In the dynamic and ever-expanding universe of the Internet of Things (IoT), monetizing hardware remains a prevalent strategy, accounting for over 95% of revenue in the sector. However, as industries continue to be revolutionized by connectivity and data-centric solutions, pivoting towards IoT subscriptions emerges as a vital strategic move. While traditional hardware sales have formed the backbone of IoT financial gains, the shift to more nuanced monetization approaches, such as IoT subscription models based on usage, duration, and outcomes, unveils new horizons. These models of IoT subscriptions not only help build enduring customer relationships but also align pricing more directly with the value offered, leading to reliable and continuous revenue flows.
IoT subscriptions are pivotal in today’s rapidly changing business environment, offering tailor-made solutions that adapt to the evolving needs of an interconnected ecosystem. They enable businesses to tap into the power of data and connectivity, transforming how value is delivered and experienced in the IoT realm. Adopting IoT subscription models signifies more than a change in billing; it heralds a transformation in customer engagement and value proposition, crucial for thriving in the digital age. With IoT subscriptions, businesses can leverage the full potential of IoT, ensuring adaptability and resilience in a competitive marketplace.
Learn how how IoT subscription models can be a game-changer for your IoT initiatives, marking a new chapter in your company’s growth and digital evolution.
Embracing IoT Subscription Models in the Evolving IoT Industry
As the IoT industry shifts its focus from traditional hardware monetization to digital and data-driven avenues, incorporating aspects of mobile data becomes critical for most IoT use cases. This change underscores the need for comprehensive systems and applications designed specifically to facilitate the creation, management, and billing of IoT subscription-based business models. Understanding and integrating these elements are essential in staying ahead in the rapidly transforming realm of IoT monetization.
This article delves into the core elements of such a system, which Freeeway has termed the IoT Monetization Hub. With the growing adoption of IoT subscription models, these systems play an important role in enabling businesses to efficiently manage their revenue streams. They offer the flexibility and scalability necessary to accommodate varying customer usage patterns and service tiers.
IoT subscriptions, when integrated with a well-designed monetization hub, can lead to enhanced customer satisfaction by offering more personalized and value-driven service options. This tailoring of services not only benefits the customer but also allows businesses to optimize their resource allocation and revenue models. By focusing on the IoT subscription framework, companies can extract maximum value from their IoT offerings, ensuring a sustainable and profitable IoT ecosystem. The IoT Monetization Hub, therefore, becomes a crucial tool for any enterprise looking to succeed in the modern IoT marketplace, where subscription models are rapidly becoming the norm rather than the exception.
IoT Subscriptions: Advantages for Companies and Clients
IoT subscription-based business models offer a range of compelling advantages for both companies and customers. One of the key benefits is the predictable, recurring revenue stream they provide, which enhances financial stability and sustainability for businesses. These models allow companies to build long-term relationships with customers, fostering loyalty and trust. Moreover, by aligning pricing with actual usage or the achievement of specific outcomes, IoT subscriptions ensure that customers pay for the value they receive, enhancing cost-effectiveness. Additionally, IoT subscription models encourage innovation, as companies are incentivized to continually improve their services to drive success for both themselves and their customers. This approach enables businesses to remain agile, adapt to changing market dynamics, and stay ahead of the competition in the ever-evolving IoT landscape.
Easily Manage IoT Subscriptions with the Monetization Hub
The IoT Monetization Hub is a platform that helps IoT solution providers and companies in the business to CONNECT, MANAGE, and MONETIZE their offers and services. This will transform their revenue stream from a product-led business model towards a recurring revenue-generating machine.
CONNECTION is the strong foundation in all digital businesses. To digitalize your products and services, you need to gain access to data from your remote devices, locations, etc., to drive use-cases such as predictive maintenance, digital twins, real-time streams – you name it!
As your use cases span globally, you will need to MANAGE those connections at a global scale. This is usually the domain of connectivity management platforms or CMPs.
As IoT subscriptions are becoming more sophisticated, the MONETIZATION element is a main point of focus going forward.
Elements within these domains are broadly discussed down below and more in-depth in consecutive blog posts.
CONNECT – Global IoT Connectivity
Having access to connectivity at a global scale is important for many IoT use cases. This is the domain of sourcing cellular services based on various technologies, such as 2G/3G/4G – LTE, 5G, NB-IoT, and LTE-M.
MANAGE – Connectivity Price Management
You could treat the mobile data either as a cost or as a revenue stream. The IoT Monetization Hub enables businesses to monetize with data connectivity and stay flexible, leaving it up to them to define their own mobile data price models.
MONETIZE – Introduction to The Hub
This is the key component of the IoT Monetization Hub. It enables businesses to create, manage and invoice IoT subscriptions that span various value drives from Hardware, SaaS, Digital- & Traditional Services, as well as Connectivity.
IoT Subscription Plan Management
So businesses are able to freely define IoT subscription business models, the IoT Monetization Hub combines the following meters into a single subscription, such as
- Fixed amount limits: e.g, number of devices included, a dedicated rental fee, etc.
- Mobile Data limit: The amount of mobile data included in the subscription, either per single device or shared between a group of devices
- Custom Usage limits: Any value driver from a customer’s business models to enable usage-based subscriptions, should be fed to the IoT monetization hub based on real-time feeds
- Service limits such as a particular SLA
Each limit should have a trigger so that when the limit is reached it triggers a consecutive action. A trigger may be that the max. a number of devices of a subscription (= fixed amount limit) is reached, and the next tier of your defined IoT subscription model will be invoked.
Billing automation
Is the domain to automate each billing cycle. For B2B use cases invoice creation out of an automated bill run is a key requirement.
Payment collection
In IoT use cases, where the device is with the end-user, the subscriptions are usually settled via payment providers such as Pay-Pal, Visa, Stripe, Klarna, etc. Such use cases are the domain of devices such as trail cameras, pet-, kid- and dog trackers, and home alarm systems. Also, medical devices such as blood-pressure monitors, elderly trackers, etc.
The IoT Monetization Hub is, therefore open to be integrated with multiple payment providers.
Recurring Payments
As subscriptions enable a recurring revenue stream, the IoT Monetization Hub must support consecutive payment collections. This is usually done by implementing recurring payments based on the respective payment provider’s capabilities.
Multi-Currency & Taxation
In all global use cases, each subscription should be set up in multi-currencies to provide the capability to react on market-specific price elasticity and requirements for a global service. Hence, multi-currency support in setting up IoT subscriptions is a key requirement that needs to be addressed by the IoT monetization Hub.
As this system enables businesses to establish a direct customer or end-user relationship, local tax implications in different markets must be taken into account. This is usually done by integrating tax providers to the platform to determine the local tax applicable for each transaction.
Revenue Recognition
This is an essential, yet under-valued element of IoT Monetization. In particular, when you start spanning your IoT subscriptions over more extended periods- such as 6 months, annually or multiple years. If you or your company opts for usage-based revenue models, this is an important factor for sales recognition.
E.g., when you monetize mobile data based on subscriptions, the revenue will be recognized based on the amount of mobile data consumed per month during the subscription term. Freeeway’s IoT Monetization Hub supports usage-based revenue recognition also for mobile data subscriptions.
Data & Analytics
In order to stimulate demand by setting price promotions or evaluating your optimal IoT subscription price, insights into your IoT subscriptions are of key importance. Such a system has to consider insights like daily revenues, subscriptions sign-ups, daily average payments, geographical distribution of your users, etc. It’s best to have a system that gives you as much information as possible.
As connectivity plays an important role in IoT, data & analytics also have to consider the usual insights in the connectivity services you are sourcing or offering. Insights include where, when, and how often a device connects. If the device is currently on- or offline, how much data has been consumed in the actual bill cycle, with which device IMEI the connection is associated, what IP address is being used, and many more.
Integrations
IoT Monetization Hub is a system that does a very specific task to enable your IoT subscription business. It usually integrates with CRM or ERP systems. IoT Monetization Hub supports open APIs and webhooks to integrate with customers’ environments.
In summary, the IoT Monetization Hub is central to managing and optimizing IoT subscriptions, catering to diverse needs from connectivity to billing and analytics. Global IoT connectivity is crucial for IoT subscriptions, using cellular services like 2G/3G/4G-LTE, 5G, and NB-IoT. This hub allows businesses to convert mobile data from a cost into a revenue stream, offering flexibility in defining mobile data price models for IoT subscriptions. It enables the creation, management, and invoicing of IoT subscriptions, combining various elements such as device limits, mobile data, and custom usage into a comprehensive IoT subscription plan. Billing automation, integrated payment collection with multiple providers, and support for recurring payments are vital for maintaining continuous revenue streams in IoT subscriptions.
Additionally, the hub’s multi-currency and taxation features address global market needs, crucial for setting up effective IoT subscriptions. The hub also aids in revenue recognition for longer-term or usage-based IoT subscriptions, especially crucial when monetizing mobile data.
Finally, data analytics provide valuable insights for optimizing IoT subscription prices, while integration capabilities with CRM or ERP systems enhance overall IoT subscription management.
Harnessing the Power of IoT Subscriptions for Future Growth
The evolution of IoT towards subscription-based models marks a significant transition, highlighting the need for tools like Freeeway’s IoT Monetization Hub to efficiently manage these changes. The shift from a predominantly hardware-focused approach to one that emphasizes software, services, and connectivity illustrates a broader industry trend towards recurring, usage-based revenue models. These models offer more flexibility, scalability, and better alignment with customer needs, creating a win-win scenario for both providers and users.
Freeeway’s IoT Monetization Hub plays a pivotal role in this transformation. By providing a comprehensive solution for managing the complex dynamics of IoT subscriptions, including billing, analytics, and global connectivity management, the Hub ensures businesses can leverage IoT’s full potential. Its ability to seamlessly integrate multiple pricing models, accommodate various billing cycles, and support different technological needs makes it an indispensable tool in the IoT ecosystem.
The benefits of adopting IoT subscription models are clear. They help businesses stabilize revenue, foster customer loyalty, and stay agile in a fast-changing market. In a world where digital transformation is the key to staying competitive, the ability to quickly adapt and offer tailored IoT solutions is crucial. IoT subscription models, facilitated by platforms like the IoT Monetization Hub, are not just about sustaining business growth; they’re about paving the way for innovation and future success in the vast, interconnected landscape of the Internet of Things.
Find out how your business can profit from IoT Subscription-based pricing models today!
We now know why efficiency and autonomy when setting up IoT subscriptions is a key concern for many IoT solution providers that wish to monetize their IoT use cases. From today’s 95% hardware monetization, we see a particularly strong push towards usage-based subscription models- those that combine multiple value drivers into one. As a system like this is very complex, businesses are now confronted with manual process steps during every billing cycle. This is inefficient and requires a lot of resources that could be used for more value-creating tasks.
Want to know more? Get in touch with us by completing our contact form below.
