Market Strategies: The Evolution of the Smart Home

Smarter homes will benefit from smarter consumers
By Patrick S. Duffy

It should come as no surprise that the average consumer in 2016 has a general idea of what a smart home is, with a recent study estimating that 30 million U.S. households will add smart home technology in the next 12 months. But what may surprise you is that the market remains largely the domain of early adopters – including the purchasers of new homes – because the hype doesn’t yet match the reality. If, as market researcher Gartner is predicting, the typical family home could contain more than 500 smart devices by 2022, the transition from early adopter to mainstream consumer will require simplicity and ease of use over shiny, new products which don’t serve to budge the status quo.

So how can the building industry bridge this gap? By focusing the most on those smart home services which interest consumers the most – like home security, cited by 63 percent of consumers in a recent study commissioned by August Home and Xfinity Home – and pairing them with triggering events, most notably moving into a new house (26 percent) or remodeling an existing one (14 percent). Yet because the speed of adoption and lists of concerns can vary by age group, providing consumers the ability to match their individual wish lists with these products and services is essential.

Fortunately, there are initiatives already underway to educate consumers about smart home options. For the existing home market, Coldwell Banker has recently partnered with CEDIA, the global trade association for home technology, to launch a smart home education curriculum for its brokers and agents. Offered via Coldwell Banker University by a CEDIA instructor, the program will focus on just how smart home products are changing the way people live and interact with their homes. Given that the company’s Smart Home Marketplace Survey concluded that almost half of Americans either own or are planning to invest in smart home technology by the end of 2016, the plan is to give their agents an advantage when marketing their listings.

Fortunately for home builders, our industry is a lot further ahead in this game, with the Housing Innovation Alliance acting as a collaborative think tank since 2006. Sponsored by Pittsburgh-based housing innovator IBACOS, the alliance now includes more than 75 leading builders as well as more than a dozen building products suppliers and manufacturers. With the mantra “builders helping builders,” the alliance also assists its members with the marketing, appraisal and financing of ‘high-performance’ homes.

The alliance achieves its goals through three primary areas: How We Live (identifying ways in which builders can best understand how consumers view the performance of their homes), How We Build (sharing best practices, trends, codes and standards), and The Future of Housing (analyzing and sharing global and technological trends shaping housing in the years to come).

In order to better demonstrate the benefits of a high-performance home, Avid Ratings has also recently introduced its GoTour program. Both virtual and augmented reality give potential buyers the ability to ‘tour’ a home before and after it’s built to view all of the technology options – even those usually hidden behind walls. By allowing viewers to cycle between rooms as well as among categories such as lighting, appliances and other energy efficiencies, they can jump-start their own research on how to save money, which might even result in a larger selection of options when the contract is signed. Even better, since virtual reality allows potential buyers to view these systems from the comfort of their own homes, they can save both time and money by not having to drive somewhere else to see it in person.

In order to simplify comparison shopping for consumers, IBACOS has also introduced its own rating to better gauge thermal comfort for its residents. As opposed to just measuring energy efficiency – which may be at odds with comfort much of the time—the Thermal Comfort Rating Metric (TCRM) would let buyers decide how important comfort is when weighed against cost and efficiency. For builders, a realistic rating system could help reduce the cost of callbacks when buyers are prepared for these trade-offs, and have had their specifications tweaked into the building of the home itself.

Finally, there’s also a network effect at play here, in which greater penetration feeds on itself. According to iControl’s most recent State of the Smart Home report, 66 percent of consumers who know someone with a smart home are likely to be more interested in these technologies – and that’s even before they step foot in your model home.

Patrick S. Duffy is a Principal with MetroIntelligence Real Estate Advisors and contributes to BuilderBytes. He can be reached at pduffy@metrointel.com or at 310-666-8288.

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