The concept of the Internet of Things (IoT) has been here for quite a while now, and it won’t be going away anytime soon—not with the continuously evolving applications of smart tech and the integration of the Internet in our daily lives, from entertainment and shopping to health managementand even the way we manage our homes.
What businesses sometimes fail to understand, however, is that the IoT is NOT what makes money. IoT is primarily focused on collecting and exchanging data. Instead, it is the business model, optimized by the IoT, that monetizes products and services for the business.
Companies who want to play in the IoT field would do well to focus on providing products and services that they can continuously resell. The Internet moves at an incredibly fast pace, highlighting the importance of building solid relationships with consumers, which you can then capitalize onto capture valuable data. In the future, when you are expanding your business or developing new marketing strategies, for example, you can capitalize on the data that you have gathered along the way. This is why one of the most competitive business models in the age of IoT is the subscription billing model.
Higher Customer Lifetime Value
The subscription billing model, when done right, results into higher customer lifetime value or CLV. In simple terms, CLV is the predicted amount of net profit that can be chalked up to a good relationship with a current or future customer. The key is to find and develop solutions that eliminate a customer’s pain points and provide a seamless experience that would make them want to stay and renew their business. Using subscription billing solutions is one good example, as it removes the frustration of failed payments and ensures the timely and accurate collection of fees. Special offers to loyal subscribers and other rewards programs may also incentivize customers to continue their subscriptions.
More Actionable Data
Subscription-based businesses usually get their customers to subscribefor a whole month or yearbefore asking or reminding their customers to renew (hopefully, the customers say yes). Within this time frame, businesses can gather intelligence on frequency of usage, consumer habits, preferences, and online activity, among others, which can then be used to develop informed business decisions. This is in contrastto, say, a solely premium model when the business-to-customer interactions usually stop after the customer pays for a service or product.
Easier to Monetize
Subscription billing is also a more sustainable business model, especially for B2B companies, because the revenue comes in consistently. To put this into context, a sensor-based system that can detect when a machine is going to need a tune-up or part replacement can be sold (a) as a hardware-software bundle, with a subscription on the software maintenance; (b) a software-only offer, with key features enabled on a subscription basis; or (c) as a service with subscription fees for the company to perform the service. This gives the customer a range of options that are not only more affordable, but also more convenient.
IoT companies can also monetize the data that they gather from customers. For example, a company that designs smart home systems can develop energy management services based on how consumers use their products. The company can then offer this as a subscription service (plus a few consumer insights on the side, as a bonus) to utility companies who want to improve their services for their customers.
Customers Love Subscriptions
Many customers like the fact that they can subscribe to products or services as opposed to owning them. Just ask the millions of Netflix subscribers. A subscription-based product or service is as flexible as it is convenient, which consumers definitely love. And because they pay only for the products and services they use, consumers can also extract the most value for their money. By offering different subscription options and multiple payment methods, a company can capitalize on the market’s familiarity and affinity with subscriptions and memberships.
With an estimated 20.8 billion interconnected devices by the year 2020, the IoT market is becoming more and more competitive, not to mention more lucrative. Through the help of a subscription billing business model, a business can maximize the income and customer service potentials of the Internet of Things.