This story was originally published at Diginomica.com by Phil Wainewright.
While Google’s Nest attracts breathless headlines from the tech media whenever it makes a move, its UK rival Hive powers ahead in its domestic market, almost unnoticed. Launched in 2013, the smart home platform already has half a million customers and expects to reach one million this year. It is now expanding into the US, Canada and Ireland.
This year saw the launch of a new set of services that take the Hive brand and mobile app not only beyond the original smart thermostat, but also into the realms of subscription sales. Hive Welcome Home is a £5.99-a-month ($7.90) subscription package that provides two smart light bulbs, a smart power plug, a motion sensor and a smart hub. Customers don’t need to own a Hive thermostat and can add additional devices as part of the subscription. The US package leads with a thermostat and is priced at $24.99 a month, while the lower-priced UK package opens up a new market for Hive among home renters who may not have the option of installing a thermostat.
Making the switch to subscription services
The switch from one-off product sales to a recurring subscription service has been accompanied by a big change in how the smart home company goes to market, says Jo Cox, Commercial Director at Centrica Connected Home, the owner of the Hive brand.
“Up until now, it has been very product-led decision-making, which is, ‘What is the product we want to bring to market?’ We’ve flipped it on its head this year.”
Customers don’t think in terms of products, says Cox. Instead, the company has adjusted its product marketing to focus on use cases such as, “Never come home to a dark home,” and then assembling the products and functions that bring that to life.
“What our customers feed back to us is, ‘I actually don’t care about the technology, I don’t care how it does it, I just want to know what it does for me.’ It’s about, as you get within 10 miles of your home, your home knows you’re nearly home, so it turns on the porch light, and it turns on the landing light, and it turns on the lounge light, for instance.”
Flexible smart home packages
This new approach of packaging up an experience has led to a more flexible approach to product selection and pricing. Hive uses Zuora to manage subscriptions and has leant on the platform’s flexibility to help it fine tune its offers. For example, the initial Welcome Home package was a fixed-term, fixed-price subscription — similar to a mobile phone contract — but early feedback from consumers led Hive to introduce a more flexible offer, says Cox.
“The feedback from my customers is, ’24 months is too long, we don’t feel comfortable with that in the new technology sector. Second of all, please can you make sure that I’m understanding what’s value and what’s product?’ Because of Zuora, within six weeks we changed the model.”
As a result, Hive unbundled its service element, called Hive Live, so that customers who want to continue to use the smart home app at the end of the subscription period, once the bulbs and other devices have been paid for, can carry on paying for just that element.
Conversely if customers want to add extra bulbs or other devices at the beginning of the subscription — or at any other time — the Zuora subscription engine automatically recalculates the monthly price. This has been really helpful as the company tests the market, says Cox.
“There’s very few engines that allow you that sort of flexibility in the moment. Usually you have to go, ‘Oh no, the customer said that they want five bulbs and four plugs, so now we have to build a subscription that allows you to do that.’ For a company that’s new in this smart technology in a brand new segment, where we’re learning as fast as our customers, we have to have a system that allows us to be that agile.”
Another option that takes advantage of this flexibility is the ability to pause the service element of the subscription for a period of time, for example if the homeowner spends part of the year away from their home.
New packages have dictated the selection of products, for example a new service called Home Check, which adds a camera so that subscribers can keep watch on their home while they’re out. Another service currently under consideration would allow subscribers to add sensors to an elderly relative’s home to keep an unobtrusive eye on them. For example this might monitor when they boil the kettle or open the fridge door, to know whether they’re up and about.
The Hive app helps consumers set up functions such as the Welcome Home service by prompting them through a sequence of questions, such as which lights do you want to come on, what thermostat setting do you want? No one has to configure a software tool such as IFTTT to chain actions together, unless they want to. The machine learning-based AI can also prompt for instructions if a setting hasn’t been preset, says Cox.
“It does really simple things like, as you’re driving home, if you don’t have a setting, it’ll say, ‘I sense that you’re nearly home, would you like me to turn your heating up so your home is warm when you’re coming home?’ It’ll learn what you normally like to do, and then it’ll ask you if you want to set that as a standard, and then it will start to automate in the background. It’s about removing the thinking and doing that thinking for you.”
This user-centric design approach is important to remove barriers to adoption when selling the Hive subscriptions online. The original thermostat product became successful because Centrica also owns the British Gas brand, whose field engineers are one of the most trusted workforces in the UK. Their recommendation during an annual boiler service visit helped overcome the usual resistance to a £249 price point, says Cox.
“If an engineer is in your home and is saying, ‘Oh, by the way, you can actually control your home from your phone with this smart thermostat,’ the propensity to buy is much, much higher than just through standard marketing, buying it.”
As this example shows, the switch from product sales to subscription selling involves a lot more than simply introducing a pay-monthly price list. Moving to what we at diginomica call an everything-as-a-service or XaaS business model entails a radical shift of mindset. Instead of products and transactions, the organization must refocus around relationships and outcomes. Hive has learned that lesson well and it will be interesting to see what inroads it can make on Nest’s home turf in the US market with this distinctive approach.