In the world of connected devices, the subscription model is paramount. The number of connected devices surpassed the number of people in the world years ago, and by 2020, Forrester Research predicts there will be 50 billion worldwide.
In the consumer realm, connectivity is deeply personal: Are my children safe? Is my door locked? Am I wasting energy? A wide range of IoT-enabled home devices and services offer peace of mind, convenience and efficiency for consumers. And of course the connected car is one of the ripest areas for IoT exploration with an ever-growing array of infotainment, telematics, vehicle communication and autonomous operation options.
But these aren’t all whiz-bang, Back-to-the-Future-type devices. Now everyday objects like washing machines, light bulbs, and running shoes have sensor technologies like GPS, RFID tags, accelerometers, and others that collect and share data that can make our lives better—by just a little or a whole lot.
This fundamental paradigm shift, called the Internet of Things, is breaking open a whole new way of doing business for companies, one that’s about building ongoing, long-term relationships based on the valuable customer data they get from these devices. These deeper customer relationships pave the way for vastly greater opportunities for companies to tailor their offerings and generate ongoing revenue via a subscription experience versus the old, one-time transactional model.
Though even with this embarrassment of data and relationship riches, the big question still remains: how do you actually monetize and capitalize on relationships through connected devices?
The good news is that IoT helps to level the playing field. While large companies may have the deep bench and budget to throw at connected-device development, small and medium businesses can use their agility and third-party platforms to help them monetize their IoT solution and get it deployed quickly. For example, FedEx and UPS have been using data to manage their fleets and make their companies run more efficiently for years. Now that connected devices are becoming more available and affordable, local and regional transportation companies can get the same benefit as the big guys.
Here are six ways that businesses can leverage their connected device solutions to improve results, monetize successfully, and capitalize on the IoT market.
1. Open the door to integration
IoT solutions that are connected to other third-party products and services are the ones that deliver the most value: the larger the number of connections, the more value generated. To tap into this vast well of value, companies need to develop solutions that play well with others so they can pump up their revenue volume.
Fitbit is a good example of a ‘team player’. Do you like to access your fitness data on Myfitnesspal while your partner prefers Mapmyrun? No problem. Fitbit works with both of them and several other third-party apps. The savvy gadget caters to a wide range of fitness enthusiasts without personal preferences posing a barrier.
These types of partnerships, however, can make the revenue model more complicated. If you’re charging $10 a month for your service, you’ll be paying partners a percentage of that number, which can get complicated quickly. Sound billing systems and strategies are key to being prepared for this complexity.
2. Be ready to invest in agility
Customers today expect instant gratification in almost every product and service experience. So it’s important to have customer support and product development teams beefed up to respond quickly to technical questions, feature requests, subscription changes and upgrades, and other improvements.
This means you have to invest in the resources necessary to deliver this kind of experience, an investment that may not give you instant gratification for your bottom line. In the long run, however, these investments are crucial to your IoT company’s market viability.
Qualcomm, a Fortune 500 global leader in the semiconductor industry, designs and markets wireless telecommunications products and services, so it make sense that they’d be on the forefront of IoT. In fact, Qualcomm was actually ahead of the market curve: 25 years ago, their first major business unit was Omnitracs, a product installed in their trucks, which allowed them to track movement of their fleets, collect telematics data on fuel consumption, and other good data.
Today, Qualcomm is still creating IoT devices for the marketplace and discovering the best ways to monetize them. “It’s not just a matter of building a device, you have to have the whole marketing, sales and support ecosystem behind it,” Bridges says. “because there’s such a proliferation of connection and subscription models, it can be difficult to keep up.”
Qualcomm has had to build out systems & processes across the entire organization to accommodate how consumers want to use the product. For example, their product can be activated at home instead of having to go into the store and it’s accessible both at home and on the go with mobile connectivity.
They’ve also had to be agile enough to address challenges, like how they keep track of the usage of the device and how they bill for that usage.
Finally, they learned early on that billing strategies are crucial when it comes to a good customer experience. “You have to be flexible and be ready to pivot when it comes to billing plans,” says Bridges. “You have to try different plans, see which one gets traction, and then have a system in place that allows you to easily change your business model.”
3. Find the white space in the market
As competition in a category amps up, connectivity can be a way for companies to differentiate their products in the marketplace. Ever-more-savvy customers look for things that make their life easier, even if it means they pay a little more.
For example, Nest looks prettier than most thermostats, but that’s not the reason consumers are paying 3-4 times the cost of a basic model. Part of its appeal the convenience of being able to control their heating and air conditioning through their phone even from thousands of miles away. Turn on the heat from the airport and your home is all warm and cozy when you step in. Nest offers even more convenience with its ability to learn your preferences. Give it a week and it figures what temperature you like on specific days and times. And it ends a lifetime of wrangling with your thermostat!
4. Get devoted to data
Until the past decade, selling was pretty simple. You have a product or service to sell and charge what the market will bear. Somebody or some company wants it. You bill them. They pay. End of story.
In the IoT world, it’s now about your platform, not just your product. That’s because the customer is in control and they want choices about how much to buy, when to buy it and how to use it. Obviously this isn’t nearly as predictable a revenue strategy as the old days, but the good news is the data we have access to now means you have the tools you need to understand more deeply how your customers are using your product.
This is a new mindset for many businesses, even for those who are, by nature, data driven. Lots of companies say they’re great at collecting data, but not sure what to do with it. One way to overcome this challenge is to shift to an IoT platform mindset and start really analyzing what this data says about the customer: How do they live? What does their life cycle look like? What do they order? What do they churn? What do they buy for a month? What do they buy for a year? This important information can drive your pricing strategy and give you the revenue results you need to make your business successful.
Ford is such a strong believer in the power of data that it appointed a global Chief Data and Analytics Officer last December. With the connecter car becoming a reality, the company has heavily invested in data in recent years including setting up a Big Data Analytics Lab.
Examples of Ford’s data usage include it’s Energi line (plug-in hybrids) generate 25 gigabytes of data per hour which is processed and sent back to drivers via a mobile app. Customers are given information on battery life, nearest charging stations, etc. The data also helps the company understand how customers are using the car and improve its performance. Another Ford vehicle, the Super Duty pickup truck offers a “crew chief” package which enables fleet managers to monitor fuel consumption, engine performance, etc.
There’s also a way to monetize data beyond the end-customer relationship. Companies that collect data from their customers can partner with other companies to share the wealth. For example, a telecom company can sell its user data to an app developer who wants to know what kind of apps are hot—and why.
5. When in doubt, take action
The subscription economy is waiting for no one. For companies unsure about what IoT strategy might work for their business, taking action with the assets at hand can be a great first step, like adding connectivity and sensors to existing products.
For example, look at what Oral B did with the ubiquitous toothbrush – they added bluetooth connectivity and now your toothbrush wants to have a ‘word’ with you. These connected toothbrushes help customers with personalized guidance, information on brushing patterns, reminders, recommendations and rewards. Of course, the app also cleverly lets consumers know when it’s time to change the brush-head.
Another good example is the Philips Hue which is revolutionizing the light-bulb. The Hue combined LEDs with IoT allowing you to personalize your ambient lighting, control your lights from anywhere (you’re not home but want the lights on to make it seem that you are home), to automate your daily routines (lights come on every morning and go off at bed time), work as an alarm and so on. All this with a simple light bulb.
And once in the connected space, without action, the data you get from connectivity is useless. It could be as simple as quoting your customer a different price on their service or as complex as adjusting thermostats in thousands of households and offices to avoid electricity brownout.
6. Count relationships, not just cents
In typical transaction-based companies, enterprise resource planning (ERP) software has been the gold standard for keeping the business humming along. Today’s subscription economy demands more—and longer-term—insights to succeed. Enter relationship business management (RBM).
A classic example is Amazon. The company stays focused on the end-customer (much to the chagrins of other businesses). The cheapest, the fastest, the easiest seems to be their mantra. With Amazon Prime, the company offered cheaper and faster shipping for an annual fee. While that’s great for shoppers and an excellent customer retention strategy, what’s in it for the business? Amazon Prime members spent 40% percent more on the site than they did prior to their memberships. Happy customers lead to happy businesses.
With RBM the focus is on the customer who’s buying, not the product that’s being sold. And because customers have evolving needs, you need to be able to move quickly to figure out how to get them what they want. Traditional ERP systems aren’t great for trial-and-error, but RBM allows you to do consumer testing with your products, see if it’s scalable and make changes accordingly, all at a cost that doesn’t threaten the bottom line.