An IoT device on its own has little value beyond that of a corporate curiosity. With our front-row seat to IoT device and system deployment, we know that a right-valued business model makes all of the difference in considering a deployment successful.
IoT deployments are new territory for many companies – not just because of the technological approach, but because of underdeveloped and under-serviced business models. If you find that your planning could use a tune-up, consider the below list as inspiration!
IoT Revenue Models and Business Models
IoT Revenue Models sit at the heart of Business Models that exist to support them. Revenue through these models can be much different from the one-time ‘sell a piece of hardware’ model that many product manufacturers rely on. Let us know which of these models may apply to your business – whether it be in the consumer, industrial, or commercial sectors:
1) The Subscription Model of IoT Revenue
Selling Software as a Service is a common model for IoT products, especially in consumer markets. Subscriptions to Connectivity-Based Software is a great way to find recurring income from individual hardware sales. Selling access to a dashboard to monitor one’s own data is an obvious example.
Monetizing access to this data can exist at a variety of levels. Freemium configurations allow base-data at no cost, with fuller access at a subscription level. One time paid upgrades for access are also an option. Giving your client access to their own data allows companies to build relationships, learn about consumer behavior and surroundings, and also to offer upgrades and new hardware options when product-life or upgrade paths make sense.
Examples of subscription-based IoT services: Health Monitors, Dog and Equipment Locators, Air Quality Monitors, Home Energy Dashboards and more.
Please alert your customers about the service offerings before they buy the hardware. Nothing turns off a consumer and increases product returns like unseen costs that are not disclosed upfront.
2) The Product-Oriented Pay-as-you-go IoT Revenue Model
Consumers buy Value. Whether it is the hours a commercial oven cooks, the gallons of water pumped through a pump or the hours an airplane spends in the air, customers are paying for the value of products that are utilitarian in nature.
With an IoT connected device, a company can sell the value that a product provides and not the product itself. Consider it a smart lease.
Examples of pay-as-you-go services include industrial products like motors, pumps, dies and casting machines, residential air conditioners and furnaces, and even dishwashers. You may even find a new answer to the age-old “Is your Refrigerator Running?” phone prank.
How does it work? Upon start up, a connected device can send usage information from which a fee is calculated on a daily or monthly basis.
By selling the value and outcome of your product, a consumer can understand the relationship between their dollars and the results of the product.
2 part ii ) The Service-Oriented Pay As You Act Offshoot
Some traditional service-oriented agencies are also getting into the pay for what you use mindset.
Mile-based auto insurance companies are happy to charge per-mile insurance rates, while health tracking tools are likely on the horizon (health discounts if you get your 10K steps in every single day) all an effort to adjust health and life insurance rates.
There are certainly hardware opportunities for tracking service usage will add new clarity to countless businesses.
3) The Asset-Sharing Model of IoT Revenue Model
Not every device is owned by a user. The electric scooters that now litter the streets of nearly every urban downtown landscape are a prime example of the Asset-Sharing Model. IoT connected devices and Consumers pay-per-use for a product that can be found in public.
This model works extremely well for transportation-related devices – scooters, zip cars, bicycles, but also for stationary service devices including public toilets, device charging stations, public entertainment services, jukeboxes, and parking space leasing.
4) Consumables Model of IoT-based Revenue
“Give the razor away for free, make your money on the razors”.
The razor is not an internet-connected device (yet) but plenty of products that do use consumable goods are connected. Take for example our client Purell – they sell Smart Dispensers for their hand santizer. As part of their subscription-based analytics and device status service, hand-cleanser is reordered automatically once a fixed amount is used.
Hallsten Innovations assisted the Purell team in creating the underlying electronics for their smart dispenser. Read the Case Study.
The Consumable Model is often related to the hardware product that dispenses or uses the consumable – be it a printer with ink, hand sanitizer station, or even a dog biscuit station. But that need not be the case. The Amazon team, with their DASH buttons, has removed the need for a hardware application from the consumable model all together.
Many companies are considering adding the consumable model to their existing hardware.
5) The Data-Driven IoT Revenue Model
The end-user hardware owner is not always the biggest customer in an IoT Revenue Model.
Any IoT device and it’s environment creates data, but the more valuable that data is, the more someone else might may want to pay for it.
Environmental sensor data may be incredible valuable to a city-wide pollution task force, or driving habits/conditions might be valuable to your insurance company, the weatherman, and city service providers.
When the hardware is not part of the recurring revenue solution, it must be deployed in vast numbers. This model might find optimum results in reduced cost hardware (loss leader, of sorts) or even free hardware (your insurance company giving you a driving habit monitor, to track your teen).
Privacy issues are certainly relavent in this case. Device users must weigh the loss of privacy with some other perceived value.
Bringing the consumer alongside you in creating the data for the greater good is one option, but so is creating an IoT device that has such high value, the provision of free data from that hardware owner is only a secondary thought. Alexa agrees.
Selling data is an excellent way to make a living.
6) The KPI Improvement IoT Revenue Model
Key Performance Indicators (KPIs) are measurements of a business process or a manufacturing process to judge how well a production unit is working, or how well an entire facility is performing. If you can improve a single KPI for a business customer, you can seek a revenue share for that improvement.
For industrial device manufacturers – if you are certain that your product will provide dramatic change to your client’s business, prove it to them through KPI measurement!
Will they be able to extrude more plastic per minute, to stamp more parts every hour, or to pump more water every day? If the answer is yes, consider making that KPI measurable via IoT hardware – and use that data to bill your customer on KPI value.
The KPI Improvement Model is slightly more esoteric than the rest of these models and is surrounded more in financial agreements (if ‘this’ KPI improves by 5%, then you pay the provider a sum of money annually over the life of the product), however, it has exceptional sales value.
The Revenue Model is just the beginning
These IoT revenue models are just a few examples of the ways companies are utilizing data intelligence to improve the customer experience – whomever those customers may be. Hallsten Innovations provides design services from the back of the napkin ideation events all the way through to product manufacturing and cloud ecosystem development.
So, the question is…