Is the digital home immune to the cost-of-living crisis?

1. Spending intentions and value-for-money perceptions remain intact

The pressure on household finances has dampened consumers’ interest in new products and services, with 43% saying they’re now less interested than before in new connectivity and content experiences, and 48% saying the same about new technologies and gadgets for the home. They’re also more anxious about price increases, with 73% wanting better pricing guarantees from broadband providers. Older customers are particularly prone to concern — only 25% of users over age 55 think connectivity providers have been supportive during the cost-of-living crisis, compared with nearly half (45%) of 18–34-year-olds.

However, a much smaller proportion of households are actively reducing their expenditure, with just 19% delaying purchase of a new device, 17% reducing streaming expenditure and 16% reducing broadband spend. While one in three have canceled or plan to cancel at least one streaming subscription, less than half (45%) cite cost savings as the main rationale. A lack of original or favorite content, alongside preference for rival platforms, are the other key reasons, underlining that service providers need to compete on service quality just as much as cost in a hyper-competitive market.

Crucially, consumers’ perceptions of value for money have improved year on year across most service categories. Only mobile is declining while broadband providers are gaining ground on streaming providers in terms of value-for-money perceptions in content. And there are signs of rising receptivity to premium offerings, with 36% of households willing to pay more for a broadband bundle in return for good customer service, up from 32% last year.

3. Decision fatigue: the downside of streaming demand

This year’s survey findings point to strong growth opportunities for streaming subscription providers. Already preferred providers of film in all markets, they are now the preferred platform for comedy in five of eight markets — having ranked behind traditional broadcasters in all markets just two years ago — while Canadian, Spanish and US households also view them as the best source of documentaries.

The path to monetization is also benefiting from more diverse levers. Advertising has an important role to play, while 33% of households across all markets would pay a premium to stream TV without advertisements, an even larger proportion (41%) are interested in taking an ad-supported service in order to save money. Given that attractive pricing is the top criterion when streamers select packages, service providers can build on these ambivalent attitudes toward advertising to create new propositions.

However, less positively, there are clear signs of decision-making fatigue among consumers: 54% of consumers across all markets agree there’s too much choice of streaming platforms. Households in Spain and South Korea are most likely to feel overloaded (both at 60%). Interestingly, there’s also a clear demand for content aggregation services. Younger consumers voice the greatest appetite, with 51% of 25–34-year-olds willing to pay more for a single platform to access content. In this light, service providers that can bring different content portfolios together on a single platform and interface stand to gain.

4. Low trust and convenience limit smart home adoption

Smart home products have been on the market for many years but have yet to go mainstream. No single type of product is owned by more than one in five households, and our findings point to only an incremental increase in adoption in the coming years. Interestingly, high prices don’t appear to be a major barrier to take-up: the proportion of households agreeing that smart home products are reasonably priced has risen to 33% from 26% last year, reflecting lower price points for digital assistants and smart speakers.

However, as with streaming services, there’s a clear sense that the smart home marketplace is congested and overcrowded, with 51% of consumers feeling there’s simply too much choice. Consumers’ attitudes toward connected home devices reveal some important issues for providers to address, with 61% of households concerned about cyber attacks and 47% about a lack of compatibility between devices from different providers, reflecting a fragmented service provider landscape. Forty-four percent of households would prefer to use non-smartphone control interfaces, suggesting that simplicity doesn’t always come in the form of a mobile phone app.

Half of households believe that smart home devices don’t provide enough convenience to justify the cost. While price perceptions are improving, it’s clear that device manufacturers and service providers need to position their connected home offerings as much more than technology gadgets if they are to maximize their addressable market.

5. The bundle is back: consumers look for low-cost convenience

Consumers are increasingly attracted by bundle packages, with 40% agreeing that the cost-of-living crisis has made them think it would be better to use a single supplier for all their connectivity and content. This positive view of bundles is underlined by respondents’ rationales for buying multiple services from one source: 61% of households believe bundles are very important to save costs and gain the convenience of a single bill, while 58% cite the single point of contact for customer support.

Building on the positive sentiment toward bundling, consumers’ readiness to take additional products along with their broadband service is rising year on year across all bundle combinations, led by cloud storage, utility services and health and wellness add-ons. Interestingly, streaming customers are also receptive to taking other services alongside their monthly subscriptions, whether shopping and event discounts or broadband subscriptions. This suggests providers should focus on new ways of bundling broadband and video that major on the streaming service as the anchor product.

Despite fresh demand for bundles, providers still face substitution risks, with one-third of households saying they’re open to dropping fixed broadband in favor of a mobile connection, as long as it can meet their household needs. Lower monthly costs and faster, more reliable internet lead as rationales, but this could be a tall order for many service providers, given that our reliability data shows mobile data performance worsening inside the home.

6. Complexity creates a greater burden on customer support

Household satisfaction with customer support is rising, with 65% saying they’ve been satisfied with the responses to their broadband queries over the past 12 months, up from 58% in the previous two years. At the same time, their satisfaction with self-service channels has also risen. Taken together, this suggests further investments in digital support tools will put providers in a better place to drive satisfaction and retention in the long term.

Nevertheless, the proportion of customers seeking help is trending up: 39% have reached out to customer support in the past 12 months compared with 36% last year. This reflects stubborn pain points early in the customer journey: For example, 49% of households find price changes difficult to understand, and 39% have trouble locating terms and conditions relating to broadband prices. A particular focus for dissatisfaction is the installation of technology, connectivity or content services in the home, which is considered more complex than ever. Service providers should do more to help customers become self-reliant, which will reduce the burden on their support functions.

While customer support satisfaction scores offer encouragement, the cost-of-living crisis is posing new challenges for service providers on the path to purchase, reflected in survey data highlighting where customers go first to buy new products. The proportion going to online or physical stores selling single brands has declined 14% year-on-year, while price comparison site usage is up. Differentiated value propositions have never been more important in order to stand out from the crowd as consumers shop around.

Despite the impacts of the cost-of-living crisis, our findings this year reveal many positive developments for service providers: Households’ perceptions of value for money remain positive, the appetite for bundles is increasing, and satisfaction with customer support has risen.

Yet, alongside the encouraging news, there are challenges — many of them longstanding — that require attention if resilient spending levels and interest in new forms of bundles are to translate into long-term customer confidence, satisfaction and loyalty.

1. Make pricing more predictable and easier to understand

Almost three-quarters of households want more fixed-price guarantees, while 49% find pricing changes hard to understand. Service providers should build more confidence in the pricing message throughout the contract lifetime, helping ensure pricing is transparent and clearly communicated. This is particularly true of bundle packages, with per-service pricing made easier to unpick for more proactive customers. Companies should beware of offering too many pricing options, since introductory offers risk confusing as much as enticing customers.

2. Focus attention on vulnerable customers

Only 34% of consumers overall think connectivity and content providers have been supportive during the cost-of-living crisis, dropping to one quarter of those aged over 55. Focusing on older and more vulnerable customers has never been more important, particularly as regulators double down on the needs of these groups. Assessing their often more basic service needs and building greater confidence in their ability to install and use technology are vital, as is closer collaboration with groups representing their needs.

3. Build more trust in the connection and the device

Network reliability is a persistent pain point for households, who note minimal improvements year-on-year. Connectivity providers should take clear steps to address this issue, whether that’s improving network fault detection, educating customers about how to maximize signal strength, providing more proactive support during network outages or introducing new types of “back up” functionality. Meanwhile. connected home providers should ensure that security and convenience credentials lie at the heart of their value propositions.

4.  Simplify packages to capitalize on the strong appetite for bundles

Consumers’ enthusiasm for bundled subscriptions is accompanied by a sense of overload in the market for content and home technology. To reconcile these mixed signals, service providers should look to create packages that allow for service aggregation — on a self-serve basis — while also being easily understandable. New service combinations that harness connectivity, entertainment, retail and lifestyle services could also gain traction in this environment of heightened consumer receptivity.

5.  Take the pain out of the path to purchase and installation

While satisfaction with customer support is improving, there are persistent challenges early in the customer journey around service discovery, evaluation and installation. Providers need to make buying and installing new products more straightforward for customers, which will reduce the volume of queries and issues they receive. Accommodating indirect sales channels is also becoming more important, as consumers shop around more during the cost-of-living crisis.