Parks Points

This story originally appeared in Dealerscope.

The growing number of connected devices in consumers’ lives can be immensely rich in information, creating personalized experiences and generating a lot of data. These devices also provide targets for hackers creating a real need for the industry to address. The recent Equifax hack of potentially 145.5 million accounts in its credit database, though not device related, only serves to exacerbate consumer anxiety around data security issues.

A critical marketing question explored by IoT providers is “To what degree are consumer fears about data security inhibiting adoption?” While consumer concerns are sometimes overridden by an even stronger penchant for technology or convenience, the level of a consumer’s security concern has a strong logical connection to purchasing behavior. Addressing security concerns for smart home products becomes as important as addressing ease-of-use, finding the right value proposition, and identifying the best price point.

Parks Associates measures consumer attitudes toward companies that collect and manage their data and privacy and security concerns are an important barrier to overcome. Over two-thirds of consumers prefer to “keep tight control” over access to their data. A similar portion believe it is impossible to keep data private from the companies from which they purchase goods and services.

Many consumers generally do not trust companies with their data; nor do they believe they receive adequate value for sharing data. Almost half do not trust companies to keep their data safe and over half do not believe they get a lot in return for sharing access to data (disagreeing with the positive statements, rating 1-3). Underlying these statements are beliefs about privacy, security, and the equity of data exchanges. Privacy viewpoints are best understood by framing them in terms of whether the consumer controls who, what, and when data is shared rather than pure privacy. Low ratings for value received signal how much companies need to work to win consumer confidence. Consumers will be more comfortable with connected products when they trust the companies that have access to their data and believe they receive value in return.

By age group, we find that the youngest adults 18-24 have the highest levels of concern when compared to concerns in the 25-54 age group. Almost three quarters of respondents ages 18-24 have some level of concern (rating 5-7), while almost half report a high level (rating 6-7) of concern. Clearly, voluntary sharing of personal data by Millenials in social media, as some spotlight, cannot be misconstrued as a lack of concern for data privacy and security.

When it comes to trust in companies managing personal data, a comparison reveals consumers trust most and in order: insurance companies, security monitoring providers, and electricity providers Over 50 percent of consumers rank these companies as the top three most trustworthy company types. A substantially lower tier of trust accrues to Internet service providers, mobile phone providers, device manufacturers, and pay-TV providers. An inherent need for safety and security is common to the operations of top- tier trusted companies.

About half of U.S. broadband households are “very concerned” about hackers getting control of connected devices. Consumers are equally concerned about hackers getting access to historical data from those devices. Over the past few years, the share of those “very concerned” has grown by 6 percent ? 7 percent and the share of consumers who are “not concerned” (rating 1-3) has shrunk by about half.

The challenges to securing the smart home create ample business opportunities across the value chain for security solution providers. Security is a vital product component at every layer of the application stack. Semiconductor companies, system integrators, networking protocol alliances, home networking solutions, broadband providers, and cloud platforms and services each play a critical role in securing connected products and home networks. The fast-moving security threat and response environment requires OEMs access the very best resources to guide product development and product management.

Vendors can differentiate themselves by providing security expertise and solutions that keep pace with changing security requirements.

Since adoption is growing year-to-year, albeit slowly, these concerns are not yet enough to dissuade early adopters of the value of smart home technology. These concerns may, however, be slowing the adoption rate if they serve as a barrier to wider mass market acceptance. Of all the smart home devices, no single device has a higher level of penetration than 12 percent. The lifecycle remains in the early adopter stage. Security concerns may provide headwinds where adoption should have or would have happened faster if data breaches and hacking were not so prominently recounted in headlines.

From a consumer perspective, data security relates to data privacy as well as data equity. Data equity speaks to the economic conception of data as currency. Consumers do not want data stolen by hackers or exploited by companies. Giving consumers something of value for sharing data takes the conversation into strategic incentives to encourage voluntary data sharing. Incentives may be both non-monetary and monetary.

When presented with a variety of non-monetary incentives, 40–50 percent of household heads are willing to share data under some circumstances. Consumers are more likely to share data for value related to warranties, product improvements, product education, and remote technical support. They are less likely to share data to receive product recommendations or to simplify ordering consumables. Notably, data sharing for consumable orders is of interest to 34 percent of consumers even though this is the least familiar use of data among the options tested.

Many consumers are attracted to convenience no matter the risk. Currently, ease-of-use can get prioritized above security best practices. The sweet spot is where ease-of-use and security are both achieved.

While “security fatigue” can become a de-motivator in enterprise environments with hypervigilant IT departments, the consumer space is far from being challenged by an over concern for security.

For more information about Parks Associates research, visit www.parksassociates.com. And be sure to check out Parks Associates' free white paper on the business opportunity cybersecurity.