail to print!
For a great many consumers, dealing with these problems has often been a case of "do-it-myself" insofar as they fixed them on their own or sought the assistance of a technically-minded friend or family member to solve the problem. This "self-help" approach is particularly prevalent for problems related to Internet security threats - viruses, worms, and spyware, in particular - where consumers are becoming more accustomed to finding new software to address these issues.
At what point, however, do "do-it-myself," the "family-and-friends" network of IT support, and additional software purchases and downloads fail to keep pace with the ever-increasing complexity of the digital home? When self-help fails, how do product manufacturers and service providers avoid creating huge cost burdens for their technical support centers when customers require their assistance? What key solutions are needed now to help customers ameliorate the complexity, confusion, and consternation with which they view their home technology products? Finally, are there business cases that can be built upon delivering digital home management solutions?
Addressing these questions is more critical now than ever. With the many benefits provided by digital home applications - convenience, cost savings, expanded entertainment, enhanced communications applications, etc. - comes the peril of delivering services and products that simply do not work as promised, with the risk of alienating future buyers by disappointing them today. The need for more enhanced management and maintenance applications is driven by key factors, including:
2.3 Opportunity for Digital Home Services
Overwhelmingly, consumers deal with Internet security challenges on a do-it-yourself basis, and they are not strongly interested in third-party security software that comes as part of a subscription. However, a security service can be perceived with greater value if it provides a truly holistic solution that incorporates features in addition to protection functions. Some of these value-added functions and features could include alerts, updates, and recommendations for both proactive preventative and reactive measures against Internet threats.
When it comes to ensuring that home computers are properly protected from Internet maladies, a majority of consumers in the U.S. and Canada are doing a good job of regularly updating virus definitions and running virus and spyware scans. However, for other regular maintenance functions (in this case, cleaning out the Internet cache and running a disk defragmentation), the percentage reporting that they perform these activities on a regular basis drops precipitously.
Our study finds very strong interest in a "digital dashboard" feature that automates some basic PC and Internet performance enhancements and provides up-to-date diagnostics information that can be easily reviewed by the user.
As consumers acquire and create more and more digital content, they have growing needs for reliable, economic, and high-capacity storage and backup solutions. It is easy to put a price tag on commercial content, but personal content such as digital pictures and home videos are priceless to their creators. Right now, most consumers rely on hardware solutions such as CD/DVD burners, external hard drives, and networked storage devices for their storage and backup needs. We believe that such solutions are insufficient, and significant opportunities exist for broadband service providers to play an important role in improving them.
In addition to some standard problems regarding the throughput and coverage of home networking solutions, other major problems reported by home network users are related to configuration. Specifically, the configuration of printers and drives as shared resources is a problem that at least 10% of home network users report. Software and support to solve this issue will be critical as consumers move beyond the use of the home network for such basic functionality as sharing a broadband connection to seeking more integrated and feature-rich applications that may include shared entertainment and multimedia content.
We were surprised by the consumers' strong response to the notion of paying for unlimited technical support. When you consider the strong interest in remote (phone- or Web-based) customer support plus the high rate at which consumers pay for extra warranty and damage protection contracts when purchasing a new home computer, it is clear that there is a business model for hand-holding. After conducting this quantitative research and some earlier qualitative work, Parks Associates has come to believe that consumers place a significant monetary value on a trusted resource (in-home, in-store, or remote) that can work with them to solve some of the complexity they are having with their technology. We sense that remote IT support services will soon improve leaps-and-bounds beyond simple remote desktop control and incorporate features such as automated diagnostics as well as reporting tools that assist a help-desk agent in proactively solving a digital home problem, rather than forcing him or her to play "20 Questions" with the consumer.
The true value of having a trusted technical advisor or professional resource to help manage the complexity of the digital home is only fully realized after a customer has experienced a debilitating technology malfunction. From our Managing the Digital Home study, we are able to determine the areas in which consumers respond most-favorably to the idea of a professional technician's assistance (Figure 5).
The cases in which respondents are most likely to call in the professionals are those related to home computer hardware or software issues, home networking issues, or new home computer set-up and configuration. These responses reflect the market realities that Best Buy's Geek Squad® service has experienced in recent years, as much of its businesses has come from exactly these problems.
For IT products such as home computers, consumers are willing to expend additional funds to purchase peace-of-mind features such as warranties and accident protection. In addition, significant percentages of consumers paid for professional installation and configuration of their home computers. Despite their standards-based architecture and widespread use in schools and offices, home computers remain technically complex for many consumers. The addition of home networks, peripherals, and other connected devices to the home IT environment presents a significant opportunity for support and services at the time of product purchase.
Consumers have paid and are willing to pay for home computer equipment set-up and configuration, as well as for professional assistance in a "break-fix" case in which a home computer and/or home networking equipment is in need of attention.
A key for solutions providers in this space is assisting carriers and equipment vendors, and other third-party players (remote IT support organizations, for example) need to understand the basic parameters of the digital home. At present, these entities are largely flying blind when it comes to knowing which devices are connected on a home network and how they are being used. With remote diagnostics capabilities and two-way reporting to a "knowledge database," carriers can benefit from more timely information about the configuration and use of digital home products and provide more proactive service if their customers have problems with equipment or services. Furthermore, the value of the knowledge database can be extended as consumers seek to add more devices to their home networks. In addition to recommending fixes, the database can be used to generate recommendations for compatible hardware or equipment. For example, the carrier may build internal case studies that would indicate that Wireless Bridge X works particularly well with Game Console Y, and could serve to recommend such a product when the customer is ready to link his or her game console to the broadband connection for online gaming.
Given the challenges associated with using home computers, Internet services, and home networks, we anticipate significant interest among both home network equipment players and broadband carriers in deploying a host of more advanced products and services to help their customers overcome challenges in installation and use. These solutions will include the following types of applications:
We anticipate significant opportunities for hardware and software companies helping service providers, home network and home computer vendors, and CE vendors to develop more proactive customer help solutions, as pictured in Figure 9. Near-term opportunities include a potential market of more than 50 million U.S. households (broadband users) with home computers. These consumers can use any or all of the services and applications that relate to improving the security and performance of the Internet and home computing environment. Mid-term opportunities will center on making the home network more usable by developing easier ways for consumers to share resources and allow them to derive more functionality from their home connectivity solutions. This step will pave the way for longer-term digital home features, in which consumers are using the home network not only for data-specific applications (PC and Internet-related) but also for distributing multimedia content (music, photos, and video) and leveraging the robust and always-on broadband connection for other applications such as online gaming. There is a significant opportunity to improve the customer experience and begin developing digital home solutions that will evolve to meet consumers' changing needs and wants.
Figure 9 Hardware/Software Opportunities: Managing the Digital Home
About the Author:
Kurt Scherf studies developments in home networks, residential gateways, digital entertainment, technology development in the housing market, and residential and building management and controls. Kurt is the sole author or contributing author/analyst to more than 50 research reports and studies produced by Parks Associates since 1998.
Kurt is a frequent speaker at conferences and events around the world, and is frequently cited in the industry and general business press. Kurt is a certified Focus Group Director.
Kurt joined Parks Associates following a career in political research and multi-tenant dwelling management. He earned his BA from The University of Iowa.
INDUSTRY EXPERTISE: Home Networks & Residential Gateways, Wireless LAN and PAN solutions, Home Networking Media, Media Center PCs, Set-top Boxes & Residential Gateways, Consumer Storage, Consumers and Digital Entertainment, IPTV, and Customer Support for the Digital Home.
About Parks Associates: Parks Associates is a market research and consulting firm focused on all product and service segments that are "digital" or provide connectivity within the home. The company's expertise includes home networks, digital entertainment, consumer electronics, broadband and Internet services, and home systems.
Founded in 1986, Parks Associates creates research capital for companies ranging from Fortune 500 to small start-ups through market reports, multiclient studies, consumer research, workshops, and custom-tailored client solutions. Parks Associates co-hosts CONNECTIONS™ (in partnership with the Consumer Electronics Association) each year. www.parksassociates.com.