How to Monetize IoT products and Solutions?
Analysts believe over the next ten years; the Internet of things will create somewhere between 6 Trillion to 33 Trillion USD of new value. Most of the companies think twice to invest today in IoT in wondering what would be their ROI and how could they monetize their investment? In fact, there are lot of ways IoT can yield revenue and cash flows both in immediate and far future.
Packaging the IoT Product & Solution
Traditional way of selling products purely based on features and merits would go well with customers who really understand the potential of IoT and only if the salesforce is well trained and expresses correctly. Even then the conversion cycles would be longer. According to most of the wise men, the first impression and the wow factor of surprise on seeing something new or something that solves the problem at hand will ensure that the leads get converted and revenues are realized. So, the key factor to monetize the IoT products and solution is to package the solution well and wrap it up with all the models that will make the customer interested in buying.
Premium Hardware – This is a slight twist to the traditional package but here the premium feel on the product or solution by creating a successful demo or proof of concept or showcasing in an expo for the industry/product segment. These demos awe the prospective buyers, makes them understand the benefits and convince them on their purchase decisions.
Subscription-based & Consumption based model – IoT solutions or even the product itself might be capital intensive for the end user. With the advent of innovative credit options from the financial institutions, companies can create a periodic subscription-based billing or consumption (usage) based billing. These models would generate recurring revenues and with right pricing, higher profits.
Freemium – Customer need to feel assured that their purchases are right and beneficial. Best way for it is to make them feel it at first hand. Offer the IIoT product or solution for free on a trial basis to the customer to help them understand the features and benefits of the connected solution. This will create a good conversion as IoT can be used to demonstrate strong case studies. Alternatively, provide the basic product free with less features to make the customer feel the benefits and ask the customer to pay for the detailed and comprehensive product to obtain the actual gains.
Results based commercials – To build trust and make the customer believe in IoT product and solutions, we must publish the key outcomes and benefits for a customer on using the product. As a company, one must agree with the customer on commercial which would be based on the actual results on key benefits. For ex: If a customer saves X % of energy costs by using the smart product then he pays the company Y% of his savings on energy costs. In this, the percentage can be fixed at higher rates to get a good revenue margin.
Data Selling Model – In some scenarios, customers love to have the digital form of the data generated and the analytics rather than the product. So, in this scenario instead of selling the product or solution, we should sell the generated data and analysed insights in a highly presentable and usable form. Customers would reap the benefits and power of the data which is his need rather than the product which he does not understand.
System of System – IoT solutions is generally not a single product from a single company. Different products from different companies interact with each other and produce multiple touch points and benefit the customer. A company can make its product interoperable with other popular ecosystems or it can create its own ecosystem where other companies can apply their products. This will help companies build more use cases referencing other products.
Above are few of the popular methods that are used to monetize the IoT products and solutions. IoT is evolving continuously and rapidly that even far more models like crowd ownerships, seasonal ownerships, Social Ownership, Reviews-oriented-model etc. are possible. But one must not forget that to the centre of it all is the product or solution. We should have an innovative product/solution with a strong business case to monetize it.
Sri Sabari Nathan
Chief Customer Officer,