Businessmodel of Nest Labs

Customer Segments

Nest Labs has a niche market business model, with a specialized customer segment. The company’s customer base is consumers who desire to control/monitor their home environment’s features through smart devices.

Value Proposition

Nest Labs offers two primary value propositions: convenience and cost reduction.

The company’s products create convenience with devices that have the intelligence to make decisions about home environment factors, through sensors and other components. This means that homeowners do not have to worry about proactively monitoring features such as temperature or carbon monoxide level. Even so, consumers can control settings with mobile devices if they so desire. Nest’s products also provide useful alerts such as a notification of when batteries are running low.

The company facilitates cost reduction by having its thermostats lower energy levels as necessary. The devices program themselves through features such as Auto-Schedule and Auto-Away. This means that less overall energy is consumed, particularly when consumers are not present in the home. Consequently, bills for HVAC systems are reduced. Independent studies show that the product saves an average of 15% on cooling bills and 10-12% on heating bills.

Channels

Nest’s main channel is its website, through which it directly sells its products; over half of its sales originate online. The company also distributes its offerings through third-party eCommerce sites Amazon and Google Store, and brick-and-mortar retailers Best Buy, Home Depot, and Lowe’s.

Customer Relationships

Nest’s customer relationship is primarily of a self-service, automated nature. Customers utilize the service while having limited interaction with employees. The company’s website offers a comprehensive “Nest Support” section with user guides, videos, answers to common questions, and a product compatibility checker. There is also a community component as it features a forum, and a personal assistance component as the firm offers phone and e-mail support.

Key Activities

Nest’s business model entails designing and developing products. It outsources the actual production of the items to third-party contract manufacturers.

Key Partners

Nest Labs operates the five following partnership programs:

• Energy Partners: The company partners with energy firms who want lower customer’s energy consumption. The firms offer consumers who sign up for certain plans perks such as a free Nest Thermostat, an instant rebate with no paperwork involved, and “Rush Hour Rewards” ($20-$60 refunds for low energy usage). Specific partners include Con Edison and Direct Energy.
• Insurance Partners: The company partners with insurance firms who want the information that the Nest Protect monitor can provide (as it connects to WiFi). The firms offer consumers a free monitor and “Safety Rewards” (a discount of up to 5% on premiums). One of the partners is TotalProtect Home Warranty.
• Works with Nest: The company works with manufacturers of third-party devices to help them communicate with Nest Labs products. The long list of partners includes Whirlpool Washers and Dryers, LG Appliances, ChargePoint, Augusta Smart Lock, Life360, and Mercedes-Benz.
• Nest Weave: The company works with developers (big and small) to help them connect their hardware and/or app solutions to Nest’s cloud service and its app.
• Nest Pro: The company invites anyone to learn how to sell and install its products. Partners receive training and tools, customer referrals, and live VIP support. ### Key Resources

Nest Labs’s main resource is its research and development staff that design and develop its product lines. It also depends heavily on sales/marketing staff. Another significant resource is its intellectual property.

Cost Structure

Nest Labs has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is likely sales/marketing expenses, a fixed cost. Other major drivers are in the areas of cost of goods sold (a variable expense) and product development (a fixed expense).

Revenue Streams

Nest Labs has two revenue streams:

Product Prices: The company prices its products as follows:

• Nest Learning Thermostat - $249
• Nest Protect - $99

• Nest Cam - $199 Subscription Fees: The company charges fees for Nest Aware, a service that provides video footage that the Nest Cam records; pricing is as follows:

• 10-day video history – Starts at $10 per month or $100 per year
• 30-day video history – Starts at $30 per month or $300 per year