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IPSOS AFFLUENT INTELLIGENCE:

SMART HOME 2.0 WHAT A DIFFERENCE 2 YEARS MAKES

AFFLUENTS AND SMART HOME

At Ipsos Affluent Intelligence we regularly apply our focus on categories undergoing significant change – from FinTech to OTT and Streaming TV to Social Media to Experiential Travel. That’s because the Affluent often lead the way in the adoption of innovations. And we’ve identified a group of affluent influencers – Affluencers – who are disproportionately influential. In every category we’ve studied, it’s the Affluencers who lean into the categories they’re passionate about and are the first to know about and try new products and services. Armed with expertise and experience, it’s no wonder their networks rely on them for recommendations and advice before adopting for themselves. Affluencer recommenda-tions may be the single most powerful form of communication in any category.

We did a deep-dive into Smart Home in Q4 2017 exactly for this reason, as it was and remains an emerging category. In the ensuing two years since then, there have been a number of large category changes – many of which have affect-ed (and expanded) aspects of distribution and access.

Two years after our first foray, we felt it was time to do another deep dive into the category to see where Smart Home is now, and where it might be headed.

Michael BaerSVP, Ipsos Affluent Intelligence

SMART HOME PENETRATION HAS GROWN SIGNIFICANTLYIn our 2017 review, we identified that the smart speaker would be a new gateway to the smart home category, providing a jolt to the adoption system. By the end of 2019, we see the effects of this jolt – overall penetration of smart home devices in Affluent HH’s has grown from 55% to 73% in just 2 years. The growth can be largely attributable to smart speaker adoption. In fact, smart speaker penetration amongst the Affluent has nearly doubled, from just over one-in-four 2 years ago (28%) to over half (53%) now. And that growth has been demonstrated across genders and all generations (even 40% of Boomers/Seniors now own a smart speaker). It’s clear that these products have lowered the threshold for purchase due to their lower price, simple technology and variety of uses.

- Amazon’s ownership of Whole Foods is further developed (they’d completed the purchase only a couple months before we fielded our 2017 study)– providing a brick & mortar outlet to sell its digital products and services, including Echo Smart Speakers.- The Smart Speaker category has evolved and added features (notably video) and skills that broaden its benefits and uses.- Manufacturers have introduced smart speaker variants that are smaller and less expensive – in some cases less than $20.

1

2017 2019

2017 2019

Household Ownership of Smart Home Devices

Any smart speaker/hub

or smart home technology

Any smart speaker/hub

Any smart home

technology

Only smart speakers/hubs

Only smart home technology

Own both No smart devices

55%

73%

28%

53%47%

58%

8%15%

28%20% 20%

38%45%

27%

Total Affluents Men Women Gen Z/ Millennials

Gen X Boomers/Seniors

28%

53%

26%

52%

30%

54%

38%

65%

26%

53%

21%

40%

Smart Speaker Ownership by Gender and Generation

2

It might not come as a surprise that Affluent smart home device penetration is significantly higher than that of non-affluent. Overall, just 51% of non-affluent households have a smart home device, compared to the 73% of affluent households that do.

However, and perhaps counterintuitively, it’s Affluent adoption of smart speakers that has taken off – while non-Affluent’s smart speaker purchasing still seems to be taxiing on the runway. Affluent penetration has grown to 53% of households from just 28% in 2017 – while just 34% of non-affluent households have a smart speaker in them today. Despite the low price points (and in some cases, we’ve seen them being given away along with the purchase of another service), smart speakers have not gained a huge amount of traction yet with non-Affluents.

Affluent vs. Non-Affluent Attitudes Towards Smart Home

SMART HOME – AFFLUENTS VS. NON-AFFLUENTS

Price is likely still a component at least perceptually. Non-Affluents are a whopping 53% more likely to say price is an extremely important smart home consideration factor. And 62% of non-Affluents say that smart home is still an exclusive purchase for those who can afford it. However, price isn’t the only one reason.

The non-affluent population simply don’t have as positive an attitude towards the category as Affluents. Affluents are much more likely to agree that “smart home technology will help improve my life”, the lives of my family, and the safety of my home. They’re also more likely to be early adopters and influencers in the category.

Currently own any smart speaker/hub

2017 2019

Non-AffluentAffluent

Aflluents Non-Affluents

Technology will help improve my life

I consider myself an early adopter of smart home

technology

I am interested in learning more about smart home

technology

I feel safer in my home because of smart home

technology

People often ask my advice when they are looking to

buy smart home technology and appliances

I think smart home technology will help improve

the lives of those in my family

28%

53%

24%34%

60% 0%

3

THE SMART SPEAKER (R)EVOLUTION

Penetration of smart home speakers isn’t the only aspect that’s changed in 2 years. We’re also seeing evolution and change in both smart speaker location in the home and the usage of them.

Firstly, we see that the living room/den, while remaining the #1 location for smart speakers, has seen a 10-point decline in placement. Picking up the slack has been the kitchen, which has shown a 16-percentage point increase, with nearly half of smart speaker owners now having one there. This change is likely due to the many new speaker features, includ-ing video and additional skills and content that fits the kitchen location, e.g., recipes. In addition, placement in children’s bedroom has increased three-fold.

Usage patterns are also evolving. Interestingly, overall uses-per-owner has decreased from 5 different types of uses to just 4. We hypothesize that earlier users were testing out all manner of uses, but by now consumers are adapting behavior toward uses they have learned perform best and add the most value.

The number one use for smart speakers remains focused on the speaker itself, specifically using it to play music. Three-quarters of all owners use their smart speaker this way, a slight decline from 2 years ago. The uses that are show-ing the strongest growth are focused on the interactive nature of the smart speaker, specifically “answering random questions” and checking weather. Most other uses have shown slight or significant declines. In fact, the great voice commerce wave that’s been predicted has most certainly not occurred as yet, as “purchasing items” with one’s smart speaker has declined from 15% to just 9% of owners.

Smart Speaker/Hub Placement in the Home

Living room/den

Kitchen Master bedroom

Kid’s bedroom Home office Bathroom Dining Room Garage

72%62%

27%

43%33%31%

6%18% 16%13%

3%9% 11% 6% 5% 3%

4

2017 2019

2017 2019

Smart Speaker Usage“Purchased Items”

15% 9%

STAGNATING “OTHER” SMART HOME TECHNOLOGY?

With regards to smart home technology beyond speakers, our data shows that penetration has stagnated over the past two years. This year’s data includes the addition of two product types that weren’t included in 2017 – smart video door-bells and smart car features – and even with those products added, penetration has grown only 11ppts, from 47% to 58%. And those products most certainly had penetration two years ago, meaning that growth of all smart home tech products has likely been less than 11%. A look at all the constituent products shows slow-to-no growth, with the only products showing modest growth from 2 years ago being products directly or at least tangentially focused on security - smart lighting/bulbs, security systems and outlets.

5

Growth in Smart Home Technology

THE SMART HOME ADOPTION CURVE

Any Thermostats HomeEntertainment

Systems

Video Doorbells Lighting/Light Bulbs

SecuritySystems

Outlets/Switches

CarFeatures

Window Covers/Shades

SprinklesSmoke andCarbon

Monoxide

LocksAppliances

47%

58%

26%28%22%24%

N/A

20%14%

19%

11%16%

9% 12%

N/A

9% 8% 8% 8% 8%13%

8% 6% 7%4% 2%

2017 2019

At IAI, we’re fairly obsessed by the adoption curve, as it’s so important to know who the early adopters are in a category – since almost every category is going through disruption and change and demands innovation. In fact, we’ve recent-ly optimized our overall Affluent Survey questionnaire to even better address the concept of early adopters, first followers, late followers and laggards across each category.

We segmented the smart home consumers according to a similar model – identifying a roughly analogous grouping of the four segments from early adoption through to category resistance.

The four segments are as follows:

Enthusiasts, who currently own smart home devices AND plan to purchase more in the next 6 months

Dabblers, who currently own but do NOT plan additional purchases in the next 6 months

Followers, who currently do not own smart home devices but DO plan on purchasing in the next 6 months

Resistors, who both don’t currently own AND do NOT plan on purchasing in the next 6 months

6

Affluent Smart Home Adoption Segment Penetration

A lot has changed in the past two years. Notably, as more and more Affluents have purchased and experienced the benefits of smart home technology, the number of Enthusiasts has grown nearly 40% – from just over a quarter to 2 out of 5 Affluents, while those holding out (the Resistors) have declined by nearly half, to less than ¼ of Affluents (note: we changed the “plan to purchase” question from within three months in 2017 to within six months this wave, as this does not have a significant impact on the data).

No surprise, it’s Enthusiasts who are by far the most excited about smart home technology, with from 2/3 to 3/4 or more agreeing with the statements about interest and category enthusiasm (hence the name). When it comes to attribute importance, Enthusiasts also care significantly more about Design and Innovation than all other groups. Followers are naturally second highest performing group on interest in learning more. And Resistors set the pace on concerns about safety, security and privacy, with 8 in 10 showing serious concerns. It’s important to point out that everyone exhibits these concerns – even 2/3 of Enthusiasts, those most passionate about the category.

Enthusiasts Dabblers Followers Resistors

29%

40%

26%33%

8% 5%

37%

22%

Growth in Smart Home Technology

I have serious concerns about security breaches into smart home technology data

I have serious concerns about personal privacy and

smart home technology

I think smart home technology will help

improve my life

I can’t wait to see where smart home

technology goes next

I am interested in learning more about

smart home technology

40%

78%

62%

25%

42%

67%

35%

11%

49%

75%

32%

17%

60%65%

73%83%

56%66%

78%79%

Dabblers ResistorsEnthusiasts Followers

2017 2019

7

An interesting finding that supports the adoption theory regards the sources of information used for the category. We see that Enthusiasts outperform Followers on all sources – which makes sense as they are the most involved and engaged category users. However, they’re equal on recommendations – but not all recommendations. While the #1 source of information for Enthusiasts is recommendations from professionals, with 68% saying these are extremely or very important (2x the number for Followers), Followers are equal on recommendations from friends and family. In other words, Followers aren’t doing as much research or consulting with experts, but, in essence, are waiting for their earlier adopting friends and family to do the research/gain experience, and then get personal information and recommenda-tions from them. And Enthusiasts are helping promote the products they support.

Interest in Smart Home Category

HAS INTEREST PEAKED FOR THE SMART HOME CATEGORY?One potential warning sign for the category is that despite the overall growth, there are signals that interest and overall enthusiasm has waned in the past two years. Firstly, while about 1/3 of all audiences do say they are more interested in the category than they were two years ago, that number is significantly lower than those that were more interested when we measured it two years ago.

Enthusiasts Followers

Same Level of Interest More InterestedLess Interested

Information Sources

Non-Affluent

2017 2019 2017 2019 2017 2019 2017 2019 2017 2019

Affluent Gen Z/ Millennials

Boomers/ Seniors

Gen X

Recos from Professionals

Consumer Online Reviews

Internet Showrooms/Trade Shows

Recos Friends/Family

Print Publications

Broadcast Media

Social Media Ads

Social Media Posts

68%

34%

41% 37%

8%

51% 51%

12%

47% 33%

3%

50%60%

8%

56% 36%

2%

42%

59%

4%

48% 30%

3%

49%

63%

8%

38% 32%

5%

57% 56%

12%

62%

41%

61%

29%

53%

32%

52% 53%41%

18%

40%

11%

26%

10%21%

3%

In addition, Affluent agreement about category benefits has decreased fairly significantly in the past two years, with the belief that smart home technology will improve my life down 7 percentage points, that it will improve the lives of my family down 12 percentage points, and that it will help the environment down 11 percentage points. Interest in learning more about smart home tech is also down 10 percentage points. In fact, the only attitude that shows growth is concern about privacy, which is up 14 percentage points.

Finally, about a quarter (22%) of Affluents agree (top 2 box) with the statement “Smart Home technology was cool at first, but now the newness has worn off I use it much less”. However, “Enthusiasts” agree even more, with 25% agree-ing. How can some of the biggest category cheerleaders be in agreement?

This signals a couple of watch-outs. Firstly, the category has been around for a number of years, and consumers still don’t have the Jetsons’s robot to do the housework or make them dinner. So, it could be that there’s been a degree of “over-promise and under-deliver”. Secondly, the security issues that are rising in importance for smart home users and prospects are likely beginning to take away from the overall category appeal.

Smart Home Attitudes

I have serious concerns about personal privacy and smart home

technology

I am interested in learning more about

smart home technology

I think smart home technology will help

improve my life

I think smart home technology will help improve the lives of those in my family

I think smart home technology will help

the environment

54%68% 63%

53%59%

52% 55%43% 45%

34%

8

2017 2019

9

One thing is clear, the concept of security is a real duality/dichotomy for smart home. On the one hand, Security has become the #1 benefit for smart home buyers. And category supporters like the “Enthusiasts” are even in stronger agreement. In addition, the smart home tech products most focused on family/household security are the ones show-ing the greatest growth.

However, security – of data and privacy – are also enormous issues and risks for the Smart Home category. While the Resistors and laggards are the most concerned (and it’s likely a reason for – or at least a post-rationalization of – their not being consumers yet), a majority of all consumers cite serious concerns, even those most enthusiastic about the category. It’s clear that manufacturers will have to work harder to allay those concerns moving forward for the category to continue to fulfill on its promise.

THE DICHOTOMY OF “SECURITY”

9%

2%1%

20%23%

13%

15%

17%

Increase security of home

Help save time

Help save money

Work with other tech in home

Make home more eco-friendly

Help kids in household

Help seniors in household

No interest in smart home technology

Most Important When Considering Smart Home Technology

These findings represent just a sampling of insights and potential opportunities for the smart home category in targeting the Affluent. There is significantly more data in the study to be mined and leveraged – and we also provide the capability to customize the findings and insights for your brand by appending this (or any other) Barometer data to brand user data. Contact us for more information: IpsosAffluentIntelligence@ipsos.com

ABOUT IPSOS AFFLUENT INTELLIGENCE

Ipsos Affluent Intelligence began our Affluent Survey over 40 years ago because we understood that Affluents are one of the most powerful and influential target audiences across all industries, driving revenue, adoption of new technolo-gies and experiences, and influencing purchases among their peers and network. Affluents control the lion’s share of U.S. household net worth and outspend non-Affluents in virtually every category. Consequently, marketers of everything from automobiles to watches, technology to media, and entertainment to travel rely on capturing both the share of wallet and share of mind of this critically important group.

For the purposes of this White Paper, the definition of Affluents is adults aged 18 and over, living in households with at least $125,000 in annual household income. Data presented are from a Q4 2019 Ipsos Affluent Barometer.

For more information:http://www.ipsos-na.com/go/affluentsurveyhttp://www.twitter.com/affluentintelIpsosAffluentIntelligence@ipsos.com

6 © 2020 Ipsos. All rights reserved. Contains Ipsos' Confidential and Proprietary information and may not be disclosed or reproduced without the prior written consent of Ipsos.