Smart and connected thermostats both provide different opportunities for manufacturers

Many thermostat manufacturers are bringing Web-connected smart thermostats to the market, to compete with the Nest Learning Thermostat. Multi-service operators (MSOs), home security monitoring services and other smart home device manufacturers are taking a different approach -- using connected thermostats as part of a wider smart-home system.

The end-user benefit of having a smart thermostat is that the product makes decisions about heating and cooling, based on actual environmental factors. The smart thermostats currently in the market use presence-sensing and algorithms to determine a person’s location, in order to adjust the thermostat accordingly. As with all high-tech devices, these features are continually updated and improved. While algorithms could be easily upgraded with automatic software updates over the internet, adding an environmental sensor requires the replacement of the entire thermostat. As with smartphones, consumers might need to upgrade their thermostats every couple years, to make sure they are taking advantage of new technology; however, many end-users might not want to spend the money to do so.

While connected thermostats lack the decision-making capability of smart thermostats, they can still be connected to the Internet and communicate with smart home systems. That’s why service providers and manufacturers in the smart home market are offering connected thermostats in their solutions. They are also using the intelligence installed around the thermostats, to help end-users save money. For example, a smart home hub could gather presence information from the security system, determine that no one is home and turn off the air conditioner on its own.

With this type of setup, smart home technology can be easily expanded to take advantage of new features. Consumers who build their own smart home solution can purchase a hub, a connected thermostat and any inputs the system currently supports. As the software inside the hub is upgraded to take advantage of new innovations and sensors, consumers can expand their systems.

For example, instead of spending $300 for a new thermostat with sensing technology, someone with a smart home system could add a feature and install it into their system, just by purchasing a new sensor for $50. Customers who rely on multiple service operator (MSOs) for their smart home solution only need a technician to come out and upgrade their systems. These smart home solutions do sacrifice simplicity to make gains in upgradability, however. For many end-users, the all-in-one smart-thermostat package is much easier to use and understand.

According to the IHS Thermostats Report, unit sales of connected thermostats in North America will grow at a compound annual growth rate (CAGR) of 22 percent through 2019, while smart thermostats are forecast to grow at a CAGR of 25 percent. While both types of thermostats are enjoying solid growth, manufacturers of the devices must keep their target end-users in mind, to support successful marketing efforts. Those targeting tech-savvy individuals might be better off focusing marketing efforts on connected thermostats, while those going after the less tech-savvy end-users might want to focus their attention on smart thermostats.