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Leveraging the Internet of Behavior (IoB) to Boost Customer Loyalty

4 min read

Boost Customer LoyaltyCustomer loyalty is critical to any successful business strategy in today’s digital age. With emerging technologies such as the internet of things (IoT), companies are now leveraging a new approach called the internet of behavior (IoB) to gain deeper insights into their customers’ behavior and preferences.

What is IoB?

The internet of behavior exists because of the internet of things. IoT is the interconnection of physical digital objects that gather and exchange information over the internet. On the other hand, IoB makes sense of the collected data from various sources, including wearable devices, digital household devices, human online activity and social media.

The acronym internet of behavior (IoB) was coined by Gartner, a tech research firm, as identified among the top 10 trends in their strategic technology report for 2021. However, the concept of using data to influence customer behavior was developed in 2012 by Göte Nyman, a psychology professor at the University of Helsinki, long before the internet of things took hold.

Gartner defines IoB as an extension of the internet of things, focusing on capturing, processing and analyzing the “digital dust” of people’s daily lives.

Simply put, IoB interconnects IoT, consumer psychology and data analytics. The data is analyzed in terms of behavioral psychology to capture patterns that marketing and sales teams can use to influence customer behavior.

How IoB can Influence Customer Loyalty

Aside from products and services, customer experience has become a significant factor in business success. By understanding customer behavior, businesses can leverage IoB data to influence customer loyalty in various ways.

Personalization

Personalization has the power to transform customer experience. This is reflected in a survey that revealed 76 percent of Americans are more likely to complete a purchase because of a personalized experience.

To take advantage of IoB, companies study insights extracted from collected data and use it to decipher customer behavior; that is, their practices, preferences, habits, needs, wants and more. The company can then leverage this data to offer personalized product recommendations, such as insurance premiums, saving plans, travel destinations, etc.

For example, an insurance company can have users install apps on their phones that collect data on distance traveled, car speed, etc., and optimize their car’s premium based on driving behavior.

Timely Improvement of Products and Customer Services

IoB also makes studying how customers interact with specific services or products easy. This saves companies from time-consuming surveys that are used to determine consumer preferences. The collected data is analyzed to identify pain points and issues of concern. The company can then address the issues before they become significant problems, such as by improving on products and services. This is an excellent way to build trust and confidence in a brand, leading to customer retention.

Behavioral Retargeting

Since companies can access customer preferences, recent activities, likes, dislikes, and location data, they can send real-time notifications to customers about discounts and new offers in stores nearby. They also can track loyal customers and offer them rewards. This kind of retargeting will make customers feel like a business values them and caters to their interests.

Develop a Tailored Marketing Strategy

Insights from IoB data can help tailor marketing strategies to individual customers. For instance, a retail store can offer products or services based on the mood, age or gender of a customer; thereby providing a satisfying experience that will lead to a stronger emotional connection with the brand.

Key Challenges that must be Addressed for the Success of IoB

Despite the opportunities IoB offers, companies must be aware of some key challenges to fully realize its benefits.

  • Privacy Concerns – Although personalization will make consumer lives easier, there is a concern about privacy. Companies must implement strong cybersecurity policies and measures to ensure that customer information is used only for that which a customer has given consent.
  • Convincing Users to Share Personal Data – People might not be comfortable sharing their personal data.
  • Laws and Regulations – Strict regulations around collecting and using personal data, such as the General Data Protection Regulation (GDPR), require companies to comply in order to avoid fines and legal issues.
  • Cybersecurity – As reliance on technology rises, so do cyberattacks. Cybercriminals may access sensitive data on consumer behavior, making consumers susceptible to online scamming and identity theft, among other threats.

Conclusion

Leveraging IoB can provide businesses with a competitive edge and drive revenue growth. Companies seeking continuous success should consider placing IoB at the center of business innovation to create personalized customer experiences. At the same time, they must also examine any challenges that might reduce the effectiveness of IoB.

Noteworthy 2023 IRS Inflation Tax Changes and Accounting Considerations for High Inflation

4 min read

2023 IRS Inflation Tax ChangesWith the world seeing inflation, the Internal Revenue Service (IRS) has issued guidance for tax filers. Based upon an October 2022 IRS News Release, there have been more than 60 adjustments in conjunction with its yearly inflation alterations. Highlights of inflation adjustments include increasing the married couples’ standard deduction for 2023 by $1,800 to $27,700. Another highlight of inflation adjustments includes raising the threshold for the highest tax rate of 37 percent for individual taxpayers to an income higher than $578,125 or $693,750 if two married individuals are filing jointly.

However, there are certain things that are not subject to indexing for inflation. This includes permitting unlimited itemized deductions and maintaining the personal exemption at zero for the 2023 tax year – codified into law by the Tax Cuts and Jobs Act. The modified adjusted gross income (MAGI) amount used by joint filers to determine the reduction in the Lifetime Learning Credit (§25A(d)(2)) is not inflation adjusted for the taxable year (post-Dec. 31, 2020).

When it comes to the topic of inflation, while the United States experienced monthly inflation as high as 9.1 percent in 2022, there are considerations for economies and businesses operating in foreign jurisdictions where the rate of inflation is much higher for sustained periods of time (multiple years).

The International Financial Reporting Standards (IFRS), via International Accounting Standard IAS 29, explains how companies navigate financial statements if their primary currency used for commerce is the same legal tender experiencing hyperinflation in a particular economy, generally within a specific country. It also may be referred to as functional currency. IFRS generally looks at wages, pricing, and interest correlated with a price index increasing by at least 100 percent in aggregate over 36 months when determining if a company’s financial statements must be amended for economies with hyperinflation.

With PWC considering Argentina a hyperinflationary economy to entities whose functional currency is the Argentine peso, it’s considered so due to IAS 29. Specifically, IAS 29.3 details criteria when evaluating if indeed, an economy and its currency is experiencing hyperinflation. Select criteria include:

  • Residents of the subject jurisdiction attempting to preserve wealth via non-monetary assets or stable non-native currencies.
  • Business is indexed and transacted in non-native currencies with far lower rates of inflation.
  • When credit is the means of a transaction, it is priced at levels factoring in the expected debasement of the subject currency according to the time frame of the borrowing.

As of the 2019 publication, based on the 36-month lookback measuring inflation gauges and the IAS 29 evaluation criteria indicating hyperinflation, PWC determined the Argentina economy to be hyperinflationary. And according to IAS 29 standards, if a company’s primary legal tender it uses for commerce is the same as a country experiencing hyperinflation economic conditions, it must adhere to specific financial reporting standards.

Financial statements in hyperinflationary environments, according to IAS 29, that factor in relative details are required to be reported in the functional currency in up-to-date figures at the conclusion of the coverage time frame. When it comes to revising to current units of currency, businesses must use a general price index to account for inflationary changes. In addition to requiring a distinct declaration for a required business’ net monetary position, it must be reflected as proceeds or a decline in profits for the defined time frame.

The business must adhere to full disclosure, which includes transparency whereby financial statements have been restated, what price index the business relied upon to adjust for currency inflation considerations, and if the financial statements have been put together via historical or original costs versus current or fair value costs. The remaining requirement is that business results must assess its financial outcome and situation in its functional currency. Although according to IAS 21 guidelines, once financial results are restated, the restated functional currency can then be read in alternate forms of currency.

When it comes to inflation and the jurisdiction it occurs in, knowing the levels is important to help businesses account for times of normal and abnormally high levels. 

Sold Your Home Last Year or Plan to in 2023? If So, Here’s What You Need to Know

4 min read

tax breaks home sale, 2022 2023 home sale taxesThe U.S. housing market has been extremely volatile over the past year. Year-over-year growth rates were at highs of 20.1 percent in April 2022, then declined to only 8.6 percent in November – the biggest drop in over 20 years. As a result, many homeowners who sold their homes in 2022 or plan to in 2023 may have either gains or losses depending on their location and timing. Below, we tackle the issues you need to know to properly account for the taxation of your home sale.

Only Some Gains Are Taxable

Not all gains on home sales are taxable, with the initial $250,000 or $500,000 exempt in certain circumstances. All you need to do is have lived in the home as a main residence for at least two out of the past five years before the sale.

A key factor is that the above exclusion applies only to the sale of your main home. If you own multiple houses, the one you spend the most time in typically counts as your main home.

Reporting

Just because the gain on a home sale qualifies for exclusion from taxation, it does not mean that you do not need to report the transaction and income. Often, you will receive a Form 1099-S; and in all cases, you need to report the sale on Schedule D and Form 8949 with your Form 1040.

Also, remember that part of your gains could be taxable. Even if a married couple qualifies for a $500,000 exclusion, if they have a $600,000 gain, then the $100,000 over the exclusion is taxable.

Figuring Your Gain

To understand if you have a gain or loss on the sale of a home, you will need to make a calculation. First, start with calculating your basis. This is the price you paid for the house plus any significant improvements. When you sell your home, your gain is the sales price (less taxes, realtor commissions, etc.) and this basis. It pays to keep good records of remodeling and additions.

Capital Gains Tax

Like any capital asset (a stock, for example), if you owned your home for one year or less before you sold it, then you have short-term capital gains, which are treated as ordinary income for tax purposes. If you owned it longer than one year, then your capital gain above the exclusion is long-term.

Losses

In the case where you have losses on the sale of your home and not a gain, then you are in a bit of a bad spot. There is no tax impact since you cannot claim a loss on the sale of a personal residence. This is the other side of the exclusion of gains.

Exceptions to the Rules

As always, with the tax law, there are exceptions. One example is when a home is transferred as part of a divorce settlement. Here there is no reportable gain or loss unless your ex-spouse is a nonresident alien.

Other exceptions that might affect the taxability of your gain include those involving taxpayers who died, empty land, or a home that was destroyed. If you believe you have unusual circumstances related to a 2022 or pending 2023 home sale, then it’s best to consult with your tax professional.

2023 Home Sales

Looking at the remainder of 2023, there are mixed opinions on the single-family housing market. The consensus is that there will be fewer homes on the market for sale; however, how far prices may decline is up for debate.

Some analysts believe home prices will not drop much in 2023, despite increased mortgage rates due to demand being supported by low inventory. Meanwhile, others think prices could decline quite a bit, especially in certain markets such as Florida, Texas, and the Southeast, where they’ve run up the most in recent years.

National home price averages, while statistically cited, are meaningless, with residential real estate being, so location dependent. Many homeowners who sell in 2023 may still have a profit on the sale of their home. Assuming no tax law changes, the same capital gains rules will apply in 2023 as they did in 2022.

The takeaway here is that if you are thinking about selling this year, start planning now. Gains realized in 2023 are not reportable or taxable until 2024. Figuring out your basis and adjustments now will save a lot of headaches next tax season.