4th Wave Consumer Study

October 2013

4th wave early adopter and tech savvy consumer surveys

Over the past two years, the customer experience and expectation in connectivity has been revolutionized. The George Jetson era has arrived, as consumers expect instant access as a way of life and we see products becoming automated, connected and hopefully, simpler. The mobile phone has become the remote control for our lives and everything from door locks, to thermostats, to home surveillance, to garage door openers, to wallets, and even health care innovations are now becoming matter-of-fact solutions. The Fourth Wave of innovation has clearly become the talk of the tech industry, with new innovations in connectivity hitting the market from every direction as new players emerge. With the emergence of players in Connected Home, M-Health, Mobile Enablers and Connected Car, the consumer is now starting to embrace connectivity and adopt numerous Fourth Wave solutions. We have seen accelerating adoption of point to point solutions, as well as scaling of WAN connected tablets (72% of postpaid gross adds with ATT). The Sprosty Network leaders have been working where disruptive connectivity meets the customer experience in the Fourth Wave arena for years, so we are collaborating with Chetan Sharma Consulting to ask early adopters if they are ready for the next wave of solutions. We asked them what products they are likely to buy, how happy are they with the operators, the OSs, and the shopping experience? What do they see as the top stories? How did the predictions of our industry experts measure up against tech-savvy early adopters? This study with early adopters enables better understand their level of interest in the new products on the horizon to connect their lives. Quantitative surveys of mobile technology early adopters The methodology for defining for the survey participants as Tech Savvys: Ages 25 to 54 with at least $50K income with a mix of male and female. All respondents completed 3-question battery to ascertain early adopter status. 410 respondents attempted battery, 240 completed (59% completion rate) and participated in survey. Very Early and Early
Adopters (Tech and Early Adopters who purchase technology prior to the curve with high ownership of numerous connected devices (Participants averaged 4 connected products each) 64% rated as very advanced mobile user and 22% rated as advanced mobile user and over 80% were tablet owners

We broke down the fourth wave into Connected Home, Connected Health and Wellness, Connected Car product domains for comparison and asked participants to rate their likeliness to buy if the pricing was right. The results were surprising! For further inquiries, email info@Sprosty.net or you can reach Dave directly at Dave@Sprosty.net

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Summary Findings
PRIVACY BACKLASH AND TRUST: Even with the advances in convenience with solutions such as Google Now, even early adopters have growing concerns regarding privacy and the backlash. They see this as the top story in mobile for the year on survey 1 and in survey 2, nearly 50% of the group disagreed or disagreed very much that the value equation, or trade off of data privacy was worth the value of offers for better managing their life. We also found that 70% of consumers disagreed very much or somewhat that the carriers are looking out after their best interest. FOURTH WAVE SOLUTION INTEREST: There is encouraging interest in all solution domains of the fourth wave, with Connected Home leading the pack. We introduced Completely Connected to the participants as the ability to have instant access to digital information about the most important things you have in your home and your day to day living. This includes knowing about: Power failures, water heater function, natural gas issues, household appliances, lights, consumer electronics, doors and windows, inside temperature, and when your children return from school. You would personalize how you monitor these things by using your smart phone or tablet. Connected Home had strong interest in all four solution sets which included Automated Home (Connected wireless home services monitoring thermostat, lights (on/off), and locks (locked/open), Home Security and Surveillance (easy monitoring of windows/doors managed from your mobile phone or other devices, Home Energy Management/Safety (Home energy function efficiency detection (e.g., power outages, plumbing leaks, HVAC, etc. and Ubiquitous Home Content (the ability to move content from device to tablet, to TV easily) +65% of tech savvys are likely or very likely to purchase a connected home product on average. In Connected Health and Wellness, which includes solutions like Aging in Place, (Products that wirelessly monitor your parent's medical status so they can stay in their home longer as they age), In Home Health Monitoring (Product that monitors your recovery progress from home by using mobile technology, allowing you to stay home when you are sick rather than take a trip to the hospital/doctor and connected and wearable fitness, (Application that collects solution that collects your current and past workout information from you home exercise equipment) Average interest was in the 50% range, which was surprising for such new value propositions that are not clearly understood by the market Connected Car had the top scoring individual value proposition, with over 70% interested and 34% very interested in auto diagnostics. Broken down individually, there are also good signs for the future with car Wi-Fi and satellite radio.
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Summary Findings
SHOPPING EXPERIENCE FOR CONNECTED PRODUCTS: When we think about retail, it is on two fronts, Brick and Mortar and Web/Mobile Commerce. Where will the consumer prefer to purchase, how to they feel about the current complex sale in mobile, and what is their take on m-commerce and mobile at point of sale? First, where do customers prefer to purchase these fourth wave complex solutions? Bricks and Mortar is the optimal channel. Even with Tech Savvys, the preferred channel across domains was bricks and mortar stores over web sites. The Bricks and Mortar channel winners were different by domain, however. Connected Home bricks and mortar preference was over 65% on average. The need for consultative interaction may have driven the lead in preference in full line stores with installation, such as Sears and CE stores like Best Buy, followed by home improvement stores like Home Depot and Lowes. Connected Health and Wellness had the biggest anomaly, where the where the split of web vs. Bricks and Mortar moved closer to 50% and Direct from Manufacturer was the top alternative in bricks and mortar.

Connected Car. Full line stores took the top spot for bricks and mortar and usage based insurance was the only product where the web exceeded bricks and mortar for preferred channel.
Sub-Par Experience: Consumers do not like the experience they are getting at point of sale. How do customers prefer to interact with the complex product at point of sale? Customers still dont really enjoy the process of purchasing a mobile phone, validated by the point that over 50% of them disagreed or strongly disagreed that purchasing a mobile was a reasonably enjoyable experience. It is interesting that even tech savvys valued service as the #1 consideration even over price in the process of purchasing a complex mobile product that includes service in the selling process. Tablets which are a simpler transection, were the inverse. NPS and Satisfaction: The level of satisfaction with carriers versus OEMs is surprising. While Samsung beat Apple by 110bps in satisfaction and by 30 bps in willingness to recommend, the real surprise was seeing their top box scores nearly double the operators.
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Our top ten findings

1. 2. Privacy is the new hot button with consumers, likely due to recent publicity The early adopter is ready to open their wallets for new Connected products

3.
4. 5.

Auto Diagnostics was the top likely to purchase Connected value prop
Bricks and Mortar is the top channel for procurement of Connected Home The value equation for usage based insurance is still not enough to drive scale

6.
7. 8. 9.

Tech Savvys value service even over price in complex transactions like mobile
Even with the plethora of new innovation in phones, battery life still rules! There are Apple lovers and a sizable segment of Apple dislikers The early adopters have trouble trusting the operators

10. Our price elasticity research (not shown) validates that people are willing to pay for connecting their life, but tech savvys do not yet understand the value equation of disruptive products like Google Glass enough to drive scale.
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Privacy: use of mobile big data not a given

7% 25% 20% 23% 25% 4%
I am fine with the fact that tech companies, retailers, and service providers can have ways of using data to find out my current circumstances and make offers for these circumstances based upon my recent purchases.

I dont mind that by knowing where I am now, where I tend to go, and my upcoming calendar events; tech companies, retailers, etc. can tell me I may need to leave to leave early and offer best route to take based upon traffic conditions, make recommendatio

19% 23% 22% 32%

Agree very much Agree somewhat Neither disagree nor agree Disagree Somewhat Disagree Very Much

0% 10% 20% 30% 40% 50%

Will value propositions like Google Now overcome this growing concern?
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4th Wave Solutions intent to buy scored well with early adopters. Connected Home leading the pack.

Automated Home Home Security & Surveillance Home energy Safety/Cost Wellness Aging In Place M Health, Monitoring

Wellness & Fitness

Auto Diagnostics Usage based Insurance Ubiquitous Content

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An aggregate of bricks and mortar was surprisingly the top connected channel. Website fared well in health and UBI
Automated Home Home Security & Surveillance Home energy Safety/Cost Wellness Aging In Place M Health, Monitoring Wellness & Fitness Auto Diagnostics Usage based Insurance

Ubiquitous Home Content

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Consumers continue to dislike the process of subscribing, confirmed by the rare demand for service over price
Gaps in the activation and contract approaches could be driving the significant delta between tablets (price) and phones (service)
Mobile Phone Retailer Tablet Retailer

Question Procuring a phone is reasonably enjoyable/fun experience

Disagree very much 22%

Disagree somewhat 34%

Agree very much 4%

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Consumers were tough on the carriers

70% disagreed very much or somewhat that the operators are looking out after their best interest.
Question I believe that mobile phone carriers are looking out for my best interest Disagree very much 36% Disagree somewhat 34% Neither agree nor disagree 20% Agree somewhat 8% Agree very much 1%

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Tech savvys are not sitting on the fence with Apple; its either love or hate relationship

Question

Disagree very much

Disagree somewhat

Neither agree nor disagree

Agree somewhat

Agree very much

I love Apple products I love Microsoft products

I love Android system products

13% 6%
4%

9% 13%
9%

16% 31%
35%

30% 35%
33%

32% 15%
19%

as Apple clearly bests Android and Microsoft on the love, but doubles them on dislike

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Most desired phone improvements. Battery life still rules

Even with all of the advances in applications and features over the years, increasing battery life was most chosen improvement across all OEMs Speed of data was a distant second

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Willingness to purchase Google Glass lines up differently than wearables as a whole, which made the top 5 in study #2

Interest in shelling out $ Google Glass was low-moderate.

Willing to purchase was 42% Top 2-box (8% Top Box) at $99
Somewhat Likely Very Likely

While consistently low, we saw only a 30bp difference when halving the price from $499 to $259
2% 4% 11%
$499

8%

34%

16%

$249

$99

Hypothesis: This is consistent with our other price elasticity studies, as it typically occurs with products prior to launch. The lack of a clearly defined value proposition makes it difficult to drive a mutually beneficial exchange of value in the eyes of the unaware consumer. Seeing and touching this product may be essential.
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Fun Facts Perceived category with most spend 2013

The perception amongst tech savvys is that they are spending more on apps than messaging or voice.
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Fun Facts: Percentage of paid for apps for phone & tablet

Mobile Phone

Tablet

Predictably, customers have a mindset for free apps versus paid on tablets. They are more likely to pay for smartphone apps.
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The Sprosty Network: Building connectivity businesses

Why do we exist?

We thrive in the connected world and continually revolutionize how retailers and tech companies execute connected consumer solutions at all industry levels We are known for disrupting status quo by relentlessly focusing on the consumer POV and iterating quickly. Our hands-on approach to commercialization and go-to-market gets to the money faster. We build connectivity businesses all the way to execution and run them. As operators, we know what works, what doesnt and have the relationships to accelerate scale.
Product Development & Solutions
Commercialization
Private Label Value Proposition Solution Development Business Requirements Product Roadmap Sourcing Strategy, Incubation Brand Positioning Channel Benchmarks Channel Management Ecosystem Positioning Strategic Partnerships Business Model Market Positioning

How do we do it?

Why were different

Our Services

Go To Market & Distribution

Customer Experience Transformation

Customer Needs Integrated Solutions Experience Design Retail Op Model Connected Assortment Assortment & Solutions IT Integration

Industry Retail Focus

CTIA LMS & Training Platform Industry Certification Train the trainer Industry Customer Focus

Specialized Interim Talent

C Level Officer Level Two in a box on-thejob learning Vendor Partnerships

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We are known for using customer data and employee insights to simplify the connected solution value chain
Channel Fulfillment

Platforms
Security Home Monitoring Energy Mgt.
Retail Footprint

Telematics Customer Experience

e and m commerce

Applications

Carrier

M-Health

Call Center / Chat

MSO

Solution

Environment
Truck Rolls

Service Delivery

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Our Services build connectivity businesses

We are operators who take your business all the way beyond execution to run the business. Our strength lies in our ability to execute on behalf of our clients to improve chances of faster scale Services based on customer needs
Product Development & Solutions Commercialization: We
identify gaps in consumer assortments and design value propositions, then build connected products, bundles and solutions together with partners, including Private Label. We see around the corner to transform and forklift in new integrated customer experiences. Leveraging customer data and insights, we design customer value propositions, assortments and optimal operating models and can continually manage the business to success or turn it over.

Customer Experience Transformation:

Product Development & Solutions Commercialization

Customer Experience Transformation

Go to Market and Distribution:

We identify the best of breed service providers and solutions companies to design product and services pipelines. We create complementary assortments for profitable scaling across multiple channels and can run those channels their behalf.

Go to Market Distribution

Industry Retail Leadership

Industry Retail Leadership: We partner with CTIA, and many other key Specialized Interim Talent:

players to assure that the Retail customer experience is always a consideration by gathering insights and building industry ordained Retail capabilities and training. We provide specialized wireless and mobile talent from manager to C level on an interim basis for companies that need help building a new business in the connected world

Specialized Interim Talent

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Thanks to John Tidwell

PhD in Psychometrics from University of Delaware Co-author of five publications in consumer behavior Over 20 years of experience in Market and Social research International mobile market research experience in Argentina, Brazil, Canada, China, Germany, Mexico, Peru, United Kingdom Over ten years experience in Mobile market research Seven years Director of Consumer Market Research at Nextel & Sprint Other experience in Financial Services and Manufacturing Adjunct professor in Statistics at Shenandoah University Masters degree in Public Policy from University of Delaware

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