O2 UK searches doggedly for smart home benefits, as analysts cite price concerns

O2, UK, smart home

O2 UK’s Digital Director thinks focusing on the benefits of its new smart home offering, such as knowing that the dog isn’t chewing the sofa, will determine its success.

The mobile operator unveiled the UK’s first telco-based platform earlier this month, with three packages starting at £20 per month and rising to £30pm for a minimum two-year contract.

Somewhat surprisingly, the press pack for the launch contained an O2-commissioned survey that showed just five percent of consumers it polled planned to install smart technology this year.

Another 15 percent said they did not understand what smart home tech was.

Speaking to European Communications, David Plumb says his company has built its product “to directly respond to those concerns”.

He explains: “They can control their heating, lighting, locks and more - all from their phone - and get it installed by a dedicated professional, rather than attempting complicated installations themselves.”

The Digital Director sidesteps a question about whether he’d be happy if five percent of O2’s customer base signed up to use the service.

Instead, he says trials have revealed that a “benefit-led approach” is the most effective way of tempting potential customers.

“[This] is why we’ll be focusing our efforts in explaining less about the technology and more the opportunities it gives customers,” says Plumb.

“It’s less about cameras and contact sensors, more about the peace of mind in knowing your kids have come back home safely, the dog isn’t chewing at the sofa and never having to come home to a cold, dark home.”

Alongside 19 products ranging from sensors, cameras, plugs and thermostats, O2 promises to send out staff to install the kit and to fix anything that cannot be resolved remotely.

“Our customer service offering is crucial to the success of O2 Home,” says Plumb.

“Customers are being turned off smart home technology by how complicated it can be and the difficulties of getting individual products to talk to each other.”

O2 Smart Home is built on AT&T’s Digital Life platform, which Plumb says has been designed to support large numbers of customers and is “highly secure”.

However, he declines to answer what the most challenging aspects of bringing the offering to market have been.

“Smart home technology is a new area for us, for our customers and for our industry so it's been absolutely crucial we get this right,” Plumb says.

He adds that the company cannot “stand still” in the “constantly moving” smart home market.

Analysts that European Communications spoke to commend O2 for being first to market but have a number of concerns, notably around price and partners.

Ovum’s Michael Philpott says: “My initial impression is that [O2 has] a good strategy but you cant get round the price tag, that’s what really slaps you in the face.

“I’m not convinced that consumers will understand the value of the proposition.”

He speculates that the use of AT&T’s “well regarded” but “not the cheapest” platform allied to the cost of sending out staff to install and fix the kit could be behind the price tag.

Analysys Mason’s Tom Rebbeck agrees that convincing customers of the value of paying up to £30 per month is one of O2’s biggest challenges.

Another is what he sees is “a fairly closed list of partners” that have signed up to provide services for the offering.

“It’s really hard to say if it will be successful, it may well not be in the current form and O2 will have to be agile enough to iterate,” says Rebbeck.

Philpott agrees that getting some well known brands to commit could be gamechanger.

“You need an ecosystem of partners… if they can successfully bring on household names to the platform that will suggest they are succeeding.”

He adds: “Let’s not knock O2, it’s not just a problem for them...Everyone is looking to come up with products and services that really strike as chord with customers.”

Rebbeck adds: “You need to make it obvious how it’s going to improve their lives.”

Although Philpott says that O2 will work hard to push the offering through its retail stores, he thinks it will have to cast its net much more widely.

“[O2 Smart Home] will get into homes through being pushed by industry verticals, such as home insurance, healthcare etc.”

Both analysts accept that it is a long-term play.

Says Rebbeck: “There is a lot of uncertainty about the smart home concept.

“No one really knows what customers want.”

He adds: “We should definitely look on this positively, they’re trying something and they have the balls to do that.”

Rebbeck says it is “intriguing” that O2 is first mover in the UK telecoms space.

“The case [for the smart home] is stronger for fixed operators than mobile,” he explains.

“You’re unlikely to change your fixed provider because of a smart home proposition, equally if they provide one then it’s another barrier to churning.”

With O2’s merger with Three having been blocked by the European Commission, the Telefónica-owned company needs to find ways to differentiate itself ahead of its expected IPO.

A promise to keep kids safe is probably a safer bet than tempting dog owners to save their sofas as O2 looks to capture an early lead in the smart home market.

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